How can condo arrears be collected?

A fairly common problem for Condominium Corporations is collecting condo fees that have gone into arrears by the unit owner.  In Alberta, the Condo Corporation is in a strong position on this matter, and has a few tools at its disposal.

The most important fact that protects the Corporation is that condo fees are attached to the unit, not the owner.  That means if somebody manages to sell a unit with condo fees owing, the new owner becomes liable for them.  Because of this, buyers, and their mortgagees will ensure that all arrears are fully settled before the close of a purchase.  This is true, even if the Corporation fails to register a caveat against the unit.  When a unit is sold, property taxes are given first priority, next comes condo fees (with interest), then comes the first mortgage, any other mortgage, and lastly the seller gets what’s left.

Notice, I mentioned the condo fees are due before the mortgage.  That’s important.  Because of this, the Corporation can often get paid condo fees in arrears from the first mortgagee (usually a bank).  How?  Simple run a title check on the unit, identify the first mortgage, and send a registered letter asking for payment of outstanding fees.  Surprisingly, this often works.  The mortgagee can pay the amount and simply add the amount to the unit owner’s mortgage.

If the unit is being rented out, the Condo Corporation has the right to ask the tent to pay any rent to the Condo Corporation up to the point the condo fees are covered.  The amount paid is then reduced from the tenant’s rent payable to the owner.

Next is voting.  If a unit is over 30 days in arrears, it can not vote in a general meeting of owners.  Also, the unit owner is prohibited from sitting on board of directors.  That has little impact in a large Corporation with many units.  But, is significant for smaller Corporations.  Only those paying condo fees can decide how to spend them.

Next is placing a caveat on the unit.  After 30 days the Corporation has the right to file a caveat for the amount of the arrears and any interest.  As mentioned, this last step is not necessary to enforce a claim.  However, its a good tactic, as it gets notice.  Anyone searching the title of the unit will see the caveat, and that will effect a refinance or sale transaction sooner.

Of course, before all of this, the best thing to do is to simply ask for the money owed.  Do it in writing, and make reminders.  Be sure to keep excellent records of what is owed.

 

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