Condo Lien vs Your Mortgage Lender in Ontario: Who Is Paid First

When condo fees go unpaid, two creditors can end up competing for the same unit: the condo corporation and the mortgage lender. Owners and lenders both want to know who is paid first if the unit has to be sold.

The short answer is that a condo lien can rank ahead of a mortgage, but only if the corporation follows the rules. This article explains the basic rule, the timing requirement that matters most, and what it means in practice. It is general information, not advice on a particular file.

The basic rule: the lien can come first

Under s. 86(1), a registered condo lien has priority over every registered and unregistered encumbrance, including a mortgage. That is a strong position for the corporation.

The lien arises automatically if an owner does not pay common expenses. It covers the unpaid amount plus interest and reasonable legal costs and expenses of collecting. Registering a certificate of lien gives the corporation priority in recovering the money.

There is a catch. Under s. 86(5), the lien loses that priority over an encumbrance unless the corporation gives the required notice. The details of the notice should be confirmed in the Act or with a lawyer.

The three-month rule

The lien expires three months after the default that gave rise to it unless the corporation registers a certificate of lien within that time. The Ontario certificate of lien form says the lien does not secure common expenses that became due more than three months before the certificate was registered.

The corporation must also give the owner written notice of the lien at least 10 days before it registers the certificate. In practice, a corporation that waits too long loses priority. If the lien expires, the corporation loses that priority.

What a Court of Appeal decision showed

A Court of Appeal for Ontario decision from 2017 illustrates how strict the timing is. The lien lost priority over the first mortgage because the certificate was registered after the three-month period had passed, and the corporation had to repay $4,530.98 that it had deducted.

Under s. 134(5), costs from a compliance order are added to the common expenses for the unit. The Court held that this does not extend the three-month period, so the corporation must still perfect its lien in time.

What this means for owners and lenders

• Owners: unpaid fees can create a lien that outranks your mortgage, and the amount can include interest, legal fees and certificate costs.
• Owners: paying at any point until the unit is sold requires the corporation to discharge the lien.
• Lenders: a corporation that is late registering its certificate may lose priority, and amounts it deducted may have to be repaid.
• Both: priority depends on dates and notices, so the timeline of each default matters.

Whether a lien has kept or lost priority in a given case depends on the exact dates, the notices given and the documents involved. That is a question for a lawyer who can review the file.

What to do next

If you are an owner behind on fees, the safest move is usually to deal with the arrears early. Contact the corporation, because a payment plan may be possible. Do not assume your mortgage lender will be unaffected, since a registered lien can have priority over it.

• List the dates of each missed payment and when any certificate of lien was registered.
• Get a written breakdown of what the corporation says is owed.
• Check whether you received written notice at least 10 days before registration.
• If you are a lender or a buyer, ask a lawyer to review the lien dates and notices before relying on priority.
• Consider a status certificate when buying; it shows the budget, a statement on the reserve fund and any legal issues, may cost up to $100 including taxes, and must be delivered within 10 days of the request and payment.

Frequently asked questions