BC Court of Appeal affirms “foundational democratic principles” at the heart of the Strata Property Act
March 15, 2016
BY Kevin Zakreski
In an important decision on strata-property governance, the Court of Appeal for British Columbia has grappled with whether legislation respecting a court-appointed administrator of a strata property “permits a court to abrogate a right which lies at the very core of a strata corporation’s constitutional structure: the owners’ democratic right to vote.” In Norenger Development (Canada) Inc v The Owners, Strata Plan NW 3271, 2016 BCCA 118, the court overturned an earlier decision of the British Columbia Supreme Court, concluding that, despite the administrator’s “well-meant attempt to put an end to the perceived dysfunction of the Strata Corporation,” the “foundational democratic principles that pervade the Act cannot be sacrificed to expediency absent clear statutory direction.”
Facts and background
The case concerned a strata property consisting of two buildings, located in Richmond, BC. The strata property “was created on June 27, 1990, under the provisions of the former Condominium Act, R.S.B.C. 1979, c. 61, and consists of two sections:
(a) a residential section, comprising strata lots 1 through 44, which are located in Building B (the ‘Residential Section’); and
(b) a commercial section, comprising strata lots 45 and 48, which are located in Building A, and strata lots 46 and 47, which are located in Building B (the ‘Commercial Section’).”
The strata corporation’s bylaws “were ambiguous with respect to the allocation of common expenses between the Strata Corporation and the two sections. Common expenses were to be levied in part based on unit entitlement. The Residential Section made up 44.4% of the total unit entitlement; the Commercial Section made up 55.6%.”
Whether due to this ambiguity or for other reasons, “[i]n its first twenty years, the Strata Corporation did not comply with the Act or its original bylaws. Expenses were allocated between the two sections in an irregular manner, and the Strata Corporation did not hold annual general meetings.” Ultimately, disputes over the “allocation of costs for the replacement of lights in Building B’s parking and exterior common areas” and “regarding the allocation of other anticipated costs, including the cost of replacing the building envelopes on Building A and Building B” came to a head and led to the appointment of an administrator. The administrator developed a plan that involved the adoption of new bylaws for the strata corporation, “a new formula for allocating expenses under s. 100 of the Act”, and removal of “a limited common property designation (a loading bay) pursuant to s. 257 of the Act.”
Resolutions to implement the plan were defeated at a special general meeting of the owners. The plan was ultimately submitted to the supreme court for approval. The supreme court granted the order sought, finding it to be within the scope of the administrator’s powers under section 174 (7) of the act.
For the court of appeal, the “central issue on the appeal is the proper interpretation of s. 174(7),” which reads as follows:
(7) Unless the court otherwise orders, if, under this Act, a strata corporation must, before exercising a power or performing a duty, obtain approval by a resolution passed by a majority vote, a 3/4 vote or a unanimous vote, an administrator appointed under this section must not exercise that power or perform that duty unless that approval has been obtained.
Section 174 (7) is a relatively recent amendment to the Strata Property Act, dating to 11 December 2009. In considering how to interpret this provision, the court reviewed the leading cases on the scope of an administrator’s powers that predate the provision, including Lum v The Owners, Strata Plan VR519, 2001 BCSC 493, Aviawest Resort Club v Chevalier Tower Property Inc, 2005 BCCA 267, Cook v Strata Plan N-50 (1995), 1995 CanLII 2422 (BCSC), Toth v The Owners, Strata Plan LMS1564 (19 August 2003), Vancouver L022502 (BCSC), and Clarke v The Owners, Strata Plan VIS770, 2009 BCSC 1415. From its reading of these cases, the court articulated the following principles “applicable to the case at bar [that] can be distilled as follows:
- Democratic governance lies at the core of the Act and is fundamental to the function of a strata corporation established under the Act.
- Under s. 174 of the Act, the court may appoint an administrator to exercise the powers and perform the duties of a strata corporation.
- The powers and duties of a strata corporation are independent from the powers and duties of the owners who are members of that strata corporation. The right to vote on and pass a resolution at an annual or special general meeting is an individual right possessed by the owner of a strata lot (or an assignee or mortgagee under s. 54 of the Act).
- The Act provides that a strata corporation, qua strata council, must obtain the approval of voters before taking certain action.
- Absent specific statutory authorization, the court cannot empower an administrator to act without the approval of voters as required under the Act.”
Applying these principles to the facts of the case led the court to find
that s. 174(7), as it is presently worded, does not support the interpretation which the respondents encourage us to adopt. To abrogate the democratic rights of owners requires express statutory authorization. Section 174(7) does not authorize the court to dispense with an administrator’s obligation to obtain the approval of owners under ss. 100, 128 and 257 of the Act. The judge erred in making the orders sought by the Administrator and the Residential Owners.
In the result, the appeal was allowed and “paras. 2 through 6 of the judge’s order,” granting the relief sought by the administrator in the court below, were set aside.