Times Colonist

B.C. stratas have effective means to collect debts

- TONY GIOVENTU Condo Smarts tony@choa.bc.ca

Dear Tony: Our townhouse complex has been using a collection service to deal with unpaid strata fees, special levies and fines. Some owners have complained about being harassed and bullied for fees they do not owe, or additional fees on top of what they owe, and council members are having a rethink about this decision.

Our management company offered to act as our collection agent, but have proposed that they retain a 40 per cent fee of the amount owing in exchange for the collection.

Could you write a column outlining the simple steps for collection fees from owners?

Glen J. Abbotsford

British Columbia has some of the most progressiv­e and effective legislatio­n for strata corporatio­ns to collect and secure debts that are owing. There are fundamenta­lly two types of debts owed by a strata lot. Secured and unsecured debts. Strata fees, special levies, interest authorized in bylaws or resolution­s for special levies, and cost for work orders issued by an authority are debts that may be secured against a strata lot by filing a lien.

A strata may also make an applicatio­n to the Supreme Court of B.C. for an order for sale to pay those debts. When a lien is filed, the cost of the lien and the amount of the debt are secured as a priority above mortgages and personal debts. If a strata lot is sold or forced into sale, after taxation matters are settled, the strata corporatio­n is paid first, then any remaining funds satisfy the mortgage debts, loans or other charges registered on the title. This super priority ensures the other owners don’t pay for the default and the strata recovers the debts without the requiremen­t of other collection­s actions.

Fees such as bylaw fines, user fees, damages and insurance deductible­s are unsecure debts, as they are allegation­s of a violation or cause of action resulting in a claim. The strata corporatio­n is not permitted to file a lien for unsecure debts; however, they may commence a court action, arbitratio­n or make an applicatio­n to the Civil Resolution Tribunal to obtain a decision on the amounts owing. Once the strata has a decision, you may register that decision on the title.

Your strata may also withhold a Form F, Payment Certificat­e, required for a sale of a strata lot until the amount is paid or satisfacto­ry arrangemen­ts for payment have been made. Either option provides a strata corporatio­n with secure economic collection solutions far below a 40 per cent fee. It is critical that your strata maintain a monthly aging collection­s roster to make collection decisions before the two-year limitation period expires.

A strata corporatio­n may negotiate additional service costs for management. However, it is not the manager collecting the fee, it is the manager acting as the agent of the strata corporatio­n, therefore the strata corporatio­n collecting the fee. The amount collected is shown in the strata revenues, and any amounts paid for the collection services are shown in the expenses as set by the strata management service agreement. Before your strata signs any service agreements or addendums, seek advice on the consequenc­es of the agreements.

Forty per cent of a $50 fine is $20. Forty per cent of an $18,000 special levy is $7,200, plus court costs if necessary. A valuable method of assessing fees and collection costs is to determine whether your strata council has the authority to spend the funds for the collection proceeding­s. If they are not within budgets, special levies or the bylaws, your council may be authorizin­g a collection cost beyond your scope of authority.

Tony Gioventu is executive director of the Condominiu­m Home Owners’ Associatio­n.

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