When is a Chargeback “Lienable”?
This is one of the most frequent questions we get at Deo Condominium Lawyers, and the answer is not so black and white. With respect to chargebacks, in general:
- Any chargeback must be an actual cost incurred by the corporation. A corporation cannot levy a fine or a penalty against an owner.
- All chargebacks require proof or evidence that the owner is responsible for the costs being claimed.
- If a chargeback is not lienable, it may still be enforceable and recoverable by way of a claim in the Superior Court of Justice.
- If you are unsure whether a chargeback is “lienable”, then you should consult legal counsel, as every case will turn on its own individual facts.
Here are a few things to consider when determining whether a chargeback may or may not be lienable:
- The Condominium Act tells us that we can only lien for arrears of “common expenses”. Therefore, for a chargeback to be lienable, it must fall within the definition of a common expense, which can be found in section 1 of the Condominium Act:
“common expenses” means the expenses related to the performance of the objects and duties of a corporation and all expenses specified as common expenses in this Act, in the regulations or in a declaration.
- Lienable chargebacks are also sometimes authorized in a corporation’s Declaration. The provision which authorizes a chargeback for costs incurred is called an indemnification or an indemnity provision.
- Section 92 (Repair After Damage): If an owner fails to carry out their repair obligations, then the corporation must do the work necessary to carry out the owner’s obligation. The costs that the corporation incurs in carrying out those repairs may form the basis for a lienable chargeback.
- Section 98 (Alteration Agreements): If an owner fails to comply with a section 98 agreement and the corporation incurs costs as a result of the owner’s non-compliance, then those costs may form the basis for a lienable chargeback.
- Section 134 (Court Orders): If a corporation is successful in obtaining an award of damages or costs against an owner, then those damages or costs together with any additional actual costs to the corporation, may form the basis for a lienable chargeback.
- Not all indemnity provisions are created equal. For example, some indemnity provisions authorize lienable chargebacks for an owner’s breach of the Declaration, By-Laws and Rules. Some indemnity provisions authorize lienable chargebacks for damage caused by an owner’s act or omission with respect to the common elements only. Some indemnity provisions do not authorize lienable chargebacks at all.
- Determining whether or not a corporation can lien pursuant to an indemnification provision in its Declaration requires careful reading of the provision, and an analysis of whether the specific facts fall within the scope of that provision – in most cases, the corporation’s solicitor should be consulted prior to liening for a chargeback.