Changes Coming for Collecting Outstanding Condo Fees and the Recovery of Costs

The amendments to the Condominium Property Actare expected to change who  prepares and registers caveats.

On July 1 2019 section 42 of the CPA will be amended with the word “reasonable” in 42 (b) substituted with “prescribed”. Accordingly, the section will now read as follows:

Recovery of costs

42 Where a corporation takes any steps to collect any amount owing under section 39, the corporation may

(a) recover from the person against whom the steps were taken all reasonable costs, including legal expenses and interest, incurred by the corporation in collecting the amount owing, and

(b) if a caveat is registered against the title to the unit, recover from the owner all prescribedexpenses incurred by the corporation with respect to the preparation, registration, enforcement and discharge of the caveat. 

Also coming into force on July 1 2019 are the Regulations associated with the Phase 2 amendments, and in particular Regulation 74.1 says:

Reasonable expenses re caveat

74.1 The following expenses are prescribed for the purposes of section 42(b) of the Act, up to an aggregate maximum amount of the expenses equal to the original amount owing in respect of the unit:

(a) legal fees and disbursements associated with preparing, registering and discharging the caveat;

(b) the cost of registering and discharging the caveat under the Land Titles Act.

These changes are likely the result of some Property Management companies in Alberta charging excessive fees to condominiums for the registration of caveats, as well as associated “administrative costs” which are then passed back to the unit owner by the condominium. As a result, an owner who missed one month of condo fees (of less than $300) could end up owing over $1000 once a caveat was registered against their title. Accordingly, the government of Alberta instituted this change to allow only “legal fees and disbursements” to be charged back to the owner. 

The new amendments don’t preclude Property Managers, or other third parties, from registering caveats for unpaid condominium fees on behalf of the condominium. However, it does preclude the condominium corporation from charging those costs back to the owner. 

The amendments DO allow for a lawyer to prepare, register and discharge a caveat for unpaid fees and charge that cost back to the unit owner.  As a result, it is likely that condominiums in Alberta will move the service of caveats for unpaid fees to lawyers so that the legal cost incurred can be charged back to the unit owner instead of being absorbed by the condominium itself. 

The amendments also restrict the amount of legal fees that can be charged to “equal to the original amount owing”. A practical result of this change is that lawyers won’t be filing caveats for only 1 or 2 months of arrears as the costs to the condo board would exceed the amount owning and not be recoverable.  

When fees owing are substantial, lawyers will not be able to charge excessive amounts for the preparation, registration and discharge of the caveat. Just because a unit owner owes a considerable amount of fees (i.e. $15,000), that does not justify a lawyer charging the equivalent amount to draft and register a caveat. A Review Officer at the Court of Queen’s Bench would almost certainly not allow it. 

Please contact any John McDougall, Dionne Levesque or Kate Kozowyk if you have any questions on this issue or want to engage our firm to complete a caveat to collect outstanding arrears of condominium fees.