A recent small claims court decision signals the end of condo management firms preparing, registering and discharging condominium liens in-house.
Page v. Maple Ridge Community Management Ltd., 2017 CanLII 21772 began when a unit owner at YCC 34 failed to pay a special assessment in time. YCC 34’s management firm, Maple Ridge, used its in-house paralegal employee to issue Ms. Page a Notice of Lien (Form 14) and, when no payment was made within the 10-day notice period, to register a certificate of lien against the unit.
Ms. Page discovered that the paralegal employee was administratively suspended by the Law Society at the time the lien was registered, presumably for failing to pay annual dues or file obligatory paperwork. Ms. Page paid “under protest” the special assessment arrears of $767 and the management firm’s demanded fees of $141 to issue the Form 14 notice and $678 to prepare, register and discharge the certificate of lien. The management firm’s total charges for the lien work were $819.
Having received a discharge, Ms. Page demanded return of the legal costs, arguing that only a lawyer could charge such fee, then she brought a small claims court action for return of those fees plus punitive damages for the alleged high-handed and unethical behaviour of Maple Ridge and special damages for the alleged unauthorized practice of law by Maple Ridge’s paralegal employee. Ms. Page also filed a complaint against the paralegal with the Law Society.
At trial, the unit owner tendered a Law Society investigation report showing that the paralegal was prohibited from providing legal services or holding herself out as being able to provide legal services while administratively suspended. Additionally, the report indicated that even if the paralegal was not suspended, she had (by preparing and registering the certificate of lien) engaged in activities beyond the permissible scope of paralegal practice.
The Law Society issued the paralegal a “letter of caution” but took no further disciplinary proceedings, punishment or court action. The evidence at trial was that Maple Ridge was not aware that a paralegal could not prepare, register and discharge liens, and the court heard that after this issue was raised by Ms. Page, Maple Ridge changed the way it operated with respect to liens. Maple Ridge made this change before the Law Society ruled that the paralegal was not authorized to prepare and register liens.
To support her claim for return of the $819 in legal costs she paid to Maple Ridge, Ms. Page cited s. 1(1) of the Solicitors Act, which prohibits someone who is not a lawyer from recovering legal costs in court proceedings. The court disagreed, since preparing, registering and discharging condo liens is not “an action or proceeding” in court. Additionally, the court could not find authority for a private citizen such as Ms. Page to pursue remedies personally against parties engaged in the unauthorized practice of law; the Law Society is the only entity with the authority and ability to prosecute and pursue remedies (like fines and prison terms) against unauthorized practitioners. In this case, the Law Society chose to pursue no further action against the paralegal. The court ruled that Ms. Page was not entitled to recover the legal fees of $819 she paid to Maple Ridge.
The court also held that Ms. Page was not entitled to punitive damages or special damages. Although the court was displeased with Maple Ridge’s failure to provide information about how it changed its lien processes or why it took 5 months to make changes, Maple Ridge’s conduct was not malicious behaviour that warranted punitive damages. As for special damages, the court found no evidence that the paralegal failed to follow the appropriate lien procedure or that Ms. Page suffered any damages from the work the paralegal performed.
Ms. Page’s action was dismissed.
Though Maple Ridge was completely successful, the court departed from the usual rule that a successful defendant recover its costs of defending the case and awarded costs of $500 to Ms. Page. The court gave this unusual award partly because identifying cases of unauthorized law practice is an issue of public importance.
Although the court in this case accepted the Law Society’s findings that preparing, registering and discharging condominium liens is beyond the scope of a paralegal’s practice, there has been no specific Law Society pronouncement or court ruling that only lawyers may do this work. We may assume, however, that if a paralegal cannot perform this lien work, then no one other than a lawyer may do so.
It remains possible that the Law Society’s position could be ruled incorrect by a court in a test case if someone volunteers as the guinea pig. Until such a test case is heard and concludes successfully, condo management firms or employees that register condo liens in-house risk being prosecuted for unauthorized law practice. But before opportunistic defaulting unit owners go running off to court seeking to escape the obligation to pay lien costs, they should consider whether their claims would fare any better than Ms. Page’s. Very few likely would.
It is noteworthy that neither the court nor the Law Society raised any problem with the management firm charging fees for issuing the Form 14 Notice of Lien. Giving Form 14 Notices is distinctly different than registering liens on title to units and is no more law practice than banks issuing notices of mortgage defaults or insurers giving notices of premium non-payment. Indeed, issuing Form 14 Notices (which, pursuant to s. 85(4) of the Condominium Act, must be given at least 10 days before registering a certificate of lien) is a purely administrative task best handled by management, who can do the work more quickly and cheaper than lawyers. It is more convenient for unit owners to resolve payment issues with management directly. There is no public interest reason to change this long-established system.
To summarize the lessons and impacts of this unusually punchy Small Claims Court case:
- Condo management firms should not prepare, register or discharge condominium liens in-house using a paralegal or anyone other than a lawyer;
- Management firms unwilling to give up the revenue stream from preparing, registering and discharging liens in-house risk prosecution for unauthorized law practice;
- Farming out lien preparation, registration and discharge work to non-lawyer agents may create no exposure to the management firm but exposes whoever performs the work;
- Even if the work is unauthorized law practice, a unit owner has no right to recover legal fees paid for a condo lien;
- Unit owners whose condo corporations’ managers still prepare, register and discharge liens in-house can expect to pay higher fees when lawyers do that work; and
- No one has ruled that issuing Form 14 Notices of Lien is unauthorized law practice and there is no reason to believe it ever would or should be.
With professional regulation of the condominium management sector now coming online, the opportunity arises for the various regulators to compare notes, study industry practices, consider risks and rewards and decide whether the public interest is well-served by the current division of responsibilities with respect to condominium lien processing. Further clarifying the acceptable division of lien work would also be helpful.