STRATA ARREARS COLLECTIONS: LIMITS TO THE FORM F

Often, strata corporations are reluctant to do anything about an owner in arrears of strata fees or special levies. Collecting money is not a fun task. If the owner has ignored all requests for payment, the strata corporation may be at a loss as to what to do next. As a result, some strata corporations simply choose not to do anything until the arrears are large, the strata corporation is in a cash crunch, or the owner sells their strata lot.

When a strata lot is being transferred, section 256 of the Land Title Act requires that a Form F – Certificate of Payment be filed at Land Title Office. The Form F is provided by the strata corporation and certifies either that no money is owing to the strata corporation or that money is owing but arrangements have been made to pay or dispute the amount. The Form F is usually requested a few days before the strata lot transfer is to be completed, which means the owner needing it is pressed for time. If monies are owing, the strata corporation may refuse to provide the Form F until all of the outstanding arrears (including fines and the reasonable costs of remedying a bylaw contravention) are paid. The owner can decide to pay the full amount, try to settle with the strata corporation for a reduced amount, or pay the money "in trust" to the strata corporation or to the court. Money paid in trust is set aside until the dispute is resolved by an Order of the Court or an Arbitrator, or by an agreement between the strata corporation and the owner. Payments into trust usually cover, at least, any outstanding strata fees, special levies, and interest charged on the strata fees.

Because no owner can transfer a strata lot without a Form F, strata corporations took comfort in the fact that they would be able to collect, at a bare minimum, strata fees, special levies, and interest on strata fees at some point in the future. Sometimes, the wait was short because owners in arrears of strata fees often got behind on their mortgage, which resulted in the bank starting foreclosure proceedings. When the strata lot was sold by the bank at the end of the foreclosure proceedings, strata corporations would withhold the Form F until all of the monies owing by the registered owner were paid. This process was desirable to strata corporations because the bank incurred all the legal fees necessary to force the owner out. When the strata lot was finally sold, the bank paid the strata fees, special levies, and interest on strata fees (provided there was a valid interest bylaw). In some cases, through negotiation, the bank would agree to pay some of the fines and legal fees in order to obtain the Form F. Eventually, the strata corporation would have a new owner, one who would hopefully pay their strata fees on time.

In light of the case 2003 British Columbia case, Peoples Trust Company v. Meadowlark Estates Ltd. ("Meadowlark"), strata corporations can no longer take this sit-back-and-wait approach. The Court in Meadowlark held that the change of ownership arising from a Vesting Order obtained in a foreclosure proceeding does not trigger the requirement under the Land Title Act to file a Form F – Certificate of Payment. This case was appealed, and the decision was upheld in 2005 by Madam Justice Gray. This means that a Form F is no longer required where a sale is completing at the end of a foreclosure proceeding in accordance with a Vesting Order. As a result, the strata lot may transfer to the new owner without the strata corporation ever having the opportunity to force the previous owner or the bank to pay the strata fees, special levies, interest or fines. When the strata corporation finally decides to do something about collecting the arrears, they may find themselves dealing with new owners, who have nothing to do with the previously unpaid arrears. It is unclear whether the strata corporation must pursue the previous owner or can make the new owner pay. In either case, however, it has become more difficult to collect arrears.

Following the Meadowlark decision, strata corporations need to be vigilant about the collection of arrears. As soon as arrears have accrued, they should be taking the necessary steps in order to secure their claim by filing a lien against the strata lot in arrears. The strata corporation can then decide to take further steps, or sit and wait until title is being transferred. This is because, while a Form F is no longer required in certain circumstances, filing a Form H – Acknowledgement of Payment is necessary before transferring a strata lot encumbered by a Certificate of Lien. By filing a lien, the foreclosing party must include the strata corporation in the foreclosure proceedings, thereby allowing the strata corporation to assert its full claim to arrears of strata fees, special levies, interest on strata fees (if there is a valid interest bylaw), and the reasonable costs of filing and enforcing the lien. If no lien is filed and there is a foreclosure, the foreclosing party does not have to include the strata corporation in the proceedings, and no one will ask for a Form F. When the new owner moves in, he or she will deny any responsibility for paying the arrears accrued by the previous owner. This can be avoided if the strata corporation files a lien in accordance with the Strata Property Act within a reasonable period of time after arrears have begun to accrue. Veronica Franco, Clark Wilson.