Source: https://condomanual.ca/tcm3/finances/
Timestamp: 2019-04-25 17:46:40+00:00

Document:
Can Unit Entitlement Be Changed?
Who Pays A Special Levy During The Sale Of A Strata Lot?
Is A Former Owner Entitled To Share In Excess Special Levy Funds?
What Are A Seller’s Options?
This chapter explains how the owner of each strata lot must contribute to the strata corporation’s common expenses according to a table called the schedule of unit entitlement. This chapter also describes the financial machinery of a strata corporation, including the different roles of an operating fund and a contingency reserve fund, the budget process, strata fees and requirements for a special levy. The chapter also explains how a strata corporation collects money owing to it, including the use of a Certificate of Payment (Form F) or a lien. This chapter also briefly describes the financial powers of a section.
Section 92 of the Act requires every strata corporation to have two funds: an operating fund and a contingency reserve fund (CRF). The strata corporation must account for each fund separately. 1 All owners must contribute to the funds through their strata fees.
In Dockside Brewing Co. v. Strata Plan LMS 3837, the court found that certain strata council members acted wrongly by orchestrating the expenditure of operating funds for expenses that should have come out of the CRF. 7 In that case, certain strata council members advanced their own commercial interests by spending the strata corporation’s money to instigate certain legal proceedings, most of which were carried out in the corporation’s name. 8 Given the extraordinary nature of the legal expenses, the CRF should have been used to pay them. This would require a 3/4 vote. Instead, the council members in question sought approval for the legal expenses by including them in the annual budget, which typically needs only a majority vote to pass. At the 2002 annual general meeting (“AGM”), the relevant council members successfully arranged to pass an amendment to the annual budget to add $93,772 to the operating fund for legal expenses. At the 2003 AGM, the same individuals included a further $100,000 in the operating fund budget for related legal expenses, even though at the meeting the voters actually defeated a 3/4 resolution to approve the litigation in question. In each case, it was improper to include these extraordinary legal expenses in the operating fund budget. The court took these improper expenditures into account when finding that the particular council members acted in a way that was unfair or unreasonable to the strata corporation.
A strata corporation may only invest its CRF money in one or both of the following.
a corporation that is a subsidiary of a bank and is a loan company to which the federal Trust and Loan Companies Act applies 12.
Second, the strata corporation may invest some or all of the money in investments permitted by the regulations 13.
98% or more of the value of the holdings in the fund’s portfolio have a rating of BBB or higher as reported by the issuer of that fund.
Where, before July 1, 2014, a strata corporation invested its CRF or special levy funds in accordance with the former requirements, that investment is now grandfathered. In other words, the strata corporation may continue to hold its funds in that investment, even if that investment now conflicts with the current requirements. If, however, the strata corporation liquidates or otherwise disposes of that investment, the corporation may only re-invest the proceeds according to the current requirements.
Before July 1, 2014, the Strata Property Regulation expressly grandfather old investments, including those made under the former Condominium Act. 15 The provincial government has now repealed those sections. For example, section 6.12 of the regulations used to provide that a strata corporation need not comply with the then prevailing investment requirements for special levy funds if the strata corporation had invested the money before those requirements came into force. Similarly, if a strata corporation disposed of an old investment after the then prevailing requirements came into force, then the strata corporation could only invest the proceeds in accordance with then prevailing requirements. Effective July 1st, the provincial government repealed those grandfathering provisions 16.
Apparently, the government now regards those express grandfathering provisions as redundant in view of the Interpretation Act 17. The Interpretation Act protects rights acquired before the repeal of legislation 18.
Prior to the Strata Property Act, many strata corporations treated the interest accruing from their CRF investments as part of the corporations’ annual revenue. For instance, at the start of a new fiscal year, a strata corporation would transfer all of its interest income earned in the previous fiscal year from its CRF investments to the operating fund. By paying its CRF interest income into the operating fund, the strata corporation could keep strata fees lower. The Strata Property Act prohibits this practice.
Under the former Condominium Act, many strata corporations used their CRFs to cover short-term cash flow shortages. 20 For example, while monthly revenue from maintenance fees is the same through the year, some months are more expensive than others. This usually happens in months when the corporation has large expenses that occur once per year, like insurance premiums. In those months, a corporation would lend itself money from the CRF to cover the shortfall. In the CRF, the corporation recorded the sum due in repayment as a receivable. Typically, any sums borrowed were repaid to the CRF by the end of the fiscal year.
The Strata Property Act allows a strata corporation to lend money from the CRF to its operating fund, but only to the extent permitted by the regulations. 21 Section 6.3 of the regulations allows a strata corporation to lend money from its CRF to the operating fund to cover temporary shortages in the operating fund caused by the irregular billing of expenses set out in the budget.
In other words, it is not necessary for a strata corporation to formally deliver a notice to each resident owner, if the corporation uses one of these or any other reasonable method to inform the residents. Of course, the strata corporation must still formally notify any non-resident owner who is entitled to be informed. The requirements for delivering notice are explained in Chapter 12, Meetings.
The loan must be paid back by the end of the same fiscal year.
income and expenditures, if any, by special levy.
The strata corporation must prepare a financial statement updated to the end of the fiscal year within 57 days after the end of the fiscal year. While section 6.7(2) says the strata corporation must prepare the updated financial statements within “8 weeks”, section 25(5) of the Interpretation Act requires that we calculate this eight week period by excluding the first day and including the last day. This translates into 57 days.
During the AGM, the owners may amend the proposed budget by majority vote before the budget itself is put to a vote.
used to reduce the total contribution to the next fiscal year’s operating fund.
There are some exceptions to the general rule. Under certain circumstances, only some owners may be required to contribute to a particular expense.
Each strata lot owner’s monthly contribution to the operating fund must be set out in the budget.
The general rule and its exceptions are explained in detail in Chapter 26, Paying for Repairs.
Every year, a strata corporation must evaluate its CRF. If the amount in the CRF has fallen below a certain level, the corporation must contribute funds to the CRF to restore it. Alternatively, if the amount in the CRF exceeds certain minimum requirements, the corporation has the option to contribute more money to the CRF.
If the amount of money in the CRF is at least 25 per cent (25%), but less than 100 per cent (100%), of the total annual budgeted contribution to the operating fund for the fiscal year that has just ended, a contribution to the CRF is optional. 44 In the new fiscal year, the strata corporation may contribute to the CRF or not. If the strata corporation wants to contribute to the CRF, the corporation may contribute any amount it wishes.
In the past, the Strata Property Act imposed a ceiling on a strata corporation’s CRF contributions. Effective December 13, 2011 that ceiling disappeared.
Before December 13, 2011 if the money in a strata corporation’s CRF exceeded a certain amount, the Strata Property Act prohibited further contributions in the budget for the new fiscal year, unless the eligible voters voted otherwise. A strata corporation reached its ceiling where the amount of money in its CRF was equal to or greater than 100 per cent (100%) of the total annual budgeted contribution to the operating fund for the fiscal year just ended. If so, the Act prohibited the strata corporation from making any further contribution to the CRF in the new budget year, unless the eligible voters agreed otherwise by a 3/4 vote.
When a strata corporation prepares the CRF portion of its budget each year, the corporation needs two pieces of information to decide whether, in the new fiscal year, a CRF contribution is mandatory or optional. Both pieces of information come from the fiscal year that has just ended, or which is about to end.
1. The strata corporation needs to know the amount of money in the CRF as at the last day of the fiscal year that just ended, or the anticipated amount in the case of a fiscal year that is about to end.
2. The strata corporation must determine the total annual budgeted contribution to the operating fund for the fiscal year that has just concluded, or which is about to conclude. In other words, the strata corporation needs to know how much it budgeted for operating expenses in the last fiscal year.
Once the strata corporation has these two pieces of information, it must compare them. If, for example, the amount in the CRF at the end of the last fiscal year was less than 25 per cent (25%) of the total amount budgeted for operating expenses in the last fiscal year’s budget, the strata corporation must make a contribution in the new fiscal year.
In addition, the mandatory contribution must never be less than an amount equal to ten per cent (10%) of the budgeted operating expenses in the new fiscal year.
The following table illustrates how, using the two pieces of information noted above, a strata corporation may determine its CRF contribution.
Is a contribution to the CRF mandatory in the new fiscal year?
Yes, we must contribute an amount equal to at least 10% of our total contribution to the operating fund in the new fiscal year.
No. However, we may contribute to the CRF if we want to, in any amount.
Sometimes, an owner who sells his or her strata lot asks the strata corporation to return some or all of the owner’s contributions to the CRF. Section 101 of the Strata Property Act states that the seller is not entitled to a return of contributions to the CRF upon a sale of the strata lot.
A strata corporation’s depreciation report estimates the life expectancy of major items and the ultimate cost of their repair or replacement.
What if, before December 13, 2011, a strata corporation had already acquired a depreciation report that meets the Strata Property Act ’s current requirements? In that case, the strata corporation has three years before that report must be next updated. 49 The three year period runs from the date the strata corporation obtained the depreciation report in question.
To cover an insurance deductible in certain circumstances.
The government may now exempt classes of strata corporation from the mandatory depreciation report requirements. Currently, the regulations only exempt one class of strata corporation, being those whose strata plans contain fewer than 5 strata lots in the strata plan. 53 For example, a strata four-plex development is exempt because there are only four strata lots in its strata plan. This exemption, however, only applies so long as the number of strata lots in the strata plan is fewer than five. In the four-plex, suppose that the municipal authorities and the eligible voters agree to permit a subdivision of one strata lot into two. Following subdivision of the strata lot, the strata corporation would presumably lose its exempt status because there would now be five strata lots in the strata plan.
The vote must occur within the one-year period immediately preceding the date by which the strata corporation must otherwise obtain the depreciation report. 56 For example, suppose that the Strata Property Act requires a strata corporation to obtain its first mandatory depreciation report by December 13, 2013. To defer this requirement for 18 months (that is, until approximately June 13, 2015) 57, it appears the strata corporation must pass the necessary resolution within the one year period leading up to the December 13, 2013 deadline.
Can An Exempt Strata Corporation Comply Anyway?
Being exempt means only that the strata corporation does not have to obtain a depreciation report that complies with the new requirements. An exempt strata corporation could still obtain a depreciation report in compliance with the Act if it wished to do so.
Where an exempt strata corporation’s strata council wishes to obtain a depreciation report in these circumstances, council should first obtain the approval of the eligible voters by the appropriate vote. Since the legislation does not directly say what vote is necessary in this situation, strata council should obtain legal advice on the question, based on their corporation’s particular circumstances.
While a civil engineer is likely qualified to prepare a depreciation report, there will surely be debate whether other persons have the necessary qualifications to meet this definition. To avoid disputes, one experienced strata lawyer recommends that a strata corporation amend its bylaws to clarify who is qualified to prepare the corporation’s depreciation report. 60 If a strata corporation wishes to amend its bylaws for this purpose, the corporation should have its lawyer draft the necessary bylaw to ensure compliance with the Strata Property Act.
What Must A Depreciation Report Contain?
2. A financial forecasting section.
The requirements for these components are described in more detail below.
If a strata corporation wants its depreciation report to consistently address other items over and above those required by the legislation, the corporation may wish to amend its bylaws to stipulate those matters. Alternatively, a strata corporation might incorporate those additional requirements into the contract by which the corporation hires the person to prepare the depreciation report.
If a strata corporation amends its bylaws to require additional information or analysis in a depreciation report, then the strata property manager or the strata council, as the case may be, should ensure that the person engaged to prepare the report knows about any extra requirements.
This list is not exhaustive; if the strata corporation must repair or maintain any other component, then the inventory must identify it.
The schedule of unit entitlement is a table that assigns to each strata lot a certain number of units of entitlement. The schedule of unit entitlement has several important functions.
First, the schedule is used to calculate each strata lot’s contribution to common expenses.
The Strata Property Act requires every owner to contribute to a strata corporation’s common expenses, including payment of strata fees in accordance with the annual budget. By paying strata fees, an owner contributes to the operating fund and, in most cases, to the CRF.
Specifically, to pay common expenses, each strata lot must contribute proportionately to the operating fund and the CRF according to the schedule of unit entitlement. The owner of a strata lot is personally liable to the strata corporation for the contribution due for that strata lot.
Despite the general rule, the Strata Property Act and regulations create certain exceptions where only some strata lots must contribute to a common expense. Yet, even these typically require the strata corporation to take account of unit entitlement information. 76 The reader will find more detailed information about the general rule, and its exceptions, in Chapter 26, Paying for Repairs.
Second, the schedule of unit entitlement determines financial liability where there is a judgment against the strata corporation. Section 166 of the Strata Property Act says that a judgment against the strata corporation is a judgment against all the owners. When the strata corporation collects money from the owners to pay the judgment, the schedule of unit entitlement describes each strata lot’s contribution toward payment of the judgment. For information about an owner’s liability to pay a judgment against the strata corporation, see Chapter 27, Lawsuits.
Third, the schedule of unit entitlement describes the extent of each owner’s interest in the common property and common assets.
Every strata plan must contain a schedule of unit entitlement. In a strata plan deposited at a Land Title Office before July 1, 2000, under the former Condominium Act, the schedule of unit entitlement is typically found among the last sheets (or back pages) of the plan itself. In the case of a strata plan deposited on or after July 1, 2000, under the Strata Property Act, the schedule of unit entitlement is found with the strata plan in a separate document called the Schedule of Unit Entitlement (Form V). The prescribed form for a Schedule of Unit Entitlement (Form V) is found in the regulations.
The following example illustrates how to use a schedule of unit entitlement to calculate strata fees for a particular strata lot. This example is based on the general rule that all of the owners must contribute to common expenses according to the schedule of unit entitlement. 78 Bear in mind that, in some cases, the Strata Property Act, the regulations or the bylaws might create an exception that requires a strata corporation to allocate specific expenses out of the operating fund to a particular strata lot or lots. 79 The following example is a general one that does not take into account such special considerations.
Based on the Schedule of Unit Entitlement and the formula found in section 99 of the Strata Property Act, Strata Lot Number 2 will pay 10/100 of the total contribution of $10,000, resulting in a contribution of $1,000 from that strata lot. When spread across the fiscal year, Strata Lot Number 2 must pay 1/12th of $1,000, being $83.33, every month.
The Strata Property Act does not require the use of the habitable area concept to determine the unit entitlement figure for a non-residential strata lot in a building (e.g. a strata retail store), or a bare land strata lot.
(c) a number that is approved by the Superintendent of Real Estate on a basis that fairly allocates a portion of the common expenses to the owner of the strata lot.
(b) a number that is approved by the Superintendent of Real Estate on a basis that fairly allocates a portion of the common expenses to the owner of the strata lot.
4. In a development that contains both residential and non-residential strata lots (called a mixed-use strata development), the Superintendent of Real Estate must approve the schedule of unit entitlement to ensure that it fairly distributes the common expenses between the owners of the residential and non-residential strata lots respectively.
Several statutes permit a change to the schedule of unit entitlement. Depending on the statute, requirements vary.
The Strata Property Act provides at least three ways to change unit entitlement.
Only in the case of a residential strata lot, the eligible voters may pass a unanimous resolution under section 261 of the Strata Property Act to alter the unit entitlement of a strata lot to reflect a change in its habitable area. After passing the unanimous resolution, the strata corporation must apply to the Registrar of Land Titles to amend the schedule of unit entitlement by providing a new schedule together with a Certificate of Strata Corporation (Form E). The prescribed Form for a Certificate of Strata Corporation (Form E) is found in the regulations. The new schedule of unit entitlement must comply with certain requirements.
Only in the case of a residential strata lot, 82 if the unit entitlement does not match the habitable area of the strata lot, an owner or a strata corporation may apply to the Supreme Court of British Columbia under section 246 of the Strata Property Act to amend the schedule of unit entitlement. 83 This remedy is only available where the following criteria are met.
First, in 2009 the provincial government amended the regulations to prohibit certain applications under section 246 of the Strata Property Act. 84 Effective November 24, 2009 a section 246 application is prohibited if the innacuracy in question existed in the schedule of unit entitlement when it was deposited at the Land Title Office.
Given that conclusion, unless the so-called “storage” area is also deducted from the total square footage of strata lot A, Mr. Kranz does not meet the threshold test of establishing that the square footage used to determine the unit entitlement of lot A is 10% greater than the square footage of the habitable area of strata lot A.
To put it bluntly, I do not accept Mr. Kranz’s characterization of a portion of strata lot A as being uninhabitable because it is a “storage” area. It is not storage area in the sense that certain condominiums have designated stalls or cubicles in storage rooms or basement areas of their buildings. No evidence was put before me to suggest that the so-called storage area could only be used for that purpose. Indeed, it was the evidence of Mr. Kapri Tennant, one of the Owners, that he knew of no reason why all of strata lot A was not a habitable area. In saying that, I expect, Mr. Tennant overlooked the fact that a portion of strata lot A is a garage area with five parking spaces. However, it is not reasonable to expect the Owners to deduct a large area of square footage from strata lot A for the purpose of determining its habitable area just because Mr. Kranz chooses not to develop a portion of strata lot A. If Mr. Kranz were allowed to dictate the habitable area of his own strata lot, similarly, any strata lot owner could do the same to reduce her or his unit entitlement. In that context, Regulation 14.2 of the Strata Property Regulations makes very good sense.
By contrast, Fenwick et al. v. Parks et al. (Strata Plan VIS 2014) illustrates a successful section 246 application under the Strata Property Act. 93 In Fenwick, the question was whether certain basements and garages were habitable area for the purpose of calculating each strata lot’s unit entitlement.
The strata development contained nine two-storey and 46 one-storey strata lots. Apparently, every unit came with a garage. In each two-storey unit, the lower level was a basement.
In each case, for the purpose of unit entitlement, the garage was included as part of the strata lot’s habitable area, even though none were used for living space. At the outset, the developer apparently learned that the buyer of a strata lot intended to convert the unit’s garage into a home office. Consequently, the developer told the surveyor to include a garage as habitable area when calculating each strata lot’s unit entitlement.
In each two-storey unit, the developer excluded most of the basement from the strata lot’s habitable area. All the two-storey owners eventually finished their respective basements. Among other things, the basements served as TV-rooms, bedrooms, computer rooms, closet areas, games rooms, office areas and storage areas of differing sizes.
Ultimately, disputes arose over the correct calculation of unit entitlement. The one-storey owners claimed that since the two-storey owners had finished their respective basements, the basements should count as habitable area. In the circumstances, the one-story owners argued that the two-storey owners were under-paying their share of strata fees in view of the habitable area they actually enjoyed.
Relying on the Strata Property Act, several owners applied to the Supreme Court of British Columbia for a section 246 order to amend the schedule of unit entitlement to accurately reflect the habitable area of each lot.
The court granted the application and ordered amendments to the schedule of unit entitlement.
The court also ordered garage space eliminated from the habitable area calculations. The definition of habitable area, quoted earlier in this chapter, specifically excludes garages.
If an owner can establish an error in a registered strata plan, section 14.12 of the regulations permits an owner to apply to the Registrar of Land Titles to correct the error. For the purposes of this regulation, a registered strata plan includes the strata plan, a schedule of unit entitlement, a schedule of voting rights, the mailing address of the strata corporation, and any bylaws deposited with the strata plan that differ from the Standard Bylaws. 95 The Registrar may direct the applicant to give notice of the application to any other person(s) so that others may make submissions before the Registrar decides the matter.
The Condominium Act was repealed when the Strata Property Act came into force and these procedures are no longer available.
In addition, the Registrar’s power to correct an error exists only where the error may be corrected without prejudicing rights acquired in good faith and for value. 100 Even if section 106 of the Land Title Act permits the Registrar, in theory, to correct an error in a schedule of unit entitlement, in many cases the Registrar will not be able to change the schedule if the correction could adversely affect the rights of other owners who purchased their strata lots without any knowledge of the alleged error.
Section 164 of the Strata Property Act gives the Supreme Court of British Columbia broad powers to remedy a significantly unfair action by a strata corporation, or in certain cases, to remedy a significantly unfair exercise of voting rights. For information about significant unfairness see Chapter 27, Lawsuits.
In The Owners, Strata Plan No. VR 1767 v. Seven Estate Ltd. et al., 102 the Supreme Court of British Columbia effectively created a fourth method for changing unit entitlement. The court used its powers under section 164 of the Strata Property Act to remedy a significantly unfair act by ordering the amendment of the schedule of unit entitlement.
The condominium complex consisted of a wooden building over top of a concrete garage that was used as a parking lot. The strata plan contained 28 strata lots. In the strata plan, the parking lot was a single strata lot. In addition to the parking lot, there were 25 residential strata lots and two commercial ones. Seven Estate Ltd. (the “owner”) owned the parking lot.
The unit entitlement figure for the parking lot was 4030 in the schedule of unit entitlement in the strata plan. As the result of a mistake made by the developer when he first prepared the schedule of unit entitlement, the unit entitlemen\t figure for the parking lot was at least four times greater than the entitlement of any other single strata lot.
As it turned out, the building was a leaky condo whose building envelope needed repair. The strata corporation approved four separate special levies to raise money for the repairs. Instead of assessing the owner on the basis of the revised 2015 unit entitlement figure, the strata corporation relied on the 4030 unit entitlement figure in the strata plan to claim that the owner owed approximately $126,912 for its share of the repairs.
The strata corporation then filed a lien against the owner’s title and sought a forced sale of the strata lot. The owner sued the strata corporation for an order relieving the owner from contributing to the special levies.
Without explicitly saying so, the court concluded that the repairs to the building envelope were a common expense. This meant the owner must contribute to the levies according to the schedule of unit entitlement which, in this case, meant using the 4030 figure. Could the schedule of unit entitlement, however, be changed?
The Strata Property Act contains several ways to amend a schedule of unit entitlement, but none of the methods applied in this case.
First, even if the 1989 resolution was passed unanimously and steps could be taken today under section 261 of the Strata Property Act to amend the schedule of unit entitlement, that section applies only to a residential strata lot. The strata lot in question was a parking lot.
Second, the court’s authority to change unit entitlement under section 246 of the Strata Property Act is also restricted to a residential strata lot.
(2) If it appears to the registrar that there is an error in any registered strata plan, the registrar may give notice or direct that notice be given to any person, in the manner and within the time deter-mined by the registrar, and the registrar, after considering submissions, if any, and examining the evidence, may correct the error.
Since the definition of registered strata plan includes any document referred to in section 245(a) of the Strata Property Act or one that amends such a document, and because section 245(a) of that Act expressly refers to a schedule of unit entitlement, one would think that the Registrar of Land Titles has the authority to correct an error in a schedule of unit entitlement in appropriate circumstances. It is not clear why in the court’s view this remedy was not available to the owner in the Seven Estate case. Perhaps there was something in the peculiar circumstances of the Seven Estate case that took the owner beyond the reach of the Registrar’s powers, but to which the court did not expressly refer in its written decision.
Unless the owner could establish oppression under the Condominium Act, or a significantly unfair action under the Strata Property Act, the general rule applied and the owner must contribute based upon the unit entitlement figure of 4030 in the strata plan.
The court found that if any remedial provision applied, it would be the power to remedy a significantly unfair action under section 164 of the Strata Property Act. The court reasoned that since the strata corporation sought judgment against the owner for the amount owing together with an order to enforce the lien by selling the parking lot under the Strata Property Act, the same statute should apply to any remedy claimed by the owner.
The court concluded that it would be significantly unfair, in this case, to require the owner to pay based on the unit entitlement figure of 4030 in the strata plan. The court took into account that for many years the strata corporation had allocated expenses to the owner on the basis of the revised 2015 unit entitlement figure in the 1989 resolution, and there was no longer any direct way under the Strata Property Act to change the 4030 figure in the schedule of unit entitlement.
Given that section 164 of the Strata Property Act permits the court to make any order necessary to prevent or remedy a significantly unfair action, the court directed that the strata plan at the Land Title Office be amended to change the unit entitlement of the parking lot from 4030 to 2015. The court ordered that the owner must contribute to the special levies on the basis of a 2015 unit entitlement figure, not 4030. The court also directed the strata corporation to remove its lien upon payment by the owner of the special levies calculated on the basis of the 2015 unit entitlement figure.
A strata corporation must meet various conditions before it can spend money from its operating fund or CRF. There are similar prerequisites before a section may spend money from the section’s operating fund or CRF.
Under the former Condominium Act, many strata corporations passed bylaws that permitted their respective strata councils to spend operating funds, without prior approval, up to certain limits. 109 Strata councils typically ignored the cumulative effect of such expenditures, provided that each one fell below the spending limit. The Strata Property Act requires strata councils to regulate these expenditures on a cumulative basis so that the total of all such expenditures within the same fiscal year falls within the spending limit.
Blunt and Strata Corporation VR 45 110 illustrates the need to ensure a strata council stays within its spending powers.
In April 1976, the owners approved the strata corporation’s budget at the annual general meeting. The budget did not contain any provision for painting the building.
In the absence of an amended bylaw, the council’s unapproved spending authority under the Act was $500.
In June 1976, the strata council hired a painter to paint the building’s exterior. After the painter completed the work, the strata council authorized payment of $2,400 to the painter.
Except for Mr. Blunt, all the other owners paid their respective contributions towards the cost of painting. Mr. Blunt refused to pay and sued the strata corporation for a mandatory injunction requiring the corporation to call a general meeting to consider the expenditure.
In the meantime, the strata corporation apparently fined Mr. Blunt for failing to contribute towards the painting costs.
The court agreed with Mr. Blunt. Since the $2,400 expenditure was not approved in the budget, nor within council’s $500 unapproved spending authority, the owners needed to approve this expenditure by a special resolution. 111 In the circumstances, there was no legal justification for the fines levied against Mr. Blunt. The court declined to order the injunction, however, because the strata corporation offered, during the court proceedings, to hold the necessary meeting. If the strata corporation failed to hold the meeting as promised, Mr. Blunt could reapply for an injunction.
the expenditure is necessary to cover an insurance deductible under section 158(3) of the Act.
In McGowan v. Strata Plan NW1018, 113 a strata corporation passed a special resolution [sic, a 3/4 vote] at an extraordinary general meeting [sic, special general meeting] on April 17, 2002. The resolution endorsed “the existing practice of maintaining the painting and roofing fund as a revolving fund, being expended at the discretion of the elected council.” Since the painting and roofing fund appeared to be part of the corporation’s CRF, the court observed that the Strata Property Act does not permit a strata council to make CRF expenditures on the discretionary basis set out in the resolution. Before expending CRF money in these circumstances, the Act requires the strata council to first consult the eligible voters.
Section 98(3) of the Act permits the strata council to spend money from the operating fund or the CRF without prior approval from the eligible voters if there are reasonable grounds to believe that an immediate expenditure is necessary to ensure safety or prevent significant loss or damage, whether physical or otherwise. Whether strata council spends the money from the operating fund or the CRF, presumably the emergency expenditure must be consistent with the purpose of the fund in question.
One of a strata corporation’s most important duties is to manage and maintain the common property and common assets of the corporation for the benefit of the owners. 120 To carry out those responsibilities, it is often necessary for the strata corporation to collect money due to the corporation from owners and other persons.
If certain requirements are met, a strata corporation may also charge interest on a late special levy payment. These requirements are explained later, in the “Special Levies” section of this chapter.
Before suing or beginning arbitration to collect money from an owner or tenant, the strata corporation must give 16 days written notice demanding payment and indicating that action may be taken. 125 The Strata Property Act does not specify any particular form of written notice. Any form of written notice will likely suffice if it reasonably conveys the necessary information to the reader. For example if, before suing an owner, the strata corporation delivers an invoice to the owner, the invoice is likely sufficient written notice if it makes it plain that failure to pay the amount due may result in court proceedings to collect the debt, or the registration of a lien against title to the strata lot where a lien is allowed.
[NEW]If the owner’s mortgage lender has given the strata corporation a Mortgagee’s Request For Notification (Form C), the corporation must also notify the lender by delivering to the lender a copy of the corporation’s written demand to the owner. Where the owner’s mortgage lender has not given the strata corporation a Mortgagee’s Request For Notification (Form C), it is still a good idea to deliver a copy of the corporation’s demand to the lender. In this case, the lender may itself pay the sums due to the strata corporation to protect the lender’s own position, or otherwise persuade the owner to pay.
If the owner’s lender has given the strata corporation a Mortgagee’s Request For Notification (Form C), the corporation must notify the lender by delivering to the lender a copy of the corporation’s written demand to the owner. 126 The requirements for delivering a notice are described in Chapter 12, Meetings.
The Strata Property Act provides several ways for a strata corporation to collect a debt. When deciding how to collect money owed to the strata corporation, the corporation must also consider the reason the funds are owed.
A strata corporation may file a Certificate of Lien against an owner’s strata lot in the Land Title Office, if the strata corporation meets the necessary pre-conditions.
When preparing a written demand threatening a lien, a strata corporation should calculate the appropriate notice period as described in the Demand Notice section earlier in this chapter. For the reasons explained there, the strata corporation’s demand should give, at a minimum 16 days notice to pay, and in many cases, 20 days.
[NEW] Taxable party and party costs are not the same as a strata corporation’s actual legal expenses. Rather, party and party costs are court-ordered costs calculated according to a tariff found in the Supreme Court Civil Rules, Appendix B. The tariff sets out what amounts the successful party may recover for legal work done by the successful party’s lawyer at various steps in the proceeding. As a very rough estimate, taxable party and party costs usually amount to about half of a party’s actual legal expenses. 132 In that case, the strata corporation successfully brought arbitration proceedings against an owner for feeding wild birds on his balcony and for damage caused by negligently installed plumbing, all contrary to the bylaws. In the arbitration, the strata corporation sought to recover its actual legal expenses to date. The strata corporation had a bylaw that permitted the corporation to recover its actual legal expenses incurred when remedying an owner’s violation of the bylaws. In Blackmore, the court found that if the strata corporation wished to rely on such a bylaw to require the owner to reimburse the corporation for its actual legal expenses in an arbitration, then the corporation must first ask the owner to reimburse the corporation in accordance with the bylaw. If the owner failed or refused to pay the amount claimed, then the strata corporation must sue the owner in a separate proceeding for the money owing under the bylaw. 133 A strata corporation wishing to adopt such a bylaw should first obtain legal advice about its wording.
[NEW] Note that a strata corporation may not file a lien for a fine owing to the strata corporation or for the cost of remedying a contravention of the bylaws or rules. Nor may the strata corporation file a lien if the owner has paid the disputed amount into trust with the strata corporation, or into court, or has otherwise made satisfactory arrangements with the corporation to pay the money. In Strata Plan VR386 v. Luttrell, the strata corporation registered a Certificate of Lien against title to an owner’s strata lot for outstanding strata fees, a special levy contribution and unpaid fines. [fn: Strata Plan VR386 v. Luttrell, 2009 BCSC 1680.] The court found the entire Certificate of Lien invalid for its inclusion of unpaid fines, contrary to the Strata Property Act.
[NEW] The lien serves as notice of the strata corporation’s claim for the amount owing. Generally speaking, the strata corporation need only file the single lien, whether the owner’s indebtedness afterwards increases or decreases. 142 Suppose, however, that after the strata corporation files its lien, something happens to significantly increase the owner’s indebtedness for a matter for which a lien is allowed. Imagine, for instance, that after the lien is registered, the strata corporation approves a large special levy, but the owner fails to pay his or her share of that levy. In these circumstances, it may be worthwhile for the strata corporation to obtain legal advice whether to register a second lien for this newest, large increase in the owner’s indebtedness.
In many cases, a lien remains on title until the owner needs to refinance his or her mortgage or sells the strata lot. Ultimately, the owner is effectively forced to deal with the problem because he or she cannot refinance or sell without discharging the lien from title. The owner may pay the debt or contest it. If the owner disputes the strata corporation’s claim, pending resolution of the dispute the corporation will normally agree to discharge the lien upon payment of the disputed funds into court or into trust with the corporation.
In Hammerberg & Co. v. Margitay, 143 an owner who reimbursed a strata corporation for its actual legal expenses in lien proceedings was entitled to ask the court to review the invoices of the corporation’s lawyers. In Hammerberg, a bylaw allowed the strata corporation to recover its actual legal costs from the owner if the corporation won a lawsuit against an owner for money due. When an owner failed to pay his portion of a special levy, the strata corporation retained a law firm to file a lien against the owner’s title and obtain an order for the sale of the owner’s strata lot. The owner paid the amount due. In the meantime, the strata corporation’s lawyers invoiced the corporation approximately $4,937 for their services in the matter. Citing the bylaw, the strata corporation then compelled the owner to reimburse the corporation that amount for its actual legal costs. When the owner subsequently applied to the Supreme Court of British Columbia to review the lawyers’ accounts for which he had reimbursed the strata corporation, the lawyers objected to the owner’s standing to apply for a review. The lawyers argued that only their client, the strata corporation, could ask for a review. Citing the Legal Profession Act, the court held that the owner could seek a review of the lawyers’ accounts. 144 The court then reviewed the invoices and ordered the lawyers to refund approximately $788 to the owner.
When preparing the written demand, a strata corporation should calculate the appropriate notice period as described in the Demand Notice section earlier in this chapter. For the reasons explained there, the strata corporation’s demand should give, at a minimum 16 days notice to pay, and in many cases, 20 days.
Typically, the strata corporation retains a lawyer for the enforcement proceeding. If the strata corporation plans to retain a lawyer for this purpose, it is best to have the lawyer prepare the mandatory written demand.
The court will first determine the sum properly owing to the strata corporation and enter judgment for that amount, plus prejudgment interest and costs against the owner. 148 Here the term “costs” means taxable party costs, as explained in this chapter with regard to a Certificate of Lien.
Sometimes, an owner contests a lien on the ground that he or she was entitled to withhold payment to the strata corporation because of some wrong done to the owner. An owner might argue, for instance, that she has stopped paying strata fees until the strata corporation repairs her balcony. Another owner might claim that he is entitled to offset his claim against the strata corporation for damages for negligence, and so on. None of these complaints relieve an owner from his or her financial obligations under the legislation to pay strata fees, a special levy, and so on. See also, Strata Plan VR386 v. Luttrell, 2009 BCSC 1680 described earlier in this chapter, is a good example. In that case, the strata corporation placed a lien against title to the owner’s strata lot when he refused to pay strata fees or a special levy, protesting the corporation’s position on certain matters. The court held the owner liable for approximately $11,444 in outstanding strata fees and special levy payments. Withholding payment was no defence. The Strata Property Act provides various ways for an owner to challenge a decision of the strata corporation, but withholding payment is not one of them.
After entering judgment in favour of the strata corporation in the order for sale proceeding, the court will order the defaulting owner to pay the amount owing within a specific period of time. The payment period is set at the court’s discretion. In most cases, this serves as a standstill period in which nothing happens to the strata lot while the owner exercises his or her last chance to pay the debt and escape the lien proceedings. Usually, the court allows a payment period of 30 days, although the court may make the period shorter or longer, depending on the circumstances. Failing the owner’s payment by the deadline, the strata corporation may list the strata lot for sale.
In Richardson, the strata complex suffered water leakage, which the strata corporation had not yet fully addressed by obtaining an engineering report and making repairs. In the meantime, property values in the strata plan were reduced. Should the court order the sale of the strata lot at a market value reduced by the corporation’s own failure to carry out repairs, the lenders would likely suffer a loss. The lenders opposed the strata corporation’s request for an order for sale and asked the court, instead, to first appoint an administrator to oversee repairs.
In the end, the court in Richardson declined to order the sale or to appoint an administrator. Instead, the court adjourned the matter and directed the strata corporation to carry out its statutory duty to repair by obtaining an engineering report and making repairs. The strata corporation’s failure to do so would entitle the lenders to renew their application to appoint an administrator.
At the appropriate stage in the proceedings, a strata corporation usually lists the owner’s strata lot for sale with a realtor®. After a buyer is found, the court must approve the sale. In accordance with the court order approving the sale, the sale proceeds are typically first applied to the real estate commission, if any; then the amount owing to the strata corporation under the lien, including certain legal costs; and then to mortgagees and other charge holders on title.
A strata corporation may collect money owing to the corporation by issuing a Certificate of Payment (Form F).
The reader will find detailed information about the Certificate of Payment (Form F) in Chapter 13, Record Keeping. Briefly, a strata corporation’s Certificate of Payment (Form F) certifies that the owner of a strata lot does not owe money to the corporation, or if money is owing, that the owner has paid the money into trust or into court, or the owner has otherwise made satisfactory payment arrangements.
Typically, when an owner sells his or her strata lot to a buyer, the purchaser wishes to register his or her purchase, which requires a Certificate of Payment (Form F). The necessity for a Certificate forces that owner to address the owner’s debt to the strata corporation, including money owing for fines. To obtain a Certificate, the owner must either pay his or her debt to the strata corporation, or pay the money into trust or court, or otherwise make satisfactory payment arrangements with the corporation.
Until an owner, however, wishes to register a conveyance, lease or agreement for sale, the Certificate of Payment (Form F) is not a useful tool to force an owner to pay amounts owing to the strata corporation.
A strata corporation may not file a Certificate of Lien for money owing for a fine or the cost of remedying the owner’s contravention of a bylaw or rule, as earlier noted in this chapter. 155 To collect an unpaid fine or reimbursement for the cost of remedying the owner’s contravention, it appears the strata corporation must first sue the owner to recover the money. If the strata corporation succeeds in court, the corporation can register its judgment against title to the owner’s strata lot.
Depending on the circumstances, the strata corporation may also pursue other collection remedies to enforce its judgment, such as garnishment. In each case, to determine the range of collection remedies available, the strata corporation should first obtain legal advice.
The strata corporation may refer most disputes, including a dispute over money owing for fines, to arbitration. The arbitrator’s decision and order for costs may be filed in either the Supreme Court of British Columbia or the Provincial Court of British Columbia, Small Claims Division, depending on the amount of the award and other factors. Once the decision is filed, it has the same effect as if it was an order of that court. A strata corporation can then proceed to enforce the judgment. 156 For more information about Arbitration, see Chapter 28, Arbitration.
the date by which the levy must be paid or, if payable by installments, the dates of the installment payments.
Effective December 11, 2009, 164 the provincial government amended the Strata Property Act to permit a strata corporation to charge interest on a late special levy payment, if the corporation meets the following requirements. 165 First, either the resolution authorizing the special levy or a bylaw must establish an interest rate for late payment of the special levy. Second, the interest rate must not exceed the rate permitted by the regulations. Effective January 1, 2010, and at the date of this writing, the maximum permissible interest rate is ten per cent (10%) compounded annually. 166 The Act expressly provides that interest charged on a late special levy payment forms part of the special levy, and is not a fine. This means that the strata corporation may file a Certificate of Lien against an owner’s strata lot for unpaid interest in connection with a late special levy payment. 167 The requirements for filing a Certificate of Lien are explained earlier in this chapter.
Apparently, the government now regards those express grandfathering provisions as redundant in view of the Interpretation Act. 177 The Interpretation Act protects rights acquired before the repeal of legislation. 178 Note that if special levy funds are withdrawn from an deposit permitted under the former regulations, any new deposit of those funds would have to comply with the new requirements.
If the money collected exceeds the amount required, or for any other reason is not fully used, the strata corporation must return the surplus money to the owners. 181 Later in this chapter the reader will find an explanation of the requirements for returning excess special levy to the owners.
Sometimes, after an owner enters a contract of purchase and sale to sell his or her interest in a strata lot to a buyer, but before the sale completes, a special levy arises. Some, or all, of the special levy may be payable on a date that falls after the sale is scheduled to complete. Whether in these circumstances the seller or buyer, or both, must contribute to the special levy depends on several things. The wording of the resolution authorizing the special levy, the terms of the seller’s contract of purchase and sale with a buyer, and the Strata Property Act are all critical factors.
The wording of the resolution authorizing a special levy often says that payment is due immediately, but permits owners, if they wish, to pay their respective contributions to the special levy over time by installments. In such cases, the resolution usually contains an acceleration clause. If a strata lot is sold before that strata lot’s contribution to the special levy is paid in full, an acceleration clause makes the outstanding balance of the special levy in respect of that strata lot immediately payable. If a seller fails to pay the whole amount due under an acceleration clause, the strata corporation may withhold its Certificate of Payment (Form F), which is necessary to complete the transfer of title to the buyer at the Land Title Office. The Certificate of Payment (Form F) is explained earlier in this chapter.
The buyer of a strata lot may negotiate a term in the contract of purchase and sale by which the seller agrees that if a special levy is approved before the sale completes, the seller will pay the contribution to the special levy due in respect of the strata lot, including any portion due after the completion date which the buyer, as the new owner, might otherwise be obligated to pay. Typically, the contract requires the seller to pay the necessary amount to the buyer, who then pays the money to the strata corporation. In other words, the contract requires the seller, in the transaction, to reimburse the buyer for this liability, so the buyer will not be out of pocket.
Here again the wording of the special resolution that authorized the special levy is very important. If the resolution requires the seller to pay the unpaid balance of the levy before the seller conveys his or her interest in the strata lot, then the whole amount, “is payable before the date the strata lot is conveyed”. 182 In that case, the Strata Property Act requires the seller to pay the whole special levy.
On the other hand, the wording of the special levy resolution may make a portion of the levy, “payable on or after the date the strata lot is conveyed.” 183 If so, the buyer will be liable to the strata corporation for the portion of the special levy, “payable on or after the date of the conveyance.” 184 In that case, the Strata Property Act requires the buyer to pay that portion of the special levy. If, as described earlier in this chapter, the buyer has negotiated a term in the contract of purchase and sale that requires the seller, in the transaction, to reimburse the buyer for this liability, the buyer will not be out of pocket.
The following information concerns only the recovery of proceeds that represent the return of excess special levy funds. This information does not necessarily apply, for example, to the recovery of contingency reserve funds, to the distribution of income earned by a strata corporation or of a corporation’s windfall gain, such as a monetary lottery prize.
Sometimes a strata corporation recovers special levy money as a result of litigation (for example, through a settlement or judgment), or by making an insurance or warranty claim to recover funds spent on repairs.
When a strata corporation recovers excess special levy funds, or for any reason there is a surplus of special levy money, Section 108 of the Strata Property Act requires the corporation to return the excess money to the owners, with one exception.
Where there are excess special levy funds, the strata corporation must return the excess funds to each owner of a strata lot in an amount proportional to the contribution made for that strata lot .
There may be questions about the date on which one must be an owner to share in the recovery. There may be a considerable period between the time when a settlement or judgment occurs, or the time when an insurance or warranty provider agrees to a pay-out, and the time when the funds are available for distribution. Must the strata corporation pay the excess only to those persons who are owners on the date the relevant court order is made or settlement reached, whether in litigation or in the corporation’s insurance or warranty claim? Or, must the strata corporation pay the excess funds only to those persons who are owners on the date the strata corporation actually receives the excess special levy money?
Determining which owners are eligible to share in the recovered funds may depend on the wording of the strata corporation’s resolution that authorized the litigation or insurance or warranty claim in the first place. Alternatively, in litigation a court order, or the order of an arbitrator, may govern the matter. If these questions are not addressed in the resolution, or alternatively by an order of the court or an arbitrator, the strata corporation may have to determine the record date for payment. That is, the strata corporation may have to decide as at what date an owner is entitled to receive a portion of the excess funds (for example, the date in the litigation when the corporation obtained judgment).
When a strata corporation returns excess special levy funds, the question may arise whether a strata corporation may return the funds to a previous owner of a strata lot who paid the levy, rather than to the current owner.
The Strata Property Act does not entitle a former owner to share in the excess special levy funds recovered by the strata corporation. Even though the strata corporation must return the surplus special levy funds to the owners, according to the Act the previous owner is no longer considered an owner for this purpose. The Act defines the term owner to mean a person who is the registered owner of the fee simple interest in a strata lot in a Land Title Office or, in the case of a leasehold strata plan, a person who is registered as the leasehold tenant of the strata lot. 186 When the previous owner, as seller, sold his or her interest in the strata lot to a buyer, that seller lost his or status as an owner for the purposes of the Act.
Effective December 11, 2009, the provincial government amended the Strata Property Act to clarify the position of a previous owner. As a result of the amendment, the Act now explicitly says that a strata corporation must pay the relevant portion of the excess, “to each owner of a strata lot.” 187 The payment must be, “proportional to the contribution made to the special levy in respect of the strata lot.” 188 The strata corporation must pay the owner, meaning the person who, in a Land Title Office, is the registered owner of the fee simple interest in a strata lot or, in the case of a leasehold strata plan, the person who is registered as the leasehold tenant of the strata lot. 189 In other words, the strata corporation must pay a proportionate share of the excess to the person who is currently the owner. The Act does not permit the strata corporation to pay the surplus to the former owner of the strata lot because that person is no longer an owner within the meaning of the Act.
This amendment corresponds to the legal view that prevailed before it. Prior to the amendment, most lawyers held the view that a strata corporation could only return excess special levy funds to a person who is the owner of a strata lot at the time the funds are actually recovered by the corporation.
Where an owner reasonably expects the strata corporation in the near future to recover excess special levy funds, but in the meantime plans to sell his or her interest in the strata lot, the owner may wonder how to later collect a portion of that recovery after the strata lot is sold.
Even though the Strata Property Act does not entitle a former owner to share in the recovered special levy funds, an owner who is selling his or her strata lot still has at least several options. Depending on the certainty of the anticipated future recovery, the options vary.
Suppose a strata corporation recovers special levy funds by reaching a settlement or judgment in litigation, or settling an insurance or warranty claim. The strata corporation states that it will pay the recovered funds to persons who are owners at the time the funds are received by the strata corporation. In such a case, the amount of the settlement or judgment is known, but the owners have to wait for the funds.
When negotiating the purchase price of the strata lot, the seller and buyer can take into account the anticipated distribution of excess special levy funds.
Alternatively, in the contract of purchase and sale the seller and buyer may agree on a mechanism for the seller to recover the funds from the buyer in the future. Typically, the buyer agrees, upon becoming the owner, to either pay the seller once the funds are received, or to irrevocably direct the strata corporation in writing (sometimes called an “Irrevocable Direction in Writing”), in the future, to send to the seller those funds that are due to the buyer, as the owner.
An agreement of this type is legally complex. There are many factors to consider. In the author’s view, the legal skills necessary to properly prepare such an agreement are in most cases beyond the training of a realtor®. In the author’s view, a seller should not expect a realtor® to draft an agreement for the seller, in the future, to recover the relevant excess special levy funds from the buyer. Instead, the seller should engage a lawyer to prepare the agreement.
For instance, if additional funds are later required to fund the strata corporation’s endeavour, the agreement should compel the buyer to vote in favour of, and to pay, any related future special levies, and in that case the seller agrees to reimburse the buyer for those special levies. The agreement should also compel the buyer to sign any release, if required, in settlement proceedings. In addition, the agreement should clearly provide under what circumstances the buyer will be liable in the future to pay any excess special funds to the seller. The agreement should also provide that if, in the interim before recovery, the buyer sells his or her interest in the strata lot, then the buyer will require the next buyer to be bound by an agreement containing the same obligations to the seller. These are only some of the complexities that a lawyer may take into account when preparing a suitable agreement.
Note that any agreement between the buyer and seller is a contractual arrangement between only those two parties. The strata corporation is not a party to the agreement. While the strata corporation may be advised of the agreement and may, as a result, be asked to pay the funds to the seller, the strata corporation cannot be obligated to pay the funds to anyone but an owner.
Suppose, however, the seller does not know for certain whether there will be a future recovery. The strata corporation may have only recently begun litigation, or filed its insurance or warranty claim.
The seller may factor the uncertain recovery of funds into the asking price, but in many cases this may not be practical. The likelihood of the return of funds may be too uncertain to be quantified. Alternatively, it may increase the asking price for the strata lot beyond what the market will reasonably bear.
As a result, the seller may want, as part of the contract of purchase and sale, to negotiate an agreement in which the buyer agrees, upon becoming the owner, to either pay the seller once the funds are received, or to irrevocably direct the strata corporation in writing, in the future, to send to the seller the funds that are due to the buyer, as the new owner. Some of the complexities of this sort of agreement are described above. Similarly, for the same reasons described above, the seller should engage a lawyer to prepare the agreement.
A section constitutes a form of mini-government within a strata corporation. The Strata Property Act permits a strata corporation to create certain sections of strata lot owners to represent the different interests of those owners. For more information about sections, see Chapter 10, Sections.
In some cases, a strata corporation may spend funds that benefit only the strata lots within a particular section. In addition, a section itself may spend money from its own operating fund, CRF, or special levy.
Despite the general rule, the Strata Property Act and the regulations create certain exceptions that require a strata corporation to allocate an expenditure among only some, rather than all, of the owners in the section. Since these exceptions often occur in connection with repairs, readers will find an explanation of these provisions in Chapter 26, Paying for Repairs.
The Strata Property Act also suggests that the same spending requirements that govern a strata corporation also regulate spending by a section. 192 In addition, the Act suggests that the same provisions that regulate whether all, or only some, owners must contribute to the operating fund, the CRF, or a special levy in the strata corporation, also apply to a section, subject to necessary modifications. Since these considerations often occur in connection with repairs, readers will find an explanation of these provisions in Chapter 26, Paying for Repairs.
A building strata plan deposited at the Land Title Office before July 1, 2000, under the former Condominium Act contains a schedule of interest upon destruction. A schedule of interest upon destruction is typically found together with the schedule of unit entitlement among the last sheets (or back pages) of the plan itself.

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