The Unseen Burden: Understanding Condo Liens and Their Impact on Unit Owners

For many, a condominium unit provides an attractive and convenient way of life, with shared amenities and joint ownership. However, along with the shared interests of ownership come certain shared responsibilities, foremost in the timely payment of general expenses commonly called condo fees. When these are not met by any unit owner, a powerful legal tool called the condo lien comes into the picture. Commonly misunderstood, a condo lien is a very powerful tool for protecting the financial integrity of the entire condominium community but can become a formidable evil in the hands of an individual unit owner. Therefore, knowing what a condo lien is, how it arises, and what it may eventually mean for each unit owner is crucial, especially in the ups and downs of a profitable market where properties are highly priced and demands are stringent.

To put it in simple terms, a condo lien is a legal claim or encumbrance placed on a condominium unit by the condominium corporation itself. The claim acts as security for a debt owed by a unit owner to the corporation. Although it is most commonly seen in situations of overdue common expenses, a lien may also arise for unpaid special assessments, chargebacks for damages caused by the unit owner to the common elements, or even enforcement costs incurred by the corporation when it had to seek to bring the unit owner into compliance with the condominium’s rules and bylaws. Its purpose, commonly set out in provincial condominium legislation in Canada, is to ensure that the corporation has the funds necessary to maintain the common elements, provide services, and fulfill its financial obligations to all unit owners. Without the corporation having the means to enforce payment by any one unit owner, the financial hardship faced by the community at large would become severe.

A typical series of events unfolds before the condo lien process ensues. A condominium corporation will issue a series of notices while the owner is in arrears. It serves to inform the owner of the arrears and the condominium corporation’s intention to register a lien in respect thereof if unpaid conditional on the adoption of lien proceedings. The notices thus serve a dual purpose since they in fact represent legal warnings specifying what is owed (the principal amount in arrears, interest, and costs incurred in trying to recover the money, including administrative, or legal fees). Should payment fail to be received within the designated period of time, during which time the owner will be given at least several days or even weeks to respond, the condominium shall obtain the registration of a Certificate of Lien against the title of the unit at the land registry office. With this public registration, the debt enters into the public record, being registered against and binding the land of the condominium. With a fast-moving business environment and expedited transactions within the real estate market, condo liens Toronto have become a major impediment to both sellers and buyers, and therefore such claims need to be addressed without delay.

The lien tolling constitutes serious consequences for the unit owner. First and foremost, this affects the sale or mortgage of the particular unit dramatically. The title is left in “unclear” status under a lien, disclosing the debt to any prospective buyers or lenders. In clearing the title during closing, these liens usually have to be paid in full, from sale proceeds or mortgage funds. Interestingly, a condo lien usually has a very powerful enforcement capacity, and at least in certain situations, it can take precedence over other financial claims charged against the real estate, including the mortgages that were registered against the property prior. That is why most mortgage lenders settle the arrears with the condominium corporation to discharge the lien and safeguard their priority as creditors.

If the debt intended to be secured remains unpaid, the condominium corporation is entitled to take further steps to enforce the debt, including initiating a “power of sale” or foreclosure proceedings. This even means that the condominium corporation becomes entitled, much like a mortgagee, to force the sale of the unit to recover the debt, including all arrears, interest, and costs-so-called in the very least an act of ultimate recourse, thereby highlighting the very grave nature of the condo lien and the potential for a unit owner losing their home should the debt be discharged. 

For unit owners facing a lien or already have a lien registered against their interest in title, immediate action should be sought. The first step should always be liaising with the condominium corporation to negotiate for the full amount of the arrears to be paid and to set up a payment plan. It would also be prudent to seek independent legal advice from a lawyer specializing in condominium law. A condo lien attorney will analyze the details of the lien, ensure that the condo corporation followed the proper procedures, and provide advice on the best course of action, including negotiating with the condominium corporation or, in rare cases, challenging the validity of the lien. Avoiding a condo lien and its distressing consequences is simply a matter of timely payment of common expenses.