When a condo owner of a mortgaged property fails to pay their monthly condo fees a lien may be registered to protect the condominium corporation’s interest. This prevents unpaid condo fees from becoming uncollectible.
Chargebacks are amounts levied against a suite because of unit owner or occupant actions. They may relate to late payment fees, collection costs, legal fees, repair costs or other expenses directly attributable to a condo owner or tenant.
Condo corporations may seek to recover legitimate charges incurred because of an owner or tenant through a condo lien. It is improper to use a condo lien for collections when lacking proof that an owner or tenant is responsible for the claimed expenses. With chargebacks there should be clear proof that amounts claimed are proper before using the lien process for collection.
Condo liens are powerful instruments for collection of condo fees that should not be abused by condo corporations. This power has been abused by some condo corporations which have registered a lien without a legal right to do so.
When a chargeback is assessed and owed along with monthly condo fees, a condo owner may choose to pay the monthly fees and not a disputed chargeback. When monthly fees are paid in the next month these monies may be applied to the chargeback which are the oldest arrears. As the owner continues to make payments they are typically applied to the oldest arrears. After a number of months outstanding amounts may show as owing for monthly condo fees rather than a disputed chargeback. Where a chargeback is in dispute, condo corporations should maintain proper records to avoid inadvertently registering a lien for fees legitimately being disputed.
Courts have ruled that a condo corporation should not refuse to accept payments after a lien is registered. Should payments be refused they lose the right to charge interest from the date of refusal.