The Limitation Act & Collections Update

1. The Limitation Act & Collections Update PAMA April 17, 2013 Presented byVeronica Franco

2. Limitation Periods: What are they? • Limitation period = time period a person has to file a civil claim • Lose claim if filed after limitation period expired; • Whenever there is a potential legal action, must determine the limitation period and diarize for its expiry to avoid loss of claim

3. Limitation – old system • Limitation periods are set by statute. For most civil claims, the limitation periods were set in old the Limitation Act, R.S.B.C. 1996: • 2 years; • 6 years • 10 years; • 30 years – ultimate • Postponement – discoverability principle

4. Limitation Act (old) & Strata Corporations • Civil Action in debt – 6 years • Any amounts owing that are more than 6 years old are not collectable under the law; • Limitation period regarding debt claims can be postponed if the debtor acknowledges the debt in writing or payment towards the debt is made.

5. Types of “Debt” • There are two types of arrears: • Non-lienable: fines, deductibles, admin charges, NSF, gas, move-in, key fob, parking, and other chargebacks; and • Amounts which can be included under a Certificate of Lien. • Issue: Which are debt claims? • Which are not debt claims? • Why does that matter?

6. Certificate of Lien • A strata corporation can file a Certificate of Lien in respect of the following arrears: • Strata fees; • Special levies; • Interest on strata fees, if there is a bylaw, and to a maximum of 10% per annum, compounded annually; • Reimbursement of costs of work done pursuant to a governmental Work Order • Strata lot’s share of a judgment against the strata corporation

7. New Limitation Act • Effort to “standardize” limitation period legislation across Canada • Limitation period for most claims = 2 years from date claim is discovered; • Discoverability • Postponement • Ultimate limitation period = 15 years

8. New Limitation Act (cont’d) New Limitation Act New Limitation Act Discoverability principle – claim is discovered on the day a reasonable person knew or should have known that: (a) that loss occurred; (b) that the loss was caused by or contributed to by an act or omission; (c) that the act or omission was that of the person against whom the claim is or may be made; (d) that a court proceeding would be an appropriate means to seek to remedy the injury, loss or damage.

9. New Limitation Act (cont’d) New Limitation Act New Limitation Act Section 24 – extends the running of time • Debtor must acknowledge liability in writing of the debt • Partial payment

10. Example: Special Levy due date is June 1, 2013 Owner pays part of levy on February 1, 2015 Limitation period of 2 years starts February 1, 2015 New Limitation Act (cont’d)

11. Section 27 – Expiry of limitation period = bar to non-judicial remedies: Filing a Form G – Certificate of Lien; Witholding a Form F – Certificate of Payment and Arbitration proceedings. New Limitation Act (cont’d)

12. New Limitations Act (cont’d) New Limitation Act • Transition – Section 30 • Any claims that is discovered prior to June 1, 2013 = current limitation period • Any claims that is discovered on or after June 1, 2013 = new limitation period • A claim that arises but is not discovered before June 1, 2013 = 15 year ultimate limitation period starting on the later of June 1, 2013 or the dates determined under s. 21(2) for certain types of claims (minors, disability, conversion, contribution and indemnity, fraud, demand obligations)

13. New Limitation Act (cont’d) New Limitation Act • Shorter limitation period – many pitfalls • Can’t let arrears “linger” on an account • Lienable amounts may not reach a threshold to make it cost effective to initiate a court proceeding

14. New Limitation Act (cont’d) New Limitation Act • Determine when limitation period starts: • Strata fees, special levies – due date set out in bylaws and resolution. • Fines – date of council’s decision? Date result of council’s decision communicated? Date, if any, established in the bylaws? • Damages – date of loss, date council decides to charge back, other date • Move-in fee: moving date?

15. Impact on Collection Practices New Limitation Act • For all arrears that accrue on or after June 1, 2013, the strata corporation will have two years to collect or initiate court proceedings to collect those arrears.

16. Collection Practices New Limitation Act • Be proactive – start sending demand letters early (one or two month in arrears); • File liens early on – at most a couple of months; • If necessary, get a lawyer involved early on even on some smaller arrears – to set a tone. • Strata corporations that are active in collections have fewer and lower A/Rs.

17. Collection Methods New Limitation Act • Passive collection: • Filing a Form G – Certificate of Lien • Withholding a Form F – Certificate of Payment • Another party foreclosure • Active collection • Arbitration • Forced sale proceedings • Small Claims Court

18. Form G – Certificate of Lien • Filing a Form G does not stop or postpone limitation period. • Section 112 demand letter must be sent a least 2 weeks (20 days) before lien is filed • If section 112 demand letter is not sent first, risk that lien is invalid and costs of filing to the account of the strata corporation • File a Form G as soon as practicable • Can only be used for ss.116 & 118 amounts

19. Form G – Certificate of Lien (cont’d) • Why file as soon as possible? • To maintain a handle on the strata corporation’s accounts receivable; • Filing the Lien protects the strata corporation’s priority claims – bankruptcy, proceeds of crime seizures, and foreclosures

20. Withholding the Form F • Can take a long time for a strata lot to change hands; • There are circumstances where a Form F is not required; • Include some non-lienable amounts, such as fines and costs of remedying bylaw contravention, but not damage claims that have not been awarded by court or other chargebacks • Be mindful of limitation periods.

21. Foreclosure • May never happen and if it does, the process can take awhile – keep in mind limitation periods • Collection is accomplished at a minimal cost. • Unless there are enough proceeds of sale to pay all registered charges, fines and other charges are not collectable. • Unless the arrears are needed quickly, this is the most cost-effective collection process.

22. Foreclosure (cont’d) • What do you do if you are served with a foreclosure proceeding? • File a Lien, if one hasn’t been filed already; • Consider whether to respond to the Petition where a Lien is filed – legal costs to defend Petition are not recoverable under the Form G; • Consider whether to start a strata Forced Sale proceeding to prevent a limitation period from expiring.

23. Passive Collection – Limitation Periods • Withholding the Form F and allowing the bank to foreclose does not suspend the limitation period • Therefore, before the expiry of any limitation period, active collection must be pursued.

24. Steps for Avoiding Missed Limitation Periods • Diarize debt for 18 months • Council needs to decide whether to pursue or write off debt • May need legal advice to determine best course of action • If legal proceedings are being considered, contact lawyer at least 6 weeks before limitation period expiring.

25. Legal Proceedings • Section 112 demand letter must be sent before initiating legal proceedings to collect money owing giving notice of proceedings at least 2 weeks before (20 days). • Once the proceedings are started, limitation period not an issue.

26. Small Claims Court • Total arrears must not exceed $25,000. • The procedure is fairly lengthy. There are 4 stages: (i) Filing – Notice of Claim (ii) Settlement Conference/Mediation • Trial • Enforcing the Judgment

27. Small Claims Court (cont’d) • Advantages: • The strata corporation does not need to hire a lawyer. • The strata corporation may be able to obtain a Judgment for all monies owing not just lienable amounts.

28. Small Claims Court (cont’d) • Disadvantages • The Judgment does not give the strata corporation any powers to enforce. • The process is quite lengthy. • You still need to go to Supreme Court if you want to sell the strata lot to collect on the Judgment. • Requires participation of council, particularly at trial • No special priority granted by filing judgment against strata lot – still need a Form G – Certificate of Lien • Generally, no costs awarded.

29. Supreme Court • This process is fairly quick and does not require a ¾ vote resolution to authorize its initiation. The Court proceedings starts with a Petition and involves two stages: • Order for Sale; and • Order approving Sale.

30. Supreme Court (cont’d) • Costs – Reasonable costs under the Certificate of Lien = costs under Civil Rules (Tariff) and not actual legal costs • Tariff costs at Scale B usually work out to recovery of 35% to 55% • If there is equity may pursue actual legal costs, fines and other chargebacks

31. Supreme Court (cont’d) • When do you sue? The earlier of: • The date the arrears are more than $5,000; • Shortly before the limitation period expires even if the arrears are less than $5,000 where the lienable arrears are likely to continue increase – strategy: • file Petition and hold for 10 months, • serve Petition and hold

32. Fines and Chargebacks • Can try to include in any of the above collection methods if Lienable arrears are owing. • May not be possible if there is any question about the validity of the fine or chargeback. • Make sure the strata corporation has strictly complied with section 135 of the Act. • Civil Resolution Tribunal.

33. THANK YOU These materials are necessarily of a general nature and do not take into consideration any specific matter, client or fact pattern. Please direct inquiries or comments to: Veronica P. Franco, Clark Wilson LLP vpf@cwilson.com | 604.891.7714 www.cwilson.com