Condo Adviser, épisode 32 : Pleins feux sur les privilèges et les ajouts aux dépenses communes (disponible en anglais)

Graeme: Alright. Hello, everybody and hello, thank you very much for joining us. We're going to be getting started in the next couple of minutes. We just want to make sure that everybody has some time to settle in, get their sound connected, get their snacks. So stick with us. We'll be beginning very, very soon and please we do encourage you to get your snacks or vino because it's 5:00 o'clock somewhere. In fact, it is 5:00 o'clock here. Probably going to wait another minute, maybe 30 seconds or so, as we just let everybody else come in. It looks like attendance is starting to stabilize so we'll be starting very soon. Feel free, everybody, to say hi in the chat. We love to see that. Just make sure if you want everybody to see it, remember to set your chat settings to 'everyone', rather than just 'hosts and panelists'. Not that we don't love getting your messages, but if you want to make sure everybody sees it, make sure you do that switch.

Rod: Okay. What are we looking at, Graeme? I think it's time to start.

Graeme: Looks like we're at that special time.

Rod:  Okay, perfect. Okay, folks, let's do this. I'm going to put on my screen our good PowerPoint presentation and I'm going to share my screen. Sorry, folks. You will notice, in a minute we'll tell you why we're a bit frazzled. The glue of the team is not joining us tonight and so we're kind of flying on instruments here. You're probably curious who is the glue of the team. We're about to tell you that. Okay, so Graeme, do you see the slides?

Graeme: I do indeed.

Rod: Okay and let me just do this. We usually do all this testing. Okay, folks, we're ready to go. Fasten your seatbelt, bring your table and seat in the upright position, because we're about to just jump in.

Hello, good evening, everybody. My name is Rod Escayola and I am your condominium lawyer with Gowling WLG and welcome to our April episode of the Condo Adviser webinar and at this point in my notes it says, start improvising from this point forward. Good luck. Those are my notes. So from this point forward we're flying on instruments. So, folks, this is going to be a good episode. In fact, we are going to take a deep dive on condo liens and chargebacks. There's a lot of misconceptions out there with respect to what can be charged back, when it can be charged back, how does that work and the landscape has changed recently-ish with the Amlani case. Now the Amlani case is not that recent anymore, but there's still a lot of misconception and there's some people that are just not ready to let go, and so if you Google the case, if you start reading blogs you will get variating opinions. This team here is the team that argued the Amlani case so we will tell you what it stands for and how it has changed, to some extent, a corporation's ability to chargeback certain expenses. To be able to demystify all of that we went and we got fantastic speakers as usual. I'm going to start with a regular. I think she has a pass. She can show up anytime she wants at any one of our webinars. She is the most senior property manager, or condominium manager, in Ottawa, Josee Deslongchamps, from DES Services. Hello, Josee. Welcome back.

Josee: Hi Rod. Thanks for having me back. It's been a while. I'm glad to be here.

Rod:  We can't wait to hear what you have to say and to see your notes about tonight's presentation. It's going to be fantastic. But we have for the non-Ottawa voice, I used to say the GTA voice and somebody told me, well that's from outside the GTA because we got somebody very special. We got Michelle Joy and Michelle is the Executive Director of Condo Management with Wilson Blanchard. She's physically located in Hamilton although, of course, WB is in the GTA and beyond that. So welcome and thanks for joining us, Michelle.

Michelle: Thanks so much and I'm excited to a part of the panel tonight.

Rod:  Same here. Same here. And, we also went and got an auditor because sometimes the devil is in the details. So our auditor tonight is Roger Ouseley. He is he says, just one of the partners but his name is the first name in the partnership. So he's with Ouseley Hanvey Clipsham Deep LLP. Thanks for joining us, Roger.

Roger: Good evening, everybody.

Rod: Good evening. So I had my AGM yesterday, folks at home. My own personal AGM went well and we had the good people of Ouseley Hanvey Clipsham Deep that were in attendance, and as usual, they're able to present the information in a way that even a lawyer understands it. I mean lawyers are not known to be good with numbers. Okay, so that's for the introductions. Of course, I forgot to change the slides to tell you who is playing with us tonight. As usuals the chat line is open so if you have some comments, some questions, if you want to chitchat amongst yourselves, if you want to sort of comment, by all means use the chat. Try to keep it clean. We usually try to share the chat later on but sometimes it's not always possible. Ensure that, as Graeme said, if you want everybody to read it make sure you put your setting in such a way that everybody can read it. If you have a question that you would like us to address, even though we often run out of time and we have to ignore them, put them instead in the Q&A. Okay? And the usual housekeeping, the usual disclaimers. If you're watching this webinar it's being broadcasted from Ontario so whenever we refer to legislation, I should have given that to you, Graeme. You can probably do it with your eyes closed. This is out of Ontario. We're referring to Ontario legislation, mainly. Keep in mind that while we do our best to provide you with accurate information, it can get stale dated. Today is April 6, 2022 and also keep in mind that the information we provide you is general in nature. It may not apply to your situation. It may not resolve your situation so make sure that you retain and consult the experts to give you answers that work for you. Now you may notice that it appears that I forgot to introduce our condo twins. That's because the condo twin is flying solo tonight. We only have with us tonight Graeme MacPherson and I'm going to have the immense privilege of being the other twin. The evil twin.  

Graeme: So there you go. I get to hold my good twin title still for another day.

Rod: Yeah, that's right. So thanks for being with us. David has the month, not the month off, tonight. He couldn't join us tonight so we'll have to do without him. Which means that you're going to hear more of me. Sorry. Okay, Graeme, at the risk of disappointing people 30 second update on COVID.

Graeme: Okay. I will be quick because we're not here to talk about COVID today but it wouldn't be one of our webinars without Graeme's COVID Update. This is basically just a reminder to everybody that most of the formal requirements from the Provincial regulations are no longer in place, as we are in the roadmap exit stage, but it still remains very, very important to see what your local municipality, or your local health region, is recommending. So what we've got here in these slides, which are going to be posted, we get to that as quick as we can, are the links to some various municipalities or health regions that we recommend you looking at. I think my COVID update, encapsulated, is just make sure you are aware of what your local requirements are.

Rod: Right. You can get these updates by going to the Condo Adviser website. You press the COVID tool at the top and then when you scroll down you pick the slide you would like us to be in. Right now we're the exit COVID step and it's going to give you all the information that you need to have. But if I go back to the slide that we had a minute ago here, Graeme, I'll give you an example. Ottawa has very recently issued a strong recommendation that masks continue to be worn indoors, especially in settings where there's crowds or where social physical distancing is difficult to maintain. So what we do know is that condo corporations have an obligation to abide by public health recommendations and so you have this one in Ottawa. But you really need to go to each one of your own sort of public health chapter, I'll call it, and see what are the recommendations. In the Ford nation area, I'm not going to define what that is, a lot of the public health advisors are simply telling you, we're following the Province. So if you're in one of those well then you follow the Province. It's easy. If you're somewhere that's a bit sort of more remote, like in Ottawa, you may have to adapt your policies. Okay, so that's for that. Enough time about COVID. I want to dive into the thick of it. We're going to talk about common expenses, chargebacks and legal fees and how you can collect those. What are the tools you have available to collect them? We're going to talk about various sort of common expenses. Of course there's the regular common expense which is really the monthly condo fees. Right? Those are the ones that are easy to understand and, for the most part people are able to pay them, and if they don't pay them there's ways of making people pay. We'll talk about that. There's also statutory chargebacks and those are the chargebacks that find their basis, their authority, in the Condominium Act. So there's various sections of the Condominium Act that specifically provide that you can chargeback this expense or that expense. The first one that comes to mind is the insurance deductible in certain instances. So the Act tells you that you can charge those back. Then there's what I call the declaration based chargebacks. Those are more along the lines of if you have in your declaration a requirement to do XYZ and an owner doesn't do XYZ, and there's an indemnification provision in your declaration that says you can charge it back, then you may be able to charge it back. So that one varies from condo to condo and that's the one that gets abused the most. So anyways, we'll park that. We'll address that in a minute. Another important type of chargeback that is really getting everybody excited, I guess, are the legal fees. Obviously sometimes you need to retain a lawyer to help you collect something. Sometimes that means you need to pay your lawyer. In a perfect scenario you'd be able to chargeback the legal fees to the owner. Like why would the rest of the ownership have to pay for our good services when this unit is the one to blame? Those are the various types of chargebacks that we will cover today and I just wanted to give sort of this overview. Okay.

The first segment is mine. I want to talk about the irregular common expenses. Under section 84 of the Condominium Act, it provides that every owner shall contribute to the common expenses in the proportion sets in the declaration. So there's really two places that you can find the ability to charge something to an owner. It's either in the Condominium Act or it's in the declaration. In section 84, as I said, specifically provides that an owner has the obligation to pay and it goes further. It actually provides that the owner has to pay even if, and then there's a couple of them. You often hear an owner saying, for instance, I don't have to pay for the gym. I don't use the gym. Or, why do I pay the same amount towards the elevator when I'm on the second floor? I never use the elevator. So the owners have to pay their share as set out in the declaration, even if they've waived or abandoned their rights to use common elements, and even if they have a claim against the corporation. I'm suing the corporation. You owe me $10,000.00, for whatever, and I'm going to sue the corporation and so therefore I don't have to pay my condo fees until I set this off. Until I get my $10,000.00. That's not a thing. You have to pay regardless of whether you have a claim. This other one's an interesting one. The owners have to pay their common expenses even if the declaration, or the bylaws or rules, restricts someone's ability to use a common element. I'll tell you why I find that interesting. During this COVID time a lot of corporations adopted a rule, or a policy, that would close the gym let's say. Or that would require someone who wants to use the gym to wear a mask or to show proof of vaccination. So these rules, these policies, these bylaws were restricting an owner's ability to use a common element. So some owners would actually pushback during these COVID times and they would say, wait a second. This policy, this rule, this bylaw is preventing me from using the gym, or using the pool room, or whatever it is, or imposes on me an obligation to show vaccination. So in essence, you're preventing me from using the common elements, I'm not going to pay for that. That is not a thing. You have to pay and fight it out later. Keep paying in time. Fight it out later if required. Okay. I'm almost done sort of the overview here but I like the excerpt from the Friend case. This excerpt exists in many, many other cases, but the reason why the Condo Act puts in place all of these mechanisms to collect and to collect even against someone's will, almost, the reason why that exists is because common expenses are the lifeblood of a condo corporation. If a condo corporation does not have a source of revenue, the operations of the corporation will come to a grinding halt. The Condo Act is designed in such a way to safeguard and ensure the financial viability of condo corporations in a manner that balances everybody's rights and interest. So that's a quote I really liked because it kind of explains to you why it is so important and why condo corporations can sometimes be so aggressive in their demands to be paid. If you don't pay the piper, the piper's not going to play. Another excerpt that I really like, to keep in mind for tonight's discussion, comes from the Amlani case where courts recognized that the whole system is built in a way to ensure that the collectivity pays what it has to pay and to avoid when defaulting owner imposing on all the innocent owners certain costs. So imagine this. If an owner's not following the rules, you need to hire a lawyer, you need to go to court, it's going to cost $10 - $15,000.00, $20,000.00. Why are we all paying for that when Graeme is the one who brought into the condo corporation an overweight dog? Why do we all have to pay? So the system is built in such a way that we're trying to protect the innocent owners. Okay, I think I'm turning to you for this slide, Graeme. Am I right?

Graeme: I think on our agenda the next one is the overview of condo liens but I'll do this if you want.

Rod: Yeah, I moved it around because I felt like it fit here.

Graeme: So let's do it. As Rod had alluded to before, the other types of sort of quote/unquote common expenses that we're going to be talking about are chargebacks. So specific chargebacks. Not your usual monthly payments but instead specific instances where the condo corporation is owed a specific amount of money, usually stemming from some sort of repair. That's the most usual cause. But that's the other item we're going to be talking about at large here tonight. So I want to start with statutory chargebacks. If you look at section 92 of the Condominium Act it will set out that there might be certain circumstances where an owner is responsible to do certain unit repairs or maintenance, or certain common element repairs or maintenance even. Section 92(4) says that if an owner is required to do any of that work, and they don't do so within a reasonable time, the corporation is able to go in and do that work and they're able to charge the costs of that work back to the owner and collect it in the same way as a common expense. So anytime that the Act or the declaration says that something can be recovered in the same manner as a common expense, at that point we need to start thinking, we are going to treat this in the same way that we would treat that regular first of the month payment. The other example of a statutory chargeback we've got listed here are insurance deductibles. So in the event that there is damage that takes place to a unit or common elements, and it stems from one of the units or due to the act or omission of somebody in a unit, and this is obviously going to depend on what your corporation's bylaws say in terms of whose fault it is and who has to pay. But the Act tells us that in the absence of such a bylaw, if there's been an act or omission of an owner that causes that sort of damage, then the corporation's insurance deductible amount can be charged back to that owner, and again, collected in the same way as a common expense.

Rod: That section 105 and, Graeme, I'm sorry. You did send me an updated slide and we're now looking at the prior version of the slide. I'll put the right slide when the time comes to be posted. So that's section 105 and then the other one was legal fees.

Graeme: Yeah. We're going to get a little more into this in greater detail later. But there's kind of two types of legal fees I want everyone to keep in mind. Legal fees related to enforcing compliance. So if you've got rules that say no smoking, or no Airbnb for example, and the condo has to hire its lawyer to enforce that rule, like Rod said, it doesn't seem fair that everyone should have to pay for that but there is a special way that these types of legal fees get treated. We're going to be talking about that in a little bit greater depth. Then the other types of legal fees are legal fees related to collection of common expenses. So, for example, let's say an owner hasn't been paying their monthly common expenses and the condo needs to get a lawyer to come help out and collect that, those lawyer's fees are much more easily collectable, I'll say for now, as common expenses.

Rod: Right. So two categories. Legal fees incurred to collect common expenses and legal fees incurred to ensure compliance with the rule and we're going to drill down in a couple of minutes. Okay?

Graeme: Yeah. When you're not looking at the Act, the next place you can look to see if we can charge this back as a common expense is the declaration. Most declarations have what's called an indemnification provision which is a statement that basically says any cost that the corporation incurs as a result of the acts or omissions of an owner, or someone in their unit, can be charged back to that owner's unit in the same way as a common expense. It's usually a pretty big blanket statement and how far you can enforce it sort of depends situation from situation. But then declarations often have kind of smaller, much more specific and tailored provisions with respect to indemnification for very specific things. So it might be that if the declaration says you have to maintain your unit at a certain temperature and you failed to do so, any costs that the corporation incurs as a result of that, are going to be charged back as a common expense. I think generally speaking, the more specific and the more drilled down it is, the probably easier it is to enforce. Whereas the more broad statements, you're kind of rolling the dice a little bit. The other place where you can find if something is a common expense, or chargeable in the same way as a common expenses, is to look at what is usually classified as Schedule E in a declaration. Sometimes the letter changes but it's a list where it will list out everything that makes up the common expenses.

Rod: Right.

Graeme: Then the last item here are fines and administrative fees and whether these can be charged back as a common expense. I think a lot of corporations tend to do this. Like if there's an NSF fee for a mispayment or anything like that. At the end of the day, what I'll say is that every situation is going to be based on the specific facts of that situation, but you need to make sure if you're going to try and charge something back as a common expense that you actually have the authority to do so in your governing documents.

Rod: Right. The takeaway, I think, for fine's is just once and for all you cannot fine owners. You cannot fine owners. If you're going to have an administrative fee, sometimes an administrative fee is a disguised fine. You're not making any progress here. But if the admin fee is an actual cost to the corporation, if there's a cost, then we're talking and we should have a look at that. So basically what we've done up to this point, we've talked about the general sort of common expenses and how they work and why they work the way they do. Graeme covered the chargebacks. Where you can find these various chargebacks. If it's statutory based. If it's declaration based. Now you're probably wondering, okay so let's apply this knowledge here. Yes. What do we do if an owner doesn't pay one of those. Whether it's a common expense or whether it's a chargeback. So the owner is failing to meet their obligation to pay common expenses, what mechanisms does a corporation have to force that collection? Other than cajoling, where's the stick, Graeme?

Graeme: So the stick is the condominium lien and as we'll discover it's quite a powerful tool. So what we see here is that we've written a condominium lien as a security interest registered on a unit's title that secures the condos ability to collect outstanding common expenses. What that means in practice is that if there is a lien registered against your condo unit, it will show up as a statement on the title of your unit. If you want to sell your unit the buyer is going to look up your unit's title and they'll see there that there's a statement that says, oh geez. Graeme actually has a condo lien registered. I guess this unit owes money. So that's going to likely interfere with your ability to sell the unit or at least your ability to collect all the proceeds of the sale. That's what makes it a powerful tool. For one, that it's registered on the title of your unit, but I think what makes it even more powerful is that it can be collected and acted upon in the same way as a mortgage. That's a fancy way of saying that just like your mortgagee, if you don't make the payment of the condominium lien within a reasonable amount of time, the condo corporation can in fact sell your unit and use the proceeds of that sale to make itself whole again. It is quite a powerful tool and it can be registered without you having to consent to it, and in fact, despite your protests against it. The question then becomes what does this very powerful tool cover? It sort of covers three main things. I guess four but I'll go into them. It covers the common expenses that you owe which haven't expired. I'm going to talk about that in just a second. It covers any future defaults of payment after the lien is registered and it covers interest and it covers legal fees. But, again, we're going to have a whole discussion on legal fees in a bit. Now, I did mention that what it covers is common expenses owing that haven't expired yet. What the Act tells us is that a lien expires 3 months after the default which gave rise to the lien. So we're going to be talking about a case that goes into this in a little bit more detail, but in general, the rule is that once the amount is owing and not paid we're considering the timer starting there and if 3 months go by and it's not been paid and no lien's been registered, the corporation may have lost it's right to lien for that amount. Now, does that mean you still don't owe that to the condo? No. Does that mean it can't go on your status certification? No. You still might owe that money but it just wouldn't be covered by the lien.

Rod:  Right and a lot, folks, is going to turn on when the default first occurred. A lot's going to turn on that and the default is when the sum of money was owed and payable and failed to get paid. Now if you're dealing with regular monthly fees, and Michelle's going to talk about that in a couple of seconds, but if you deal with regular monthly fee, it's the first of the month. So it's easy. If somebody skips the first of the month, the window of opportunity opens up right there. 3 months, you got to register a lien. But what do we do if you're dealing with a chargeback? I think Josee is going to talk about how does she sort of keep track of that 3 months for the chargeback. In a minute we're going to talk about that case where a corporation took more than a year to advise an owner that they had to pay the deductible amount. How does that work? Okay, back to you, Graeme.

Graeme: This is the last little bit here is that in order to register a lien, because it is such a powerful tool, but you do need to follow a specific procedure which requires you to send written notice of the lien to the owner at the address for service that they have registered with the condominium. So you need to make sure that that is done at least 10 days before the lien is registered. Then once a lien is registered, assuming you don't get payment, you need to send notice to that registration to any encumbrancer on the unit. When I say encumbrancer, the most common example is if the unit has a mortgage, but there are cases out there that maybe sort of expand on what this definition could mean, and this is my long winded way of saying it may not be a simple as just the mortgagee. So it's important if you find yourself, as a board member, as a property manager, in this circumstance where you're going to be sending out a notice of lien, to probably involve your legal counsel just so you can make sure everyone is getting notice who needs to.

Rod: Right, and that's the important part. A lot of people think I'm just going to send a letter as a notice of lien. Or I'm just going to send an email as a notice of lien. There's also sorts of requirements and some of them are fatal if you don't need them. So 3 months to register your lien. That may be fatal. Before you register the lien you have to give at least 10 days notice. So you can't just contact your legal counsel on the 29^th of the month. So the 10 day before notice is important and that notice has to meet all of the requirements under the Act and must be provided to the right people. In a minute we're going to talk about the Chin case, I think, where notice was not given to the non-registered owner who was the spouse of the registered owner. She didn't even live there anymore but she was the spouse of the registered owner. She lived off-site, and she was not advised of the lien, and she was able to punt the lien. I'll take it as her right. So I mean don't cheap out on the process because it may be fatal and you may lose the ability to collect. Okay, now all my guests are wondering why have we been called here. I mean it's been 30 minutes and we haven't said a word yet. This is where we turn to them. We just need to set the table.

Graeme: I know when I'm needed.

Rod:  Okay, perfect. So, Michelle, I'm going to turn to you first and I'd like you to help us understand. The colours may have changed so you may not recognize your own colours. So the process to lien a unit. What's the typical process that you follow at Wilson Blanchard Management?

Michelle: Sure. Yeah, happy to walk everybody through that. We're going to hit on some of the topics, or points that Graham, kind of reinforced some of those points that he hit on as well. So as we stated, payment of common expenses should always be due on the first of the month. That's I think standard across the board. Everybody has their common expenses monthly fees due on the first of the month. That's incredibly helpful because when we're doing the 90 day, or 3 month calculation, when you start at the beginning of the month it's easy to calculate that timeline. So once you have owners that go into arrears, as a courtesy try and send your owners an arrears notice of some sort. So over the years we've been, WB has made an effort to go paperless. So we do have a policy that everybody gets an emailed arrears notice. Just that we're doing less and less paper and mail these days. We do have several exceptions for one off, like chargebacks, special assessments that people aren't used to having to pay on a regular basis. So always send a courtesy in arrears notice. We send it for every month we do arrears, at the beginning of the month, so if you default one month you'll get an arrears notice until that amount is cleared. A big tip that I have as, a manager, the board gets some financial statements on a monthly basis and they are responsible for reviewing and understanding them, but as a manger we also have a responsibility to make sure that our boards know what they're looking at. Not everybody's a chartered accountant and understands things well. So ensure you review your arrears monthly with the board. Keep them up to date and let them know when a unit may be in a lien position. Boards don't like when they get into the elevator with someone who's just received a notice of lien in the mail, and maybe they didn't know that the notice of lien was going out, and now they're stuck riding to the 16^th floor being yelled at about this legal letter and all the extra fees they just got. So let your board know when someone's going to be in a lien position so they can prepare for maybe that unpleasant situation that may arise. That's the beginning steps and then once we get closer, let's say we've passed 60 days in arrears and we're approaching that 90 day period where you need to consider doing a lien, before you proceed with your lien ensure that the amount is actually collectable. So you can actually lien for it. Check with the corporation's lawyer. We've talked about all the different, Graeme talked about the different items that can be processed in the lien so make sure before you follow through with that that it actually can be liened because there's nothing worse than having to write off legal charges or reimburse an owner for something that shouldn't have gone through in the first place. One tip I have for giving to boards is be proactive. You don't want to be in the midst of a situation and finding out that you can't proceed with the lien when maybe you're trying to collect a large sum of money. So be proactive. Approach the corporation's lawyer. Have them look at your declaration, your bylaws if they apply and have them give you a summary, a legal opinion on everything you can lien on and maybe some areas that you're corporation documents may be lacking. That way you have a blueprint of how to address your collections every time you need to deal with it.

So what's the process once we hit that deadline and someone does have to go to the lien? Like we said, you want to give time because there's the notice of lien and then you need at least 10 days for that owner to receive it and have the ability to pay, but you don't want to leave it to the last minute because if it does need to be a registered lien you want to give your lawyer time to compare that paperwork and register it before the 90^th day. So our timeline is approximately, you want to be aware of what arrears need to go notice of lien by the 75^th day, and like we discussed involved legal counsel. Title search is very important. You want to make sure that it's going to the mortgagee. A lot of the times they do step in and clear those arrears before the lien even gets registered, on behalf of the owner if the owner can't clear it. So you can avoid getting into further legal issues a lot of the times because the bank will come in and clear those amounts. The lien has to be registered by the 90^th day. So we use 90 days assuming that every month is 30 days. Obviously depending on the month it could be more than 90 days but it needs to be registered by the end of the 3^rd month. So again, you want to make sure that you're giving the lawyer time to, if they don't collect it when the notice of lien is sent out, give them a couple of days so they have time to prepare the paperwork and register the lien. Don't leave it to the 30^th or the 31^st of the month. Just be courteous. So usually, in our office, I would say our accounting department is looking at their arrears at the 10^th business day of the month to start preparing, and again, it will depend on stat holidays and weekends but about the 10^th business day they're looking at who they need to potentially prepare notice of liens for so that that timeline is followed.

Lastly, I just had a couple little management tips to hit on. Once a lien goes to the lawyer, so once that lien is registered, owners must deal directly with them to discharge the lien. So if an owner calls you upset, they want to set up a payment plan, they want to discuss the charges, direct them to the lawyer handling the lien. We have a policy in our office where we don't collect anything further. So once it goes to the lawyer we won't collect any further payment from you. You have to discharge that lien with the lawyer before you can resume preauthorized payment with the management company.

Rod:  One of the reasons, Michelle, for that is just to keep everything sort of clear because otherwise the signals may get crossed and the owner thinks that they're paying something and they think it's resolving the lien, and maybe they'll call the manager and the manager will say, yeah, yeah, it's only $550.00 that you need to pay but in the meantime there's some legal fees that were added, there's some interest that must be calculated. So when somebody's in default, once it's in the hands of the lawyer, it's best to just shift it all to the one central person, the lawyer's office, to deal with the arrears, the chargebacks, the interest and so on and so forth.

Michelle: Agreed. Yup. Two other quick tips. When collecting common expenses management can apply fees paid to the oldest amount. The downside of this is that you kind of, for certain people who are maybe always in arrears, you're kind of always saving them from that lien position. So use your discretion and I say unless otherwise directed, if someone sends you a cheque and says April 2022 fees, it has to be applied to the April 2022 fees. So that's what unless otherwise directed means. But if it's just preauthorized just apply it to the latest amount. Lastly, clearly communicate your arrears and lien policies to your owners with each budget package, newsletters, AGMs. Communication is the key to successful communities and so I don't think you can ever over-communicate. But just make sure that owners are aware of what your collections policy and how liens are handled if they do get themselves into that sort of situation.

Rod:  Okay, that's wonderful. Thank you so much. Let me unpack just a couple of things that I want to flag. So Michelle spoke of 90 days. The deadline is really 3 months. That's what you have to keep in mind. Now I did a quick calculation to see if February would bring us below 90 days and it's exactly 90 days. So in most cases maybe 90 days and 3 months is one and the same but it's really a 3 month deadline. So if it's on the fourth of August, that's the default and you just count 3 months from that period of time. So I just wanted to clarify that. Something else that Michelle said that's very, and Graeme said it as well I think, in many, many, many cases registering a lien will trigger the bank to come forward and pay the arrears because they want to keep their priority. So that is why this is a very powerful tool and I had one last thing to add, something you said. Well, it'll come back. Okay, perfect, wonderful. Thank you, Michelle. I'm now going to turn, Roger just hold your seat just a second. I'm going to do the same exercise with Josee first. So Michelle spoke of the monthly arrears. Right? How she collects the monthly arrears. Josee, any differences when we're dealing with a chargeback? So obviously the chargeback is not triggered by the first of the month, necessarily, so any sort of precautions to keep on top of liening chargebacks?

Josee: Absolutely. The process for chargebacks is similar but I would say that there are three different scenarios, generally, where you're going to contemplate a chargeback. Some of them are planned, right? There's planned maintenance in every unit. The condominium corporation has agreed to buy, in bulk, a bunch of filters, or a bunch of batteries, or chimney cleaning services, that kind of stuff and they know in advance; that they've received a quote. It's going to be this much per unit. So you've broken it down. You communicate with your owners. They have signed some kind of document, a note that says, yes I do want to opt into this, yes I will agree to pay, yes I allow you to take the money out of my condominium account, my bank account. So that's one type of planned maintenance, and despite the fact that you might have an agreement and it'll tick in that box that says yes I will pay, sometimes it occurs that some owners decide that they're not going to cooperate. Typically when we do chargebacks at DES Services, either planned or otherwise, we make the date payable to the first day of the following month. Much for the same reason. It simplifies the process of trying to figure out that 90 day period, or that 3 month period, otherwise you end up with a bunch of different dates and reminders all over your calendar trying to tell you who owes what when and how far are they into their debt. So that's the first kind of chargeback that you can expect. Those are easier to handle. This is the kind of service that people are asking for. They want it. You've issued an invoice and away you go.

There's also, of course, the kind of chargeback that comes as a result of damages. A lesser pleasant thing to deal with but let's imagine for a moment that someone's crashed into the garage door. They took it off the tracks and there's damage. There's going to be a service call so always, always with chargebacks it's about communication, always. So you communicate with the owner. Find out if they're okay to start off with and commiserate about the miserable thing that just happened. They're shaken up but you're also going to then follow up with an incident report, likely, and then the service report from the contractor who came in. The invoice for the contractor who came in for the emergency work who probably has know told you it's going to be $500.00 to do a permanent repair on the door. So in your communications with these people try to always let them know. Here's how much it's cost so far. Here's how much is coming and always try to open the dialogue and have them confirm with you that they understand that they're going to be responsible for this payment when all the invoices come in. Again, you know a transmittal letter goes out with an invoice saying here are the fees that we've incurred. Here are the charges that the condominium corporation has paid, on your behalf, and your invoice is due on the first day of the next month. Assuming that the first day of the next month isn't in a day or two. Be somewhat reasonable there. If this event is happening before the 15^th of the month typically we give them until the first of the next month to pay. If it happens towards the end then we sometimes bump it to the first of the following month. It's always, always about communication and about keeping everything in writing if possible. It's okay to have that conversation to commiserate and to give information but always to follow up with a notice in your own file, something in writing, because you're going to want an audit trail. Your auditor's going to want to know if you failed to secure these payments, they're going to want to know that you tried to and how you tried, and how far you're into the process. Your lawyer certainly is going to know if you get yourself into a lien position you're going to have to turn over this file to a lawyer and say, listen, I've made attempts of payment this many times, at these dates, here's where we're at.

Rod: Right and that is crucially important. That's the first thing I always ask when chargeback lien file comes my way. Okay, so how often have we asked for the payment? When have we asked for the payment? What proof do we have of that? Are we using an email address that hasn't been responded to in forever? Do we even have the right email address at this point in time? So that's crucially important. Anything else, Josee, before I finally get to Roger?

Josee: No. I think we should give it to Roger.

Rod:  Okay, perfect. So, Roger, I feel bad because you've been waiting in the wings and usually we call you in at the AGM. You show up just for your moment and then you go and so I apologize for that, that you've been waiting in the wings for so long. But what I wanted to hear from you, Roger, is any sort of things to keep in mind when it comes time to reporting these chargebacks, or these liens? And I specifically concerned about situations where between the default and the collection there may be a fiscal year, or 2 fiscal years, and so how does that appear in our audited statements?

Roger: Liens typically secure a receivable. So you'll see it on the balance sheet in accounts receivable. We find that when receivables are secured by a lien we get comfort from that that we're reasonably assured that collection will be achieved. We get quite nervous when we come in and we see a bunch of balances in the 90 day column and we would always ask the status of those. In most cases they have been liened and in some cases managers, you can only say fair attitude towards the receivables. We would not expect condominium corporations to show bad debts, however, in a lot of cases we are unsatisfied that collection is reasonably assured so we would insist upon setting up an allowance for those accounts, which hopefully gets reimbursed the following year when we're proved wrong and collection is paying. That's about it, Rod.

Rod: Okay. I got two more questions, if I may, and I'm going to see if I can do this discreetly but I may not be able to do discreetly so I won't show that. I didn't have time to redact it. But I'm going to ask you two more questions. So let's assume that there's a unit that's not paying their common expenses because they're in arrears and they're missing in action. Let's assume, just to make round numbers, that they're contribution towards the common expenses if $5,000.00. You know when you look at the audited statement and you look at the operating statement of general funds or general operation funds, would we see I guess the budgeted amount we were supposed to collect $500,000.00 in common expenses this year, but we're missing $5,000.00. Would we see that, the distinction, the difference between what was budgeted for collection of all fees from everybody versus what we collected when Susan didn't pay her share? Would we see a delta there?

Roger: In the statement of operations you will see the full condominium fees for the full year. The uncollected portion will be on the balance sheet, or statement of financial position, in accounts receivable.

Rod: Hmhmm. Okay. Another question that we often get is this. Think of chargebacks. Let's assume that this year we budgeted $30,000.00 for plumbing expenses, generally speaking. But let's assume that there's a specific incident that took place and there's another $10,000.00 of expenses that was incurred by the corporation but was charged back to the owners. So our budget was $30,000.00 for plumbing. In reality the corporation paid $40,000.00 but was able to collect $10,000.00 from the one owner. What's the amount that would appear in that audited statement? Would we show that the corporation in totality had to cut cheques for $40,000.00, or since we were able to recover from an owner, do we just show the $30,000.00 that the corporation in fact was responsible for?

Roger: In the statement of operations you'd typically just see the $30,000.00 and the $10,000.00, if it's uncollected, would be on the balance sheet or statement of financial position. In the cash flow statement you may see the $40,000.00 but in the statement of operations you would typically see the $30,000.00. Some managers are limited by their accounting system and we see them showing the $40,000.00 as an expense and the $10,000.00 as a revenue. We would typically look to see the $30,000.00 as the expense.

Rod: Right. So you would typically focus on the actual expense that the corporation is responsible for. The fact that there was a cost neutral exercise in the background where the corporation paid for something then recovered from someone, that would typically not appear in the statement of operations.

Roger: That is correct.

Rod: Okay. Anything else. Any sort of words of wisdom, Roger, or something else to keep in mind when we're dealing with chargebacks or liens? Any sort of problems that you've encountered?

Roger: The only problem I think we find is where managers did not take the steps to put a lien in place, and they end up with a receivable, and hopefully that would be collected but sometimes it's not.

Rod: Okay. Perfect. Well you're welcome to stick around, Roger, or you're welcome to go as well. It's really up to you but that was the section that I needed your light on. So thanks for that and, again, stick around if you want but if you have to go, because I know you probably have 2 or 3 AGMs lined up for tonight, it's really up to you.

Roger: I'll stick around and learn from you. Thank you.

Rod: Oh, perfect. Thanks so much. Folks, if you have questions for Roger, put them in the Q&A. I see that Graeme has cleaned the Q&A. I don't know how you manage that.

Graeme: It was a whirlwind of typing. My keyboard is on fire.

Rod:  Well done. Okay, so there's a couple of tools that we haven't touched upon to ensure collections. So of course we have the lien. We've talked about that. Then we're going to talk about the power of sale in a minute but there's two more, Graeme, that I unfortunately did not make the slide deck and it's the ability to collect rent and it's the loss of a right to vote. Do you want to tackle these, Graeme, and we'll add a slide later on.

Graeme: Yeah. Those are two really powerful extra kind of tools that come with the lien. It really is a big deal to have one registered because in addition to the consequences I referred to earlier, one other one that Rod just referred to is if a unit has a lien on it and there is a tenant at that unit, the corporation can write to that tenant and say that a lien's been registered in the amount of X so from now on, until the lien is paid off, you are required to pay rent payments directly to the condo to help pay down that debt and you no longer make your rent payments to your landlord, the owner of the unit. That's something that, again as you're probably seeing a theme here, to be done without the owner's permission. So that's one of the other very powerful tools. Then the other item that Rod just referred to is that if a lien's been registered on your unit, you're unable to vote at the AGM, or in any owner's meeting. So that generally puts you in a position, as an owner, where you're not able to take part in really a meaningful way of the discourse or the democratic process. So it's going to be in your interest to make sure, if you can, that you can pay the lien off.

Rod:  Right. In fact, the loss of the right to vote is not triggered by the lien, it's triggered by the arrears in fact. So if you're in arrears for 30 days or more, then you can attend as an owner, you can attend a meeting but you won't be able to vote. In fact you can't even sign a requisition for a meeting because you've lost your voice. If you want to have a voice you have to put your money where your mouth is. You have to pay your common expense and then fight later. Pay and fight later. Well don't fight at all. In about 29 seconds, the power of sale, the process, Graeme.

Graeme: So the power of sale process is, in my view, one of the items of last resort in a lien. Ideally if a lien gets registered, nobody wants to have to sell someone's unit out from under them. Normally either the mortgagee will step in and pay it or the corporation will enter into a payment plan on reasonable terms so that the owner can pay back the amounts owing, at a rate that makes sense. However, if the lien goes unpaid long enough, the corporation may want to consider taking that drastic step. What that essentially means is that the corporation, through a rather long process which I don't think we're going to get into here, suffice it to say it involves numerous steps and the court, and is kind of long and arduous. The corporation can obtain an order giving it vacant possession of the unit, giving the corporation the power to go into the unit and prepare it for sale. Eventually sell it and recoup the funds it required to pay for its legal fees and the common expenses owing and then give whatever is remaining back to that owner.

Rod:  Right. This is not going to be done overnight, and as Graeme said, it's usually a last resort kind of tool but at one point you have to sell and sometimes it's the only way to recover what's owed to you. Then you get a new owner in and hopefully that new owner will be more diligent in paying their condo fees. So I want to talk about the Amlani case here for a second because that's the one that sort of spun everything on its head. The Amlani case is you're at the intersection of the collection process for arrears, under section 85, and the compliance process when you want somebody to abide by certain rules. That's under 134. So the facts of the case are like this. Mr. Amlani, who was a smoker in a smoking building where smoking was allowed, was smoking. Some neighbours complained. There may have been some seepage. Whatever it was and so the corporation sent a legal letter, as you folks call it sometimes, and said you've got to stop smoking because it's causing a nuisance. The letter came with a bill and said basically something, I'm going by memory now, but because we had to get involved it's going to cost you $600.00. This is the cost of the compliance letter and Mr. Amlani didn't pay that letter, and he didn't have to pay for that letter, and he tried to enter into discussions with the corporation to try to sort of reach a resolution on the very issue, which was the smoking issue. Then that compliance letter turned into another one and another one and then, before you knew it, the legal fees were at $25,000.00. At that point we still didn't know if Mr. Amlani was smoking, if the smoke was disturbing the neighbours, if he was in breach of any rules. But basically, and this was done, and was unfortunately done by certain condo corporations and by certain lawyers, what was happening was there is that they were shifting the debate from a compliance debate, are you smoking? Is that bugging someone? Is that in breach of something? Is this causing nuisance? The had shifted it from that to, oh my goodness. You haven't paid a common expense. The legal letter that we sent you and now we're going to lien it, and we're going to lien your unit, and now we're going to sell your unit. In that case, despite the fact that Mr. Amlani had moved out temporarily and was no longer smoking in there, the corporation was moving towards the sale of the unit. To this day, nobody had ruled on whether or not the smoking was causing any form of nuisance. That's the old days. Some corporations used to use collection to bully an owner into compliance.

Now in the Amlani case the judge looked at that and said, listen, there's two separate mechanism. One of them is the collection mechanism under section 85. If someone is in arrears of actual common expenses you can lien, you have 3 months to do it, and the lien will cover the legal fees. So do rest assured, folks at home, that if you are liening and if you're collecting or attempting to collect common expenses, the legal fees will be covered, will be captured by the lien and you'll be able to recover that. So that's under section 85. But the judge says, in this case this is really not about failure to pay common expenses. This is about an alleged failure to abide by the rules. Where you smoking? Where you smoking too much? So on and so forth. So in that case the judge said, we're falling under section 134, and under section 134 to be able to recover legal fees, or costs, or expenses, you first need to be able to obtain an award for damages. You first need a judge to agree with you that there's a breach to the rules, or there's a breach to the bylaws, there's a breach to something. So the Amlani case really sort of distinguishes the kinds of chargeback and the mechanisms that exist to collect these chargebacks. Now there's a raging debate out there as to what Amlani meant. For the purists, the ones who read Amlani the strictest, they say you cannot charge your legal fees in a compliance matter unless you have an order. So whenever you send a letter, your dog is overweight, or you're sending a letter, you're not supposed to smoke in the lobby, or if you're sending any letter that pertains to compliance and rules, the purist will tell you, you can't charge your legal fees. The traditionalists will tell you, no. Amlani failed because of the very weak indemnification provision. So if you have a strong indemnification provision that says we can chargeback anything we want to chargeback, anytime of the week, just because we can, it's in the declaration and if you breach any of our rules we will chargeback. So the traditionalists tell us that if you have such a strong indemnification provision, you're good to go. The takeaway, I think for us will be this, charging back legal fees in the context of a breach to a rule, these kinds of legal fees are no longer a slam dunk and they no longer are guaranteed. You can no longer use legal fees to bully an owner into submission, into compliance. Having said that if you're legal fees, and the last thing I'm going to say is this, is that if I'm sending you a demand letter that says you can't smoke in the lobby and you comply and that's the end of the problem, in many cases the costs of my letter may just have been the cost of doing business. If you secured compliance you may just want to move on. Like everybody else that hires a lawyer, you've got to pay for the services. Now, if you don't secure compliance that's a different story, and then you can go and get the order and then you can go and collect both the legal fees and you get compliance, and legal fees, and costs, and interest and all of that good stuff. All this to say, and I think that's the takeaway here, that you have to walk in this with your eyes wide open. If we're going to retain a lawyer to send a demand letter, let's not do it on a petty unimportant element, because we may no longer be able to recover the fees as we used to. So that's kind of the Amlani case.

We're kind of running out of time to because I, again, overpacked the agenda and we're running out of time to talk about the O'Regan case. But what's interesting about the O'Regan case was that this was a statutory chargeback. We were seeking to collect the

Graeme: Insurance deductible.

Rod: The insurance deductible. Exactly. So in that case we fell under 85, not under 134. Anyways, so folks, it's 6:00 o'clock. We're running out of time and it was very rapid fire of information. Hopefully was useful. I'm going to go around the table to thank our speakers. Is there anything that we need to add, Graeme? Is there something we forgot?

Graeme: We didn't get to everything we had planned. You'll see when these get put online that there's some slides but I think we got the main points for what you need to know about the liens and everything else was just going to be extra icing on the cake, and that could be for real condo ... who download the presentation.

Rod:  Right. So the presentation will be uploaded on our website and, for instance, you'll see a section where we talk about the kind of legal fees you can collect in small claims. The kind of legal fees you can collect at the Superior Court of Justice. The kind of legal fees you can collect at the Tribunal. But that's going to be for another day. Thank you so much, Graeme. Josee Deslongchamps of DES Services, one of my favourite condo manager, in Ottawa, maybe the favourite but don't tell anybody else, thanks so much for joining, Josee.

Josee: Happy to be here. Parting words, always need to be kind, be fair, act in good faith, negotiate in good faith, make sure everyone's on the same page, keep good records, get in writing.

Rod: Thank you so much. Michelle Joy of Wilson Blanchard. Michelle, this is your first time here but we usually ask for words of wisdom, or parting words at the end, so you're in the hot seat. Any sort of parting words for people with respect to liening and chargebacks?

Michelle: I don't know how to follow Josee's fantastic parting words. You know what? Communicate, communicate, communicate. Be transparent. Like I said during my little bit, I think communication is the key to a successful community and relationship with your boards, management and owners, so implement it in every aspect including liens and chargebacks.

Rod:  Wonderful. Thank you so very much, Michelle. Roger Ouseley of Ouseley Hanvey Clipsham Deep, thank you so much for having shed some light on the numbers and how we crunch them and thanks for taking the time to join us tonight. Any parting words, Roger, before we go?

Roger: I'm happy to have been here and just stay safe, everybody.

Rod: Yes. Stay safe. We've been, for what's it worth at the garden, we've been with Ouseley Hanvey Clipsham Deep forever, for as long as I remember and so they're dear to my heart because they are able to explain numbers in a way that I can't do it. Okay, so folks, next webinar is on May 4^th. There's two episodes left to the season. May 4^th, oh May the Fourth, nice.

Graeme: It's Star Wars day.

Rod: Yeah, it's going to be also in June but for now the next one is on May 4^th. The information will be posted on condoadviser.ca. You will need to register again and to register you need to click on the webinar tab. There'll be a way for you to register. The other thing I want to say is that this webinar, and the presentation, will be posted but just give me at least until Monday. Don't ask me tomorrow when it's going to be posted. It's going to be posted maybe on Monday and you'll be able to access it by clicking on the webinar here. My parting words, folks, we're not out of the woods yet. We're entering wave 6. There's a lot of emotions about masks and distancing and all of that. Just be kind to one another. We had the big discussion yesterday at my AGM about how you can ensure that people are comfortable. Not everybody's comfortable in the elevator with people that don't have masks so let's not make the debate about wearing masks or not wearing masks. Let's make that debate about caring for one another. Let's make that debate about being comfortable with our neighbours, being courteous to our neighbours. Before entering an elevator I always ask, do you mind if I ride with you? Being the President of the corporation, often I get a no, don't ride with me, but that's a different story. It's got nothing to do with the masks. So folks, let's be patient with each other. We're almost out of the woods but not quite yet. Thank you so much. We have gone overtime by 4 minutes. I don't take your time for granted. I love doing these I hope you found it useful and we will see you on May the Fourth. Take care, everybody.

There you go folks. Merci beaucoup, Josee. Thank you, Michelle. Thank you, Roger. Thank you, Graeme. Thanks, everybody, on the line. Time to go have supper with wine. Thanks.

Graeme: See you everybody.

Rod:  See you later.

Josee: Bye.

Rod:  Bye. See you later, folks. Good night.