Strata corporations should never have significant arrears and should never have them for very long. There is simply no reason for it. The Strata Property Act (“SPA”) provides the strata corporation with several remedies and tools to collect those arrears.
Strata councils should never allow arrears to accumulate. Under s.31 of the SPA they are obliged to act in the best interests of the strata corporation and to act reasonably and prudently. Delaying the collecting of arrears for no reason other than reluctance to deal with them is not in keeping with those obligations. When those arrears relate to strata fees or chargebacks such as a deductible, it is money that the other owners are essentially loaning to the owner(s) in arrears. The strata corporation is not a bank. In addition, the Limitation Act sets a two year period within which to collect those arrears. After that, they cease to be able to be collected, even upon the sale of the strata lot. Lastly, accounts receivable (particularly when they are fine) unnecessarily inflate the strata corporation’s balance sheet making it look wealthier than it is.
The collection of strata fees and special levies is made easy by the provisions of s.116-118 of the SPA. Under those sections the strata corporation can file a lien to collect unpaid strata fees, unpaid levies and interest owing on those amounts. The full costs relating to the steps required to file and enforce the lien are collectable (see The Owners, Strata Plan KAS2428 v. Baettig 2017 BCCA 377). This means that strata corporations should not be out of pocket for having employed a lawyer to collect the arrears.
Fines and chargebacks (including deductibles) are collectable through the Civil Resolution Tribunal. Due to its online format and simplified process it is a relatively easy thing to do; particularly with legal assistance in filing the claim and preparing the argument to be submitted. Although the CRT Rules do not generally allow legal fees to be awarded, if the bylaws of the strata corporation are properly structured those costs can be added to the owner’s strata lot account.
Both the registration of the lien and the filing of a claim with the CRT must be preceded by a demand letter under s.112 of the SPA. There are strict technical requirements for a proper demand letter. As such, it is often best to hire a lawyer to prepare and send those letters. Often the involvement of the law firm at an early stage results in payment of the arrears without further steps being taken.
If you are part of or manage a strata corporation with significant arrears we would be pleased to speak with you about how we can assist you in resolving that problem.
This article is intended for information purposes only and should not be taken as the provision of legal advice. Shawn M. Smith is lawyer whose practice focuses on strata property law. He frequently writes and lectures for strata associations. He is a partner with the law firm of Cleveland Doan LLP and can be reached at (604)536-5002 or email@example.com. He can be followed on Twitter @stratashawn.