This article provides an overview of the power of sale process under the Condominium Act, 1998, S.O. 1998, c.19 and the Mortgages Act, R.S.O 1990, c.M.40. A power of sale process is the common route to collect arrears, if a registered lien remains unpaid. There are generally ten (10) steps in this process.
Step 1 – Lien
The Condominium Act, 1998, permits a condominium to register a lien against a unit, when a unit owner falls into arrears. Beside monthly common expenses, the unit owner may be responsible for other expenses incurred by the condominium, such as charge-backs or clean-up costs.
This lien right grants the condominium priority over almost every other claim against the unit. Consequently, for a lien to be registered, the Condominium Act, 1998, requires a formal procedure be followed. The process begins with the condominium sending a “Notice of Lien” or “Form 14”. This prescribed form sets out the unpaid amount of common expenses, any interest, and all reasonable legal costs associated with the collection of the arrears. The form must be served upon all owners of the unit and their spouses. Upon the expiration of 10 days, the condominium then may register a Certificate of Lien on the unit’s title. To discharge the lien, the full amount of arrears, interest and legal fees must be paid. The vast majority of unit owners who fall into arrears pay at some point during step one. What happens if a unit owner does not pay a lien? For those rare cases, a power of sale process awaits.
Step 2 – Notice of Sale Under Lien
Technically, after 15 days of a lien being registered against a unit, a condominium may start a power of sale process. However, our firm generally recommends that a condominium wait 90 days before initiating a power of sale process.
After 90 days, our firm prepares a Notice of Sale under Lien, which is a prescribed form under the Mortgages Act. It sets out the particulars of the arrears, description of the property, details of the default, and the claim for principal, interest and other costs. Within the Notice of Sale under Lien is a “redemption date” which is 45 days from the date of the Notice. During the redemption period, the condominium is prohibited from taking any further enforcement steps against the unit owner. Upon the expiration of the redemption period, a condominium then issues a Statement of Claim with the Superior Court of Justice, to continue with the sale of the unit. Most power of sale processes end with the unit owner or lender redeeming prior to a final sale.
Step 3 – Issuance of a Statement of Claim (Action for Possession)
After the redemption period has expired, the next step in the power of sale process is to draft a “Statement of Claim”. The Statement of Claim is a court document which is required to obtain “possession” of the unit and legal authority to sell it.
The drafting of a “Statement of Claim” usually takes one (1) week to complete. To draft a Statement of Claim, our firm must review the unit’s title, the declaration, by-laws and rules, the statement of account and the status of the unit’s occupancy.
Once complete, the Statement of Claim is forwarded to the Ontario Superior Court of Justice where it is reviewed and received by the Court. This process is called “Issuing” the Statement of Claim.
Once issued, the Statement of Claim is forwarded to a process server and served personally on each defendant listed in the Statement of Claim. Generally, the only people named as defendants in the Statement of Claim are the unit owners.
To have the Statement of Claim drafted and served normally takes 7-21 days.
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