Strata Can't Collect Legal Fees for First Demand Letter Without Lien

When an owner fails to pay their strata fees the strata corporation is forced to go to collections against that owner. Continued failure to pay could result in the strata selling the owner's strata lot to collect the arrears. In that case, the strata's full legal fees are also collected from the owner: The Owners, Strata Plan KAS 2428 v. Baettig, 2017 BCCA 377

But what happens if the owner pays after the first demand letter and before the strata has to take any further steps, such as filing a lien against the owner's strata lot? Does the strata collect its legal fees from the owner? Short answer, no (unless maybe the owner doesn't dispute the legal fees and pays anyway). 

Long answer: this debate was resolved by the BC Court of Appeal in: 625536 BC Ltd v Owners of Strata Plan LMS 4385, 2021 BCCA 158. 

The facts are fairly simple: The strata is a commercial strata in Surrey. The owner owned several separate strata lots and fell into arrears. The strata hired a lawyer to send 4 demand letters for payment under section 116 of the SPA. The total amount claimed by the strata was $11,095.71, with an additional $800 for legal costs for each strata lot, for a total of $2,600 in legal fees. 

The owner paid the $11,095.71 on time. The strata refused to cash it and wanted the extra $2,600 as well for the legal fees. The debate continued as to whether the owner was required to pay the legal fees of the initial demand letter. 

The debate was decided by the BC Supreme Court on April 2020. This decision was appealed and the BC Court of Appeal upheld the previous decision. 

The main case that the parties relied upon was the Baettig decision, quoted above. 

The Court of Appeal confirmed that Baettig was useful because "it illustrates how the interpretive framework that [the court of appeal had] described  should be applied. In arriving at its conclusion and in addressing the issue before it, the Court carefully and, at some length, addressed each aspect of this framework. It addressed the language of s. 118, the language of other provisions in the Act, the predecessor provisions to s. 118, the purpose of the Act, and two earlier decisions of the Supreme Court of British Columbia. It was the interaction and confluence of these various considerations that led the Court to its conclusion. 

The court of appeal noted:

[24] On its plain language, s. 118 is limited to circumstances where a lien is registered and reasonable legal costs and disbursements are added to a Certificate of Lien. Section 118 does not purport to provide strata corporations with any independent basis to claim or collect such legal costs and disbursements. 

. . . 

[28] The language of s. 112(2), however, does not assist the appellant. Section 112(2) is a necessary step "[b]efore the strata corporation registers a lien", and the notice that is required must indicate "that a lien may be registered if payment is not made within" two weeks. 

[29] I consider that ss. 112(2) and 118 operate coherently. Whatever legal costs are incurred in preparing a s. 112(2) notice may be "added", under s. 118, to the "reasonable legal costs" that are included in a Certificate of Lien when a lien is ultimately registered against an owner's strata lot. 

 . . . 

[49] I am satisfied that the meaning of s. 118 is clear and that that [sic] meaning is consistent with both the scheme and the purposes of the Act. To be clear, I am of the view that s. 118 does not provide the basis for a strata corporation to recover the legal costs it incurs in complying with s. 112(2) of the Act unless and until it registers a lien and adds the amounts it claims to a Certificate of Lien. Accordingly, I would dismiss the appeal. 

This decision may prompt more strata corporations to send out their own demand letters for payment, rather than risk having to pay the legal fees if the owner pays after the first demand. A lawyer isn't required for the demand letter, in any event. However, hiring a professional to send the letter ensures that it is done correctly. If the demand letter is flawed the whole collection and lien process can be invalidated and the strata may lose on collecting strata fees that were validly owed to it. 

Each strata facing this dilemma will have to weigh the cost of the arrears vs. the cost of hiring professional help and whether it is worth it. 

The Civil Resolution Tribunal website: civilresolutionbc.ca is also a great resource for stratas that want to handle the initial demand letter. The CRT's solution explorer is a great resource and has specific resources with respecting to collecting arrears from owners and will even help the strata write a demand letter. 

TAEYA FITZPATRICK Taeya Fitzpatrick has specialized in strata law for most of her practice, has won cases for her clients in the BC Supreme Court, the BC Court of Appeal, and assisted with a client succeeding in defending a Civil Resolution Tribunal claim. Taeya offers full services to a strata corporation or a strata owner from redrafting the strata’s bylaws, collection of outstanding strata fees or other charges, issues with bylaw enforcement, to amending the strata plan. For more information on the services provided, you can reach Taeya by email, phone: 250-763-4323, or at her Web Page.