by Ksena J. Court and Francis N. J. Taman
In our blog article, Lending to Condo Owners – Risky Business?[1], we reviewed the decision of Master Schulz in Bank of Montreal v. Bala.[2] In that decision, Master Schulz disagreed with prior decisions respecting the priority of legal fees paid by condominium corporations over mortgages. That prior line of cases stemming from the King[3] decision states that if the bylaws permit legal fees incurred by the condominium corporation to be considered a “contribution” or “assessment”, then they will take priority over the mortgage.
Master Schulz’ ruling in Bala was appealed and the decision of Justice Feehan was released earlier this year.[4]
Justice Feehan reviewed a number of prior decisions respecting the priority positions, including the King line of cases. It was held that the powers granted to a condominium corporation and the wording of the Condominium Property Act, (the “Act”)[5] are to be read strictly.
Section 42 of the Act provides that where a condominium corporation takes collection steps, it may recover legal expenses “from the person against whom the steps were taken”.[6] If a caveat is registered, then it may recover “from the owner” all reasonable expenses with respect to the preparation, registration, enforcement and discharge of the caveat.
In this particular case, the condominium corporation brought an application to vary the Redemption Order granted in foreclosure proceedings brought by the Bank of Montreal. Justice Feehan held that those legal expenses were properly payable by Bank of Montreal because that was an application brought “against” Bank of Montreal. However, they did not become a “contribution” and did not attract statutory priority over the mortgage.
Further, any legal costs relating to the preparation, registration, enforcement and discharge of the caveat[7] are not to be equated to a “contribution” and given priority over a registered mortgage. “Those charges remain recoverable only in personam ‘from the owner’”.[8]
We understand that a dichotomy has developed between the North and the South in the treatment of legal fees claimed by a condominium corporation. In the Southern areas of the province, the King decision continues to be followed – ie. legal costs of the condominium corporation can gain priority over the mortgage if the bylaws permit them to be considered as a “contribution” or “assessment”. In the North, the practice of the Court has been to disallow the condominium corporation’s claim for priority of its legal costs over the mortgage, unless the legal costs were incurred in an application specifically “against” the mortgagee. It is likely that this dichotomy will continue to exist until such time as the issue is addressed by the Court of Appeal.
Ksena J. Court and Francis N.J. Taman practice commercial and residential foreclosure and secured and unsecured debt collection at Bishop & McKenzie LLP in Calgary, Alberta.
[1] https://albertaforeclosureblog.com/tag/foreclosure-alberta-condominium-fees-condominium-plan-no-0210034-v-king/
[2] 2015 ABQB 166 (Alta. Master) (“Bala”).
[3] Condominium Plan No. 8210034 v. King, 2012 ABQB 127 (Alta. Q.B.) (“King”); see also our blog on the King decision at https://albertaforeclosureblog.com/category/foreclosure/condominium-fees/
[4] 2017 ABQB 38 (Alta. Q.B.) (“Justice Decision”).
[6] Section 42(a) of the Act.
[7] Section 42(b) of the Act.
[8] Justice Decision at para. 82.
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