Ontario Court Reaffirms Condo Corporations Cannot Lien Units for Compliance Legal Costs Without a Court Order

In a key ruling on condominium governance and statutory interpretation, the Ontario Superior Court of Justice has clarified the legal limits of condominium liens. In Chiarelli v. Toronto Standard Condominium Corporation No. 2339, 2026 ONSC 4571, the Court addressed whether a condominium corporation can automatically charge back legal compliance fees to a unit owner and secure them via a lien without first obtaining a court order.

While condominium corporations possess certain powers under the Condominium Act, 1998, to collect unpaid common expenses, the Court established that legal costs incurred to enforce compliance with governing documents are distinct from ordinary collection costs. Without a formal court order under Section 134(5) of the Act, adding unadjudicated legal enforcement fees to a unit’s common expenses—and attempting to collect them through the lien process—is illegal and void.

Background of the Case

The Applicants, unit owners at 140 Broadview Avenue in Toronto, admitted to operating short-term rentals in breach of Toronto Standard Condominium Corporation No. 2339’s (“TSCC 2339”) Declaration, which prohibited leases shorter than three consecutive months.

In response, TSCC 2339’s counsel served formal compliance letters in September 2023 and September 2024. The corporation charged the legal costs of these enforcement letters directly back to the owners’ common expense account. Additionally, the corporation added a $99.95 chargeback to the unit account for replacing a smoke detector after a fire inspection.

When the owners failed to pay the chargebacks, TSCC 2339 served a Notice of Lien for $874.06 (the legal cost of the second demand letter) and subsequently registered a lien securing a total claimed amount of $3,634.62, including interest and lien registration costs. However, in its written cover letter confirming registration, the corporation explicitly told the owners that the $99.95 fire safety charge was excluded from the lien and might be pursued separately in Small Claims Court.

The owners applied to the Ontario Superior Court of Justice seeking an order discharging the lien, arguing that legal enforcement fees cannot be liened without a court order under Section 134(5). In response, TSCC 2339 argued that Articles 2.2 and 6.1 of its Declaration expressly permitted indemnification for compliance costs as common expenses. Alternatively, the corporation contended that the unpaid $99.95 fire safety charge alone was sufficient to validate the lien.

Legal Analysis and Judicial Findings

1. The Primacy of Section 134(5) over Condominium Declarations

The Court held that a condominium corporation’s Declaration cannot expand the statutory definition of “common expenses” to include non-litigated legal enforcement costs.

Under Section 134(1) of the Condominium Act, 1998, a corporation may apply to court to enforce compliance. Section 134(5) provides that where a corporation obtains an award of damages or costs in a compliance order, those amounts—along with the actual costs of obtaining the order—are added to the unit’s common expenses.

The Court noted that if a condominium corporation could simply draft a Declaration to add compliance legal fees directly to common expenses on its own authority, Section 134(5) of the Act would be completely redundant. The Court cited the precedent established in cases such as Amlani v. York Condominium Corporation No. 473, 2020 ONSC 194, and Peel Standard Condominium Corp. No. 779 v. Rahman, 2023 ONSC 3758, to conclude that the Declaration does not confer the right on the condominium corporation to add enforcement costs to the common expenses without obtaining a court order under Section 134(5).

Also, Section 7(5) of the Act clearly states that any provision in a condominium Declaration inconsistent with the Act is unenforceable. For all these reasons, such costs cannot be subject to a lien under Section 85(1).

2. Collection Costs vs. Enforcement Costs

The Court emphasized the distinction between types of charges under the Act:

• Enforcement Costs (Section 134(5)): Costs incurred to ensure an owner complies with governing documents (e.g., demand letters). These require a court order before they can be added to common expenses or liened.
• Collection Costs (Section 85(1)): Costs incurred to collect unpaid common expenses. Section 85(1) permits a lien to carry reasonable legal costs incurred in collecting actual common expense arrears.
• Statutory Non-Litigated Chargebacks: The Act specifically permits non-litigated chargebacks without a court order only for repairs carried out by the corporation (Section 92) or owner-caused property damage up to the insurance deductible (Section 105(2)). General compliance costs are not included in these statutory exceptions.

3. Rejection of the Fallback Argument and Defective Notices

The Court rejected TSCC 2339’s argument that the unpaid $99.95 fire safety charge validated the lien. While acknowledging established jurisprudence from York Condominium Corporation No. 482 v. Christiansen, 2003 CanLII 11152 (ON SC), which establishes that notices of lien do not require absolute perfection, the Court clarified that this does not excuse misleading or contradictory notices.

Having explicitly informed the owners in writing that the fire safety charge was excluded from the lien and would be pursued separately in Small Claims Court, the corporation could not rely on it in court to save the invalid lien. Consequently, the lien was ruled invalid in its entirety and ordered discharged from title.

4. Dismissal of the Oppression Claim and Judicial Warning on Proportionality

The Court dismissed the unit owners’ claim for statutory oppression under Section 135, noting that the owners had repeatedly breached the short-term rental ban and that the corporation had acted in good faith based on a bona fide, though legally incorrect, interpretation of its Declaration provisions.

Finally, the Court criticized both parties for spending over $100,000 in legal fees litigating a lien under $4,000 in the Superior Court, noting that minor disputes belong in lower-cost forums such as Small Claims Court. The Court indicated that this lack of proportionality will be taken into account when making the final costs determination.

Statutory Scheme Relevant to This Case

Condominium Act, 1998

• Section 7(5): If any provision in a declaration is inconsistent with the provisions of this Act, the provisions of this Act prevail, and the declaration shall be deemed to be amended accordingly.
• Section 85(1): If an owner defaults in the obligation to contribute to the common expenses payable for the owner’s unit, the corporation has a lien against the owner’s unit and its appurtenant common interest for the unpaid amount together with all interest owing and all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection or attempted collection of the unpaid amount.
• Section 134(1): Subject to subsection (2), an owner, an occupier of a proposed unit, a corporation, a declarant, a lessor of a leasehold condominium corporation, or a mortgagee of a unit may make an application to the Superior Court of Justice for an order enforcing compliance with any provision of this Act, the declaration, the bylaws, the rules, or an agreement between two or more corporations for the mutual use, provision, or maintenance or the cost-sharing of facilities or services of any of the parties to the agreement.
• Section 134(5): If a corporation obtains an award of damages or costs in an order made against an owner or occupier of a unit, the damages or costs, together with any additional actual costs to the corporation in obtaining the order, shall be added to the common expenses for the unit, and the corporation may specify a time for payment by the owner of the unit.

Key Observations

• Unenforceability of Compliance Indemnity Provisions: Declarations attempting to automatically classify compliance legal fees as lienable common expenses are void under Section 7(5).
• Strict Limits on Section 85(1): Liens under Section 85(1) are restricted to actual common expense arrears, statutory repair/damage chargebacks, and collection costs.
• Consistency Required in Notices: Corporations are bound by the written representations made in their notices and cover letters.
• Enforcement Dilemma for Condominium Corporations: While condominium boards must enforce governing documents under Section 17(3), they cannot lien these non-litigated enforcement costs without first obtaining a court or tribunal order.
• Proportionality and Forum Selection: Escalating minor chargeback disputes to the Superior Court leads to disproportionate costs that the court may penalize.

Conclusion

Chiarelli v. Toronto Standard Condominium Corporation No. 2339, 2026 ONSC 4571, confirms that condominium corporations cannot bypass Section 134(5) by drafting overriding provisions in the Declaration. While boards have a duty to enforce community standards, they must follow statutory due process. Attempting to lien a unit for compliance legal fees without a court order invalidates the lien and exposes the corporation to legal liability.

Essential Takeaways

For Condominium Boards and Property Managers:

• Avoid Liening for Compliance Letter Costs: Do not register liens for unadjudicated legal fees from compliance notices.
• Obtain Formal Orders: Pursue cost recovery through court applications or the Condominium Authority Tribunal (CAT).
• Ensure Notice Consistency: Match all numbers and descriptions across Form 14 notices, registered liens, and cover letters.

For Unit Owners and Real Estate Buyers:

• Request Cost Breakdowns: Distinguish between actual common expense arrears and legal enforcement charges when reviewing liens.
• Challenge Unlawful Liens: Remind boards that legal compliance fees cannot be liened without obtaining a court order.
• Consider Proportionality: Resolve small monetary disputes through Small Claims Court or the CAT.

For Transactional Real Estate Counsel:

• Review Status Certificates Carefully: Verify whether reported arrears consist of valid common expenses or unadjudicated legal fees.
• Classify Chargebacks: Distinguish between permissible repair chargebacks (under Section 92 and Section 105) and impermissible compliance fees when advising clients.

How an Experienced Real Estate Litigation Team Protects Your Rights

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Services for Condominium Corporations & Property Managers:

• Compliance & Legal Cost Recovery: Strategic guidance on Section 134 court applications and CAT proceedings.
• Governance Audits: Reviewing Declarations and By-laws to ensure statutory alignment.
• Lien Collections: Precise drafting and enforcement of Section 85 collections.

Services for Unit Owners & Buyers:

• Lien Disputes: Challenging invalid liens and negotiating title discharges.
• Transactional Due Diligence: Our real estate team will conduct a thorough status certificate and title review prior to closing.

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