Unpaid Condo Fees in Ontario: Can a Lien Outrank Your Mortgage?

Falling behind on condo fees can feel less serious than missing a mortgage payment. In Ontario, though, the condominium corporation has strong tools to collect, and they can affect both you and your mortgage lender.

This article explains in plain language how the lien works, when it can rank ahead of a mortgage, and how a power of sale may follow. Your situation may turn on details, so use this as a general guide and confirm the specifics with a lawyer.

When the corporation gets a lien

If an owner defaults on common expenses, the condominium corporation has a lien against the unit and its common interest for the unpaid amount (Condominium Act, 1998, s. 85(1)).

The lien covers the unpaid amount, interest and all reasonable legal costs of collection. That means a small arrears balance can grow if the corporation has to take steps to collect.

The three-month deadline and the 10-day notice

The lien expires three months after the default unless a certificate of lien is registered within that time, and the owner must get written notice at least 10 days before registration.

• The corporation must register a certificate of lien within three months of the default.
• You are entitled to written notice at least 10 days before the registration.
• If the deadline is missed, the lien can lose its priority over a mortgage.

How a lien can rank ahead of your mortgage

A registered condo common-expense lien has priority over every registered and unregistered encumbrance on the unit, including an earlier mortgage (Condominium Act, 1998, s. 86(1)). This is unusual, because mortgages and other charges generally rank by the order of registration.

There are limits. The lien loses priority over a mortgage if the corporation does not register it within three months, or does not give written notice to every registered encumbrancer on or before the day it registers the certificate of lien (s. 86(3), (5)). A condo lien also does not have priority over a Crown claim other than a claim by way of mortgage.

Power of sale and the Mortgages Act timelines

The corporation can start its own power of sale process 15 days after registering the certificate of lien.

Where a mortgage contains a power of sale, the lender cannot give notice of sale until the default has continued for at least 15 days, and cannot sell until at least 35 days after the notice is given. The 35-day notice must go to every person having an interest in the mortgaged property, and it must be in Form 1, Notice of Sale under Mortgage.

As a borrower in default, you can generally stop a lender from enforcing the acceleration clause by paying the arrears and the lender's necessary expenses (Mortgages Act s. 22(1)). You can also give written notice requiring a statement of the arrears and expenses, and the lender must answer within 15 days. Once a power of sale closes, that right no longer applies and you are limited to a claim for damages against the lender.

If a sale is under way, the lender must take reasonable precautions to obtain the true market value of the property as of the date of sale.

What to do next

• Check what you owe the corporation and whether a certificate of lien has been registered.
• Look for the written notice the corporation must send before registering.
• Tell your mortgage lender early if you are falling behind, and ask about relief options.
• Keep any notice of sale, since it should be in Form 1 and must give the required time.
• Confirm whether your unit falls under the current Condominium Act, 1998 or the repealed older Act, because older units may follow different priority rules.
• Have a lawyer check the current wording of the statutes on e-Laws before you rely on any deadline.

Acting quickly matters because the timelines are short. A lawyer can review your documents and explain your options.

Frequently asked questions