Whether a Strata Can or Cannot Recover Legal Fees in Enforcement Efforts
When a strata issues fines or fees against owners, it often seeks legal assistance in doing so. The recent decision of 625536 B.C. Ltd. v The Owners, Strata Plan LMS4385, 2020 BCSC 633 (CanLII) reviews when a strata is or is not entitled to recover part or all of those legal fees.
In the case, three owners in a commercial strata had all received letters demanding payment of strata fees which were in arrears. The strata had obtained legal advice and in its original demands demanded the strata fees which were in arrears plus legal fees. The legal fees were not specified.
One of the owners provided a cheque for the arrears, but no amount for legal fees. The strata rejected the cheque and clarified that it claimed $800 in legal fees. It later changed this mount to $620. The two amounts claimed came without explanation to the owner.
The questions before the court was whether the strata could unilaterally charge an owner for legal expenses in the circumstances, being outside of any legal proceedings, and whether there was any right to claim for legal expenses when the strata made a demand for payment of arrears and payment was offered without the need to lien the owner or commence any legal action.
The Court noted The Owners Strata Plan KAS2428 v. Baettig, 2017 BCCA 377 in which it was held that s. 118 of the Strata Property Act does allow a strata to add the actual reasonable legal costs of registering and enforcing a lien to the amount of the lien. The Court further noted that The Owners Strata Plan KAS2428 v. Baettig made it clear that legal costs cannot be claimed or recovered under the related sections of the Strata Property Act in the situation of pre-lien efforts to collect.
The Court noted that legal costs claimable on a lien is subject to an assessment process whereby the reasonableness of the legal costs claimed can be assessed. No such mechanism exists for legal costs claimed without a lien. S. 112 of the Strata Property Act clearly provides that before a claim to the Civil Resolution Tribunal can be made or a lien can be filed, owners have two weeks to respond to a demand for payment. In other words, the legislation provides a two-week period where payment can be made before any process in which legal costs for a demand could be claimed.
The Court concluded that strata was required to accept payment of the arrears and was not entitled to claim legal fees or reject such payment because it did not include legal fees. The ability to claim legal fees did not arise unless and until:
- the strata gave notice under s. 112 of the Strata Property Act;
- the owner failed to make payment of an amount properly demanded; and
- the strata properly filed a lien against the debtor-owner.
625536 B.C. Ltd. v The Owners, Strata Plan LMS4385 is a reminder to both strata corporations and tenants to carefully think about the proper process for collecting amounts owed to the strata. Legal fees are not recoverable as a matter of course on the initial demand. The ability to recover legal fees is provided for in the Strata Property Act in specific circumstances after specific actions have occurred.