Archive for the ‘Strata Information’ Category

Windup formula varies greatly

Thursday, July 19th, 2018

Significant variations to windup formula

Tony Gioventu
The Province

Dear Tony:

Our strata corporation has been involved in the winding-up process for three months and we are at a stalemate with our owners.

Our condo was built in 1988 and as a result, we have been told the formula used to buy out each owner is not the same as how we have been paying strata fees and special levies. What this means for several of our owners is that even though they have been paying higher rates for our leaky condo repairs and maintenance over the past 30 years, they are now going to receive less money than units smaller than theirs who paid substantially lower fees.

We are at a lost to explain to our owners how this formula applies and why.  

Carol R., Burnaby

Dar Carol:

The schedule of Interest upon destruction was a formula introduced into the legislation under the Condominium Act that sets a value to each property within a strata corporation. The formula would be used in the event the property was destroyed or sold.

For example, if your building was to experience a devastating fire and the structure was demolished, the insurance would pay the settlement amount under your policy to each of the owners based on the schedule of interest upon destruction.

You are correct: the formula is different from the schedule of unit entitlement, but look at it from the perspective of real estate value. A top-floor one-bedroom unit with a view may sell for more than the same unit on the ground floor facing the street. This was the approach that was taken at the time the legislation was adopted; however, after reviewing hundreds of strata plans in this time period, there appears to be a significant variation to the application of the formula.

We often see within the same strata corporation where three identical units with the same unit entitlement that determines strata fees and no differences at all, have significantly different schedules of interest on destruction.

Unfortunately, if your building was developed and filed during the time period of the Condominium Act, this schedule legally applies to your windup.

If you can convince all the owners to amend the schedule to another formula, such as unit entitlement or current assessment values, that is an option, but it requires a unanimous vote, which means a vote in favour by all the votes of all the eligible voters. If you have 66 units and 66 votes, you require all 66 votes in favour to amend the schedule that is being used.

A few strata corporations have tried to amend their schedules and failed once the benefitting owners realize they are giving up proceeds from their unit. 

If your strata corporation was developed before the Condominium Act, you may be sharing your proceeds based on unit entitlement, and if the strata corporation has been developed since the Strata Property Act came into effect in 2000, the interest schedule is based on each unit’s comparative recent assessment value.

Before anyone ventures into the time periods and formula for your strata, it is critical that all the relevant land title documents are accessed and interpreted by an experienced legal professional. Several strata corporations have started their windup process with the incorrect information and more time was spent on conflict than the windup process. 

© 2018 Postmedia Network Inc.

Location key in winding up a strata

Thursday, July 12th, 2018

The location of the property is critical in the sale of a strata corporation

Tony Gioventu
The Province

Dear Tony:

Our strata council was approached by a developer interested in purchasing our property outright. They came to a council meeting, gave us a slick presentation, told us they were prepared to pay 35 per cent over our assessed values and suggested we hold an information meeting with the owners. 

Up to the information meeting, everything was reasonably civil. At the information meeting, several owners demanded to know how many offers we have had on the property. The developer advised they don’t work that way and will retract if we look for other offers. 

As a council, we were a bit embarrassed as we did not investigate this further. I can see the point of owners in wondering whether we solicited the best price and terms or whether we just settled on a higher value.

The Strata Property Act gives us no indication of the process involved. Is there at least a best practice?

Jenna L., North Vancouver

Dear Jenna:

As a strata corporation, you are the collective property holders of a single piece of real estate that has a marketable value.

In many ways, it is no different than selling your condo. You list the property for sale and offers are made that you can accept, reject or counter offer. Through this, you negotiate the price, terms of the sale and the conditions or subjects that may apply to both parties.

The sale of a strata corporation, or winding up as known in the act, has more requirements to fulfill because the strata council does not have the authority to market the property or approve the terms and conditions of the sale without the consent of the owners. In addition, unless all the owners approve to the proposed sale and no interest holders object, the strata is required to apply to the Supreme Court of B.C. for ratification of the sale once the resolutions are approved.

In almost every wind-up, it has been in the best interest of the strata corporation to retain a commercial broker to act in the exclusive interest of the strata corporation to market the property. The competition for property has generally resulted in the best terms and highest prices, but a word of caution: not all properties will attract multiple offers due to capacity of the sale or current market conditions for buyers, and not all properties will return higher-than-assessed values. Don’t be lured into price based on assessment values as market values may be higher.

Because your property is a modest size and ideal location for redevelopment, a marketing strategy and invitations for offers may be the best option to determine best price.

There are many conditions to consider in a wind-up process. The location of the property is critical. The current and future zoning of the property, as well as the possibility to assemble neighbouring properties, may have a significant impact on the price. The terms of the sale are also significant. A closing period in six months may be a much more attractive deal than a closing in one or two years.

The current condition of your building and future cost facing your owners is also a consideration. It is possible the strata corporation may be due for some major upgrades because of aging assets. It is worth assessing the next five to 10 years of renewal costs when considering a wind-up. If you are facing $100,000 per unit in upgrade costs in the next five years, a sale near or above current values may be the best option for the owners to consider.

You will need a reliable depreciation plan or engineering study to help determine these liabilities for the owners. Before you proceed, determine the scope of legal fees for each phase of the process as you will need legal assistance in negotiating the proposed terms and conditions of the sale, the preparation and holding the meeting for the 80-per-cent vote, the court application if necessary and the appointment of the liquidator to manage to winding up of the strata and the disbursement of revenues and expenses. 

While there is a focus on strata wind-ups in Metro Vancouver, they occur routinely in every part of the province.  For more information on strata wind-ups, go to www.choa.bc.ca

© 2018 Postmedia Network Inc.

Don’t delay when pests invade

Wednesday, July 4th, 2018

Infestations best handled by strata corporation

Tony Gioventu
Times Colonist

Dear Tony:

We are a small 18-unit low-rise building in the Greater Victoria area. Two owners have reported they have chronic problems with mice in their units. One owner is accusing the other of hoarding and causing the mouse problem and the other owner is targeting the bird feeders on her ground floor patio as the source of the problem.

Up to this point the strata council has left the problem of mice and pests to each owner but now they seem to be spreading in the building and we cannot ignore this issue any longer. We have given owners notice to solve the problem and hire exterminators or the council will have to step in and back-charge the affected units. Now we are at a dispute over who is responsible and who is liable. Can you shed some light on this issue for us?

George M.

Dear George: Whenever a strata corporation is dealing with a pest-control issue the most important and first decision is how to address the problem and how to prevent future issues.

The strata corporation has the responsibility to maintain and repair common property and common assets, and owners must maintain and repair their strata lots. With the exception of bed bugs, pests almost always involve infestation of common property or at the very least access through the common property. While there is a definite boundary between strata lots, attics, crawl spaces and common area, corridors will likely be affected along with other units.

Experience over the years has shown that if left to owners, pest infestations only become a greater problem. Owners and residents tend to ignore most responsibility that involves personal cost until it is too late.

The list of pest invasions from insects to animals is extensive and the damage that can result if ignored can be devastating.

The obvious and best plan is prevention and education of your residents.

Wood and garbage piles, rotting structures, failing caulking, broken ventilation screens, unsanitary waste and recycling areas, standing water, high moisture content, and resident behaviour will all contribute to the problem.

Accumulated debris, poorly maintained property and resident behaviour such as providing food sources are the most common causes of infestations, but pest/animal infestations still occur with the best of maintenance and prevention programs.

To name a few, here are some of the common pest problems in B.C.: carpenter ants and termites in wet and rotting structures, rats and mice attracted by garbage, recycling, composting, bird feeders and human debris, hornets, wasps and bees building hives, raccoons and opossums seeking shelter in roofing and crawl spaces to create dens, silver fish and cockroaches in moisture- laden walls and structures, birds and bats seeking nesting or shelter and bears attracted to garbage and fruit trees.

As part of the annual budget, many property owners contract for monthly pest management services to avoid the disruptions and costs of infestations and to ensure they have the funds to respond when problems arise.

Responding quickly and controlling the actions to eliminate the problem is the quickest and most economical solution. This is best in the hands of the strata corporation if the infestation affects more than one strata lot or common property.

If the source or cause of the infestation can be linked to the activity of a strata lot, your strata council can consider recovering those costs against an owner and look to your bylaws and rules to identify if they have breached any of those provisions or acted in a manner that caused the problem.

Glacier Community Media © Copyright 2013-2018

Many alterations don’t comply with building codes

Wednesday, June 27th, 2018

Strata corporation bylaws, agreements will influence outcome of disputes

Tony Gioventu
Times Colonist

Dear Tony:

I am a realtor in Vancouver and have helped many owners buy and sell condos over the years. One of the chronic problems we encounter is the issue over alterations, specifically balcony enclosures or sun rooms on townhouses. Our office has noticed a recent trend that is troubling when it comes to owners purchasing units with alterations.

Even though there is no agreement on the Form B Information Certificate where the seller has taken responsibility for the alteration, several management companies are forcing buyers to enter into alteration agreements as part of the purchase documents or within a few weeks of their purchase. One company told the new owners it made no difference anyhow because once the balcony was enclosed, it was no longer common property and the strata corporation was not responsible for the enclosure. Could you provide some clarity on how alterations are managed on building exteriors and how they apply to subsequent buyers?

Phillip W.

Dear Phillip:

There are no boilerplate answers that will solve all the scenarios. Bylaws of strata corporations, designations of property, agreements signed by the previous owners and the historic practices of a strata corporation will all influence the possible outcome of an alteration dispute.

When an owner wishes to alter common property, they are required under the Schedule of Standard Bylaws of the Strata Property Act and most amended bylaws of strata corporations to make a written application to seek permission before they alter the property.

In a perfect world, this would happen in every strata and the alteration would be completed by a competent contractor with permits, plans and the applicant would agree in writing to take responsibility for the construction and future costs associated with the alterations. However, over the past 50 years of strata living in B.C., very few owners and strata councils have followed or properly enforced their bylaws, so there are many alterations that resulted from conversations, without permission or conducted with minimal construction standards.

Even fewer of those alterations were completed under the conditions of a written alteration agreement. As a result, we have an extensive number of alterations that don’t comply with building codes, were poorly installed and cause constant building-envelope failures and frequently pose a safety risk to the occupants.

If common property is altered, it does not change the designation of the property. It is still common property and the strata corporation is still responsible to maintain and repair the alteration as well as other adjacent common property areas. No one has the authority to impose a retroactive alteration agreement on an owner or buyer, and the management company cannot set out conditions to the transaction requiring the buyer to sign any such agreement.

The strata corporation is only permitted under the act to require an owner to enter into an alteration agreement where the owner of the strata lot will be responsible for any costs relating to the alteration. This has to be a condition of the alteration at the time of construction. Some owners have voluntarily agreed to enter into such agreements, but I always recommend they seek a legal opinion before they sign for the liability.

Record keeping is the other pitfall of this relationship that has serious consequences. Many strata corporations do not retain past alteration agreements. As a result, they cannot disclose or attach them to Form B Information Certificates, essentially leaving the strata corporation with the burden of the cost.

Much to the surprise of buyers and owners, if an enclosure requires major repairs and the owner of the strata lot is unwilling to cover the cost, the only option for the strata corporation may be the removal of the enclosure.

If the owner wishes to have an enclosure reinstalled, they will be required to apply to the strata corporation once again for permission to meet all of the alteration conditions and costs required within the bylaws, and subject to the strata corporation agreeing to the alteration. If you are using the standard bylaws, the strata corporation does not have to permit an alteration to common property.

Glacier Community Media © Copyright 2013-2018

Taking shortcuts with insurance not a smart move

Thursday, June 21st, 2018

Often problems with ideas about insurance

Tony Gioventu
The Province

Dear Tony:

Our strata council has been advised by our property manager to pay for a water escape claim to our building rather than file an insurance claim to avoid an increase in our insurance costs and our deductible costs.

This is only the third claim in 10 years in our 18-floor highrise. As a result, we have only a $5,000 deductible.

The claim to repair damaged drywall, flooring and cabinets to the two units is estimated at $11,000, which we have been told we can recover from the owner who caused the claim from an overflowing bathtub. The owner who caused the claim has responded that they will not pay any amount as their insurance coverage for their unit will cover the deductible amount of $5,000. 

Our council is confused by the opposing information we have been receiving. Whose insurance covers the claim and can we recover the costs so the rest of the owners in the building are not paying for one owner’s neglect? 

Tara D., Burnaby

Dear Tara:

A common error condo owners make is applying the cause of the claim to whose insurance is responsible to cover the loss. 

Under the Strata Property Act, with the exception of a bare-land strata, the common property, common assets, structure and fixtures are insured through the strata corporation policy.

Basically, think of it this way: before the day an owner moves in, everything except removable appliances is covered. When these items are damaged, whether they are in a strata lot or defined as common property, it is the strata corporation insurance policy that is applied. 

Provided the amount of the claim is over the deductible as in your case, the insurer for the strata corporation remedies the loss and bills the strata corporation for the deductible. In this case: $5,000. 

The cause of this claim, an overflowing bathtub, falls under the responsibility of an owner. If an owner is responsible for a claim, the strata corporation may proceed with an action through the courts or the civil resolution tribunal to obtain a judgement to determine who is responsible for the claim and the amount of the deductible.  

When owners have prudently purchased condo insurance that covers the amount of a deductible, once they have received a statement or demand invoice from the strata corporation for the amount of the deductible, they contact their insurance provider who pays the amount. In most cases, the insurers work in co-operation well in advance to reduce red tape and delays. 

Strata councils seem to be under the impression they can deny a claim and manage the restoration themselves. There are several problems with this approach. First, an owner under the Strata Property Act is a named insured on the policy and they can file the claim directly. Second, the restoration and remediation when water damage is involved is rarely undertaken sufficiently to prevent mould, dry rot, pest infestation and future damage to the units. The final problem with avoiding the  filing of a claim is that the strata corporation will be limited to the extent of the amount it can collect from the owner.

If the owner was responsible for the claim and the deductible was $5,000, how would you expect to collect the additional $6,000 in damages that was covered by the insurance you have now declined? And neither amount is a deductible so the authority to proceed with an action to collect the amount may no longer apply. 

There is one other wrinkle in this approach. Where did the strata corporation get the authority to spend $11,000 of the owners’ common funds? This is not an emergency expense, authorized contingency expense or operating expense. It is an insurable claim covered by a common policy all the owners pay through their strata fees. Yes, there is a risk your deductible will increase and perhaps even your policy, but that is one of the costs of living collectively in a strata corporation.

© 2018 Postmedia Network Inc.

Contract outcomes start with purchasing process

Thursday, June 14th, 2018

Diligence is required by stratas before entering into a construction contract

Tony Gioventu
The Province

Dear Tony: Our strata council has dragged our owners into trouble over a roofing contract that has gone poorly. There have been endless delays, work-site problems and now, at the end of the project, a number of serious defects, including improperly installed flashings, resulting in leaks. 

Our council decided to hold back 25 per cent of the price at the end of the project and the contractor has filed builder’s liens against all our units. Needless to say, no one can sell or remortgage while we are trying to fight this battle. There is a lot of confusion over the holdbacks and what our steps are next. Help!  

18 unhappy townhouse owners

Dear 18: There are three basic types of financial securities that are routinely applied to major construction. The builder’s lien holdback, which is legislated, a deficiency holdback, which is negotiated, and bonding, which is purchased as a form of security or insurance. 

Under the builder’s lien holdback legislation in B.C., if a contract is valued at $100,000 or more, the client/strata corporation must retain 10 per cent of the contract amount in a separate trust account for the duration of the project. The builder’s lien holdback is not for deficiencies, but a form of security for the contractor, sub-trades and suppliers in the event the client fails to pay for services or the contractor does not pay the amounts owing for services and materials. The amount may be used to satisfy those debts and prevent the filing of liens against your property.

A deficiency holdback is negotiated through the contract and will have terms and conditions on how the holdback can be applied, the conditions for deficiency corrections, the terms when the holdback is released, and a dispute-resolution process. 

Bonding is a form of security or insurance that protects the client/strata corporation in the event the contractor does not perform, encounters a financial failure or loss, or is not able to complete the project. The terms and conditions of bonding are set by the insurer and the cost of the bonding is negotiated between the client and contractor.

One of the benefits of bonding is a third party provides another level of screening over the contractor. If a contractor does not qualify for bonding, they are likely a serious credit risk or have a history of claims that indicate a rocky road ahead.

Contract successes or failures begin with the purchasing process. Whether your strata is looking for bids or quotes on a project or working with a single contractor, the best protection is a written contract that covers all your expectations and liabilities and the detailed specifications of the scope of work and materials.

Roofing is certainly the most common dispute we encounter and by using a licensed roofing inspector, you can avoid the nightmares. The consultant will create your specifications and scope of work and inspect the roofing throughout the construction and provide the final certificate of completion. Very few council volunteers have the knowledge necessary to administer construction contracts and the cost for most of these services is below two per cent of the total construction.

Many of the contract nightmares that arise can easily be avoided with a diligent process before your strata agrees to any contracts or services. Most law firms will perform a contract review for major construction for under $5,000 and provide you with recommendations to protect your owners and cover your liabilities.  Strata corporations that end up in a volatile dispute with their contractors will easily spend 10 times that amount in resolving disputes over deficiencies and removal of liens. 

Unfortunately for the 18 homeowners, money and time invested with your lawyer is now your best option and likely could have been avoided with a reasonable standard of care at the beginning.   

© 2018 Postmedia Network Inc

Stratas required to have a form of rental inventory

Thursday, June 7th, 2018

Rental numbers on buildings are available

Tony Gioventu
The Province

Dear Tony: 

We are looking to purchase a unit in Vancouver. Several of the buildings constructed since 2010 prohibit rental bylaws, but when we requested a count on the number of rentals, we were told by both the strata councils and the property manager there is no need for a rental inventory if rentals are not permitted.

If a strata corporation does not have a rental bylaw, is it required to maintain a rental inventory? As buyers, we are concerned we may be buying into a building that has too many rentals. 

Marni Beaumont

Dear Marni:

Every strata corporation has a requirement under the Strata Property Act to maintain some form of rental inventory. While the words “rental inventory” do not appear explicitly in the legislation, there are several references to the provision of the total number of rentals or lists of owners and tenants that indicate the only method of providing this information is by maintaining a rental inventory.  

For example, if a buyer requests a Form B Information Certificate from the strata corporation, one of the requirements of the form is to indicate the total number of rentals. This includes all tenancies, whether they are exempted by an owner developer exemption, family rental, hardship rental or included under a rental limitation bylaw. 

Another example is where the act requires certain types of records to be maintained. The list includes the names and addresses of owners, but also the names of tenants. The names of tenants are obtained by the strata corporation from either the landlord or tenant when a Form K, Notice of Tenant’s Responsibilities is signed and provided to the strata corporation. This ensures the tenant is aware of the bylaws and rules of the strata corporation and the strata corporation has a record of who the tenant occupying the unit will be. 

The exemptions the legislation permitted developers to create for new buildings constructed since Jan. 1, 2010 do not prohibit rental bylaws; they simply exempt the owner of the strata lot identified on the form J from the application of a rental bylaw for the period identified on the exemption. 

The rental disclosure exemption must be attached to a Form B Information Certificate and while the Form B is not a mandatory form, the only way to confirm the exemption is by obtaining a copy of Form B from the strata corporation or a requesting a copy of the exemption Form J from the strata corporation or the Superintendent of Real Estate. 

A note of caution: Not all strata corporations since 2010 had rental exemptions filed, and several are for shorter periods, such as 10 or 25 years. Don’t assume your unit will be exempt. Rely only on the filed documents.

In a number of small strata corporations that vary from duplexes up to 25 units, no exemption was filed at all. This means the new strata corporation could adopt a bylaw that would limit or restrict the number of rentals in its corporation. 

It is also important for strata councils to pay attention to their bylaws. Many strata corporations have adopted bylaws that impose a fee for move-in/move-out expenses.

If your strata corporation is not maintaining a rental inventory, how are you managing information disclosed to buyers, applying and enforcing rental bylaws, providing accurate owner and tenant lists or enforcing bylaws to collect moving fees?

© 2018 Postmedia Network Inc.

Monitoring, restricting fobs must be approved by owners

Thursday, May 31st, 2018

Be reasonable where FOBs are concerned

Tony Gioventu
The Province

Dear Tony:

Our strata corporation has a policy that each strata lot is entitled to one FOB for the access to our building and each additional FOB costs $50.

We have several families in the building with schoolchildren who are claiming this is unfair and they are being discriminated against because of their family status. But if we allow unlimited FOBs, the cost to the strata corporation will be excessive.

Is there a requirement for us to provide FOBs for every resident in the building? What if someone rents out their strata lot? Do we have to provide a FOB for both the tenant and the owner or landlord of the strata lot? If someone has a daily caregiver, do we have to provide an additional FOB for each attendant? 

We do not have a concierge or on-site manager, so we really need to control the number of FOBs for security and access. 

Miller T., Victoria

Dear Miller:

A strata corporation is permitted to charge fees for common expenses through three basic methods.

Owners pay strata fees for common operating expenses and contingency reserve contributions by special levy for projects approved by three-quarters vote at a general meeting or a strata corporation common expense insurance deductible or by user fees approved in a bylaw or a rule that has been first ratified at a general meeting. 

Many strata corporations impose fees for rentals of guest suites, elevator blankets, FOBs, additional parking or facility rentals as a policy, but have never ratified these as rules or approved them as bylaws.

In your strata, there is no evidence the strata corporation ever approved user fees as a rule or bylaw so that must be addressed first. 

Common access to a building for owners to enter their units is not the same as renting a guest suite, and while the strata corporation may approve the cost for the FOBs through the operating account, it may also need to offset the ongoing expenses through user fees. Ultimately, this comes down to what each strata corporation approves through the annual budget as a common expense or user fees in the rules or bylaws.

Every strata corporation is different and some corporations provide two or more FOBs per strata lot, while others only provide one per strata lot, but step back a moment and ask what is reasonable.

If most units in the building have more than one occupant, perhaps two FOBs per strata lot are required with an additional cost for extra FOBs. But remember: you don’t have the authority to simply impose a fee for a service or asset unless it is approved by the owners. 

FOBs are common in most new buildings and an inexpensive conversion in many older buildings. They may also enhance security and reduce operating costs.

If someone misuses a FOB or a FOB has been lost, that specific FOB can be deactivated without needing to pay the cost of re-keying a building and distributing new common area keys to all owners. If your strata corporation monitors the use of FOBs, that is a form of surveillance and collection of personal information and you will also be required to adopt a bylaw that meets the requirements of the Personal Information Protection Act in B.C.

© 2018 Postmedia Network Inc.

Owners not responsible for common property repairs

Thursday, May 24th, 2018

Responsibility for common property repairs

Tony Gioventu
The Province

Dear Tony:

Our strata has a bylaw that says owners are responsible for maintaining doors and windows on the exterior of their strata lots.

Our building is 25 years old and we are a smaller strata of 18 units. In some cases, owners have changed their own doors and windows and in others, nothing has been done; in these areas there are now some serious building problems.

The council is refusing to hire a contractor to start assessing the damages (our unit is experiencing water damage from the unit upstairs) and has simply advised the owner upstairs they are responsible for hiring a contractor to fix the problem.

Without having to spend thousands in the courts, is there a reasonable approach to finding a solution and resolving the confusion in our strata? Several are advising they cannot renew their mortgages because of the serious condition of our building. 

Caleb M., Kamloops

Dear Caleb:

Whenever a strata council and owners are faced with confusion over the responsibility of maintenance and repairs to strata lots or common property, the first place to start is with a review of the Strata Property Act, the registered land title documents and a review of the bylaws of the strata corporation to determine if your strata corporation is complying with the law.

First, we look closely at your strata plan and building design. Your registered strata plan clearly indicates the exterior of your buildings, including your doors and windows are designated as common property. This is typical for many building type strata corporations, except bare-land stratas.

Next, we look to the act and regulations, which do not permit a strata corporation to make owners responsible for the maintenance and repair of common property.

Finally, we look at your registered bylaws. While your strata corporation passed the current maintenance and repair bylaw in 2001, it failed to file the bylaw in the Land Title Registry. Under the act, bylaws are not enforceable unless they have been filed in the registry and bylaws adopted by a strata corporation must comply with the act, regulations, the B.C. Human Rights Code and any other enactment of law.

In addition to failing to file the bylaws, your bylaw does not comply with the act. Considering the number of legal violations, it would be prudent for your strata corporation to obtain a legal opinion on the enforceability of the bylaws, how it has been applied to the owners, and the best solutions for your strata corporation.

In the event the owners ignore the legal opinion, it would at the very least summarize the non-compliant issues facing your strata corporation and could be used as evidence in a complaint with the Civil Resolution Tribunal. At the very least, owners could apply to the CRT to challenge the enforceability of the bylaws and seek an order for the strata corporation to repair and maintain the building exterior and common property. 

The attempt to download the responsibility of common property exterior maintenance and repair of building exteriors is a common error for many of the thousands of smaller strata corporations across B.C. While it seems like a simple solution for the strata to avoid the costs, the reality is owners simply do not maintain and repair building exteriors on their own. It requires a co-ordinated effort on behalf of all owners to ensure the costs are shared as intended.

One of the key benefits of living in a strata is the shared responsibility and costs of operations and maintenance. As a collective, whether we are four units or 40, the larger buying power gives us the ability to negotiate costs on a larger scale and ensure everyone is paying their share of the cost without having to take individual responsibility for operations. Ask many owners why they live in a strata and they usually reply: “So we don’t have to cut the grass, shovel the snow, clean the gutters, wash the windows or paint the buildings.”     

© 2018 Postmedia Network Inc.

Stratas able to renegotiate management services agreements

Thursday, May 17th, 2018

Interest went to management firm

Tony Gioventu
The Province

Dear Tony: 

 At our annual general meeting in February, an issue was raised about the amount of interest our strata earned on our contingency fund this year. Our strata had a $900,000 investment in 2017 that showed only $4,500 in revenue, but the rate of interest on the investment was posted at 1.85 per cent, which should have shown $16,650 in revenue. 

When challenged, our property manager advised the rate of interest paid is only .05 per cent because the strata signed a management agreement in 2013 whereby the management company acts as our investment agent and retains as a fee everything above .5 per cent.

The owners who attended this meeting were furious when they were informed council signed this type of agreement. None of our current council members was aware of this condition, so we were quite embarrassed. Is this legal? 

Mark D., Vancouver

Dear Mark:

When your strata corporation signs a strata-management services agreement, it also agrees to a schedule of fees for the management and operations of your strata corporation. While the strata corporation may agree to certain types of fees and services, this fee in particular may not be in compliance with the Strata Property Act unless certain conditions have been met. 

Under the Real Estate Services Act and rules of the Real Estate Council, funds held by strata-management companies for strata corporations must be held separately in trust in the name of the strata corporation. This applies to the operating fund, the contingency fund and any special levy funds that may arise. As a result, your annual tax return and financial statement must show the full amount of the interest and revenue that was generated by the fund for the fiscal year and any expenses relating to that fund.

The Strata Property Act specifically requires that any interest earned on the money in the contingency fund becomes part of that fund. Any expenses from the contingency fund are approved under one of the following methods: an emergency expense, an expense recommended as part of the depreciation report and approved by majority vote, an insurance deductible, or any other expenses approved by a three-quarters vote at a general meeting.

As this fee is part of a contract, the strata corporation would have an obligation to pay the amount; however, it would also be required to have the owners at a general meeting by three-quarters vote resolution ratify the expense of the contingency management fee negotiated with the strata-management company. 

The essence of the payment and approvals is: the strata council cannot waive mandatory provisions of the act. While the council in 2013 may have signed this agreement, the current owners will still be required to vote on this part of the fees as a contingency expense.

For strata councils that are newly elected or negotiating strata-management service agreements, review the schedule of fees closely. Your monthly rate may seem to be a real bargain, but when you look closely at the details of service costs and fees that are published in the service agreements, you may be paying a much higher rate for fewer benefits.

Your strata corporation is always in a position to renegotiate or terminate the agreement. Before you sign a strata-management services agreement, have a legal review of the contract so your council fully understands the implications of the fees and services being provided. A fully disclosed and fair strata-management services agreement will go a long way to creating a harmonious relationship between your corporation and your management company. 

Likewise, council members who are fully informed are empowered to make prudent and responsible decisions on behalf of the owners. Every council member should have an operations binder or online platform that makes all service agreements and contracts, bylaws and rules of the strata, and all financial and operational information available. 

© 2018 Postmedia Network Inc.