A closer look at the Report on Common Property, Land Titles, and Fundamental Changes for Stratas: Should the Strata Property Act continue to require a resolution passed by a unanimous vote to authorize changing the basis on which a strata lot’s share of the contribution to the strata’s operating fund and contingency reserve fund is calculated?
August 8, 2019
BY Kevin Zakreski
This post is part of a series highlighting key recommendations in the Report on Common Property, Land Titles, and Fundamental Changes for Stratas. For other entries in the series, click here.
Brief description of the issue
The general rule for strata corporations is to calculate a strata lot’s share of the contribution to a strata’s operating fund and its contingency reserve fund on the basis of the strata lot’s unit entitlement. The act allows for some flexibility within this system: through devices such as sections and types strata corporations can use unit entitlement as the basis for calculating contributions and also attempt to allocate expenses in ways that vary somewhat from a strict accounting according to unit entitlement.
The act also allows strata corporations to make the calculations on some basis other than unit entitlement. But a strata corporation needs a resolution passed by a unanimous vote to depart from the unit-entitlement system. Should this voting threshold be lowered to an 80-percent vote?
Discussion of options for reform
Lowering the voting threshold would give strata corporations an increased measure of flexibility in dealing with expense sharing. This flexibility could be especially welcome for addressing expense-sharing concerns. While British Columbia’s strata-property sector is one of the most diverse and sophisticated in the country, its legislative approach to expense sharing is considered to be more rigid than the approach typically taken in other Canadian jurisdictions. Even though British Columbia’s legislation contains features such as sections and types that aren’t typically found in other Canadian statutes, these features only go so far. They only apply in certain circumstances and, when they do apply, only provide a modified version of expense sharing by application of formulas based on unit entitlement. Changing the basis of these formulas still requires a resolution passed by a unanimous vote, which is a very high hurdle to clear. This can leave many strata corporations frustrated and unable to pursue their favoured approach to expense sharing because it is blocked by a small minority of strata-lot owners.
Lowering the voting threshold would also bring consistency between this part of the act and the recent changes to the legislation governing termination. It could be argued that it would be anomalous to allow termination after an 80-percent vote but to insist on a unanimous vote to change the basis of contributions to the operating fund and the contingency reserve fund.
The potential downside with lowering the voting threshold is that it could open the door to ongoing abuse of some strata-lot owners. A greater burden of the strata corporation’s expenses could be shifted on to certain owners. An owner in such a position wouldn’t be bereft of defences, but such an owner would likely have to make a case that the strata corporation’s actions were significantly unfair. This would be much more difficult than the current system, which requires the owner’s consent to any changes.
Another potential disadvantage is that lowering the voting threshold could create uncertainty in the system, short of outright abuses. The relatively standardized system of expense sharing that British Columbia’s legislation creates has advantages for owners and strata-lot purchasers, particularly in the residential sector. Making it easier to depart from the standard could also make it harder for owners and purchasers to navigate this sector by introducing subtle differences between strata corporations.
The committee’s recommendation for reform
The committee grappled extensively with this issue. It could see some advantages with building in greater flexibility with the legislation. It would also be desirable to have greater consistency between other fundamental changes and the new voting threshold for termination. But, ultimately, the committee decided to propose retaining the status quo. In the committee’s view, lowering this voting threshold in this case would potentially open the door to abuses and uncertainty.
A strong majority of consultation respondents supported the committee’s proposal.
The committee recommends:
The Strata Property Act should continue to require a resolution passed by a unanimous vote to authorize agreeing to use one or more different formulas, other than the formulas set out in section 99 of the act and in the regulations, for the calculation of a strata lot’s share of the contribution to the operating fund and contingency reserve fund.