The primary rules for determining what are - and what are not - amounts and claims owed to a Manitoba condominium corporation for which the corporation is entitled to exercise a lien against a unit owner's condominium unit and such owner's interest in the common property, are determined by what's in The Condominium Act (Manitoba) (the "MCA"). These rules may be summarized as follows:
- Section 162(1) of the MCA - where an owner fails to contribute to (i) the project common expenses and/or (ii) project the reserve funds, the corporation "has a lien" against the owner's unit and interest in the common property for:
(a) the unpaid amount;
(b) that interest owing on the unpaid amount; and
(c) reasonable costs and expenses incurred by the corporation in collecting or attempting to collect the unpaid amount.
Section 162(3) of the MCA provides that where a corporation has registered a lien (against the owner's title), the lien secures both the amount which was unpaid (which led to the arising of the lien) plus, "automatically", future amounts that become owing by the owner on account of common expenses and/or reserve fund contributions, together with interest and reasonable legal costs.
- "common expense" is defined in Section 1(1) of the MCA to mean (i) an expense related to the "performance of a condominium corporation's mandate, duties and powers", and, (ii) "an expense specified as a common expense by (the MCA) or by a condominium corporation's declaration.
It is unlikely that one would have any difficulty in determining whether or not an amount owed by an owner was - or was not - a contribution to the condominium reserve fund. But what about common expenses? Although the wording "an expense related to the performance of a (condominium) corporation's mandate, duties and powers" is itself fairly broad, defining common expenses as including amounts specified as such in the declaration opens up - at least in theory - the concept considerably. Yet, it is this writer's "gut feeling" that some of the claims which a corporation might have against an owner which were listed and considered in the above-mentioned Alberta Manor Case, would not likely held by a Court to be "common expenses". Examples might be:
- Section 162(6) of the MCA provides that a condominium corporation has "the right to enforce the (registered) lien in the same manner as a mortgage is enforced under The Real Property Act". Although not explicitly stated in the MCA, it is reasonable to assume that an amount owed by an owner to a corporation which was not enforceable via the aforementioned lien, would, in most cases, be enforceable against the owner by way of an action in debt. Clearly, this was the position taken by the Court considering the matter in the Alberta Manor Case, and it is most likely that the same situation would occur in the context of a Manitoba condominiumized property.
- Sections 13(1)(h) and 13(1)(i) of the MCA - these provide that a condominium declaration must contain a statement or specification of (i) "the proportions in which the unit owners are to contribute to the common expenses, expressed in (the) percentages allocated to each unit", and, (ii) "the proportions in which the unit owners are required to contribute to the reserve fund, expressed in (the) percentages allocated to each unit".
Many - if not most - common expenses will relate to the corporation's rights and obligations to maintain the common property, including common property which happens to be situated within or running through a unit owner's unit. Where all the common property benefits or is available for the benefit of all of the unit owners, it is logical that all of the owners should contribute. That also goes for expenditures which may be made out of a corporation's reserve fund which benefit or are capable of benefitting all owners. Although perhaps not immediately obvious, the same reasoning would apply to the situation where a condominium corporation is obliged to take steps to remedy a problem which has been caused by, or which is the responsibility of one or two - typically one only - unit owner(s), but the remedying of the situation by the corporation benefits all owners. As long as the unit proportions are considered to be reasonable by those buying and selling the units (and those financing acquisitions of units), the arrangement "works". Readers who are familiar with condominium projects will know that the "usual" basis for determining unit proportions is the relative size and amenities (and perhaps the relative desirability of the location) of and pertaining to each unit, in relation to the same "qualities" applicable to the other units.
One question which arises from a consideration of how Sections 13(1)(h) and 13(1)(i) operate, is whether or not, either at the outset, or subsequently by way of a duly effected amendment, a condominium declaration could specify some - and probably most - of the common expenses to be allocated to owners based on their respective unit proportions, with other expenses allocated on a different basis. This could be (i) equally amongst all unit owners and/or (ii) 100% to a particular unit owner or owners who are responsible for the situation or "problem" which has led to the corporation having to expend monies to remediate a malfeasant owner's (or owners') misconduct, negligence or just general "bad behaviour". The above-mentioned Saskatchewan Albony Case dealt with a condominium community where it was desired (at least on the part of some of the unit owners) to have some common expenses allocated on the basis of the unit proportions (on the theory that such expenses benefitted each unit owner in some way measurable or referable to the value of a unit owner's unit, with other expenses being allocated equally amongst all owners (on the theory that all owners, regardless of the relative value of their units, benefitted equally from the incurring of such expenses). From the reasoning in the Manor Case, it appears that the corporation could have legally allocated common expenses on the two different basis, but did not follow the legislation's requirements to properly amend the corporation's "constating documents" so as to properly effect such a modification. That would suggest that in Manitoba, such a (two or more) pronged basis for allocating common expenses would be legally effective, or could be made so, if the proper procedures for amending the declaration were observed. Or they were put in place at the outset when the condominium was created.
- We know that a Manitoba condominium corporation's lien can (and indeed must) be registered against a recalcitrant owner's title, and that the lien may be realized in the same manner as a mortgage under The Manitoba Real Property Act, which means that the corporation can sell or foreclose upon the owner's title. But what about the priority that such lien will hold in relation to other competing monetary claims against the owner's interest?
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