Condo Corporation Lien and Mortgage Power of Sale in Ontario

Falling behind on both condo fees and the mortgage creates a double problem. Each creditor has its own rights, and they can affect one another. Owners often ask who is paid first and who is allowed to sell the unit.

This article explains the condo corporation's lien, how it ranks against a mortgage, and what happens to the money in a sale. Details depend on your declaration, your mortgage and the timing, so use this as a map and have a lawyer review your documents.

The condo corporation's lien

If an owner defaults on common expenses, the corporation has a lien on the unit and its common interest for the unpaid amount, plus interest and reasonable legal costs and expenses of collection.

The lien does not last forever on its own. It expires three months after the default unless the corporation registers a certificate of lien within that time. The corporation must give the owner written notice at least 10 days before registration.

Costs can grow. Damages or costs awarded to a corporation against an owner or occupier, plus its additional actual costs of obtaining the order, are added to the common expenses for the unit. That means a dispute with the corporation can increase the amount secured against your unit.

Lien priority versus the mortgage

A perfected lien has priority over every registered and unregistered encumbrance, even one that existed before the lien arose. This surprises many owners, because the mortgage was usually registered first.

The corporation must give written notice of the lien to each registered encumbrancer, and this notice is treated as a condition of priority. Your mortgage lender may therefore hear about the lien from the corporation.

The exact priority outcome for a given unit depends on whether the corporation followed each step. Whether the amounts in a particular lien qualify is a question for a lawyer who can read the current Condominium Act, 1998 and the registered documents.

Who can sell the unit

The lien may be enforced in the same manner as a mortgage. So the corporation may have a sale route similar to a lender's, subject to the rules that apply.

Your mortgage lender may also sell. If the mortgage has a power of sale clause, the lender may sell once you have been in default for at least 15 days and at least 35 days' notice has been given to everyone with an interest in the property. If the mortgage has no such clause, the statutory power of sale applies after three months of default and 45 days' notice to interested persons.

The notice of sale is given on Form 1, Notice of Sale under Mortgage. If you receive one, the clock is running.

What happens to each debt in a sale

In a mortgage power of sale, proceeds go first to the principal and interest owed to the lender, the expenses of the sale, and other encumbrances in order of priority. Any surplus goes to the mortgagor.

Whether a shortfall remains after the sale, and whether you are personally liable for it, depends on the documents and the sale price. A lawyer can confirm this for your situation.

What to do next

• Collect your latest condo statements and any lien notices or certificates
• Collect your mortgage statements and any notice of sale
• Note the date of each default and each notice received
• Contact the corporation about a payment arrangement before costs increase
• Contact your lender early about options
• Ask a real estate lawyer to review priority and timing

If you are considering insolvency options, note that a secured creditor generally keeps its right to enforce, subject to a court order. A Licensed Insolvency Trustee can explain how that applies to you.

Frequently asked questions