Report on Governance Issues for Stratas

The Report on Governance Issues for Stratas is the third report published in the project. It represents over two years of work by the Strata Property Law (Phase Two) Project Committee at 23 committee meetings and consideration of 290 responses to the Consultation Paper on Governance Issues for Stratas.

The report examines five topics relating to strata-corporation governance: (1) bylaws and rules; (2) statutory definitions; (3) general meetings and strata-council meetings; (4) finances; and (5) notices and communications.

The report contains 81 recommendations for reform. Among these recommendations are proposals to:

• relocate 12 standard bylaws (or parts of standard bylaws) to the body of the Strata Property Act;
• create statutory definitions for the often-contested terms rent and continuing contravention;
• establish a mandatory form of proxy appointment;
• set in place criteria that must be met by those who want to serve on a strata council;
• create a special limitation period of four years for claims that may be the subject of a strata corporation’s lien; and
• update a host of fines and fees in light of current circumstances.

The report also contains draft legislation and regulations, which illustrates how its recommendations could be implemented by amendments to the Strata Property Act, Strata Property Regulation, and Schedule of Standard Bylaws.

Report on Insurance Issues for Stratas

In the Report on Insurance Issues for Stratas, the Strata Property Law (Phase Two) Project Committee recommended amendments to the Strata Property Act, the Strata Property Regulation, and the Schedule of Standard Bylaws to enhance the legal framework that governs insurance in a strata property.

Insurance is a concern for all homeowners. It is no less important for people whose homes are located within a strata property. But insurance generates some complex legal issues within strata properties that don’t arise within a single-family home. This report studies the existing laws that address these issues and recommends reforms to improve them.

The report contains 11 recommendations for reform. Its principal recommendations include proposals to:

• require strata corporations to have directors-and officers insurance;
• create a new and more certain approach to dealing with liability to pay a strata corporation’s insurance deductible in cases where an owner is responsible for a claim;
• enhance reporting and information sharing; and
• give more study to adopting the standard-unit concept, a legislative device used in other provinces to determine the limits of a strata corporation’s property-insurance mandate.

The report also contains draft legislation and regulations, illustrating how the committee’s recommendations could be implemented.

This report is the fourth report issued in the project. It is the product of extensive research, committee meetings, and public consultation.

Consultation on common property, land titles, and fundamental changes for stratas

This consultation kicked off in December 2018 with the publication of the Strata Property Law (Phase Two) Project Committee’s Consultation Paper on Common Property, Land Titles, and Fundamental Changes for Stratas. The full consultation paper contained 25 tentative recommendations for reform, which addressed these topics:

• common property: defining common property, long-term leases of common property, and parking stalls and storage lockers;
• land titles: emerging issues in subdivision control, depicting common property and the vertical limits of limited common property, and certificates of payment; and
• fundamental changes: voting thresholds for amending a strata plan, amending a schedule to a strata plan, and amalgamating strata corporations.

Respondents were also given the option to reply to a summary consultation, which highlighted three proposals (one proposal addressing each of the consultation paper’s three subjects: common property, land titles, and fundamental changes). Together, the full consultation and the summary consultation had received 51 responses by the date on which the consultation closed (28 February 2019).

Statistics on project publications, meetings, and website engagement

One of the goals of the project is to make its research and conclusions widely known to interested readers. Here are some statistics, tracking how that information is made available to and accessed by the public, during the first quarter of 2019:

• number of publications: 2, the Report on Governance Issues for Stratas and the Report on Insurance Issues for Stratas
• number of supporting documents issued: 6, a media release and two backgrounders for each of the Report on Governance Issues for Stratas and the Report on Insurance Issues for Stratas
• number of project-committee meetings held: one
• number of pageviews of project page: 1195
• number of blog posts on strata-property topics: 13

A look ahead to the next quarter

The project committee’s attention in the upcoming quarter will be on reviewing the responses it received to the Consultation Paper on Common Property, Land Titles, and Fundamental Changes for Stratas and considering drafts of the upcoming report on common property, land titles, and fundamental changes for stratas. This report will be the project’s last publication. The plan is to publish it in late spring 2019.

Thanks to project funders

The Strata Property Law Project—Phase Two has been made possible by support from nine funding organizations. Support from the bulk of these organizations is reviewed from year-to-year. BCLI thanks the following organizations for continuing to support the project.

The post Two new reports the highlight of the first quarter of 2019 for the Strata Property Law Project first appeared on British Columbia Law Institute.

This post is part of a series that spotlights issues discussed in the Consultation Paper on Common Property, Land Titles, and Fundamental Changes for Stratas. To read other posts in the series please click here.

Brief description of the issue

This issue is a departure from the other issues considered in the consultation paper’s chapter on fundamental changes. In every other issue dealing with voting threshold, the legislation requires a resolution passed by a unanimous vote, which is its highest voting threshold. In this case, the Strata Property Act requires a resolution passed by a 3/4 vote to approve an amalgamation agreement. So the question here is should the act be amended to raise this voting threshold to an 80-percent vote?

Discussion of options for reform

The main reason for proposing this reform would be to create some consistency with other fundamental changes involving strata corporations. Consistency would bring several subsidiary benefits, such as making the statute simpler and more accessible.

Another rationale for raising the voting threshold would be that a higher threshold would provide more protection for minority interests. Amalgamation is a significant change for a strata corporation, one that could affect the property rights of strata-lot owners. Allowing it to be approved by a resolution passed by a 3/4 vote creates the possibility of an amalgamation going ahead with the support of a relatively small group of owners, since the 3/4-vote threshold need only be reached by “the votes cast by eligible voters who are present in person or by proxy at the time the vote is taken and who have not abstained from voting.” A higher voting threshold would also be in line with the approach taken in most other Canadian jurisdictions.

But the problem with raising the voting threshold for protective reasons is that it isn’t clear that anyone is actually being harmed by the current, lower threshold. There have been no published complaints about it. The current threshold would also allow for greater flexibility in planning for amalgamation and a more streamlined process of approval.

The committee’s tentative recommendation for reform

The committee noted that amalgamation is rarely encountered in strata-property practice. When it occurs, it tends to be a response to a highly unusual set of circumstances. The committee is unaware of any problems or abuses flowing from the relatively low voting threshold required to approve an amalgamation agreement. In the absence of real-world problems, the committee is reluctant to propose raising this voting threshold.

The committee tentatively recommends:

The Strata Property Act should continue to require a resolution passed by a 3/4 vote to approve an amalgamation agreement.

To respond to this tentative recommendation or to read more about issues like this one, please visit the Strata Property Law Project—Phase Two webpage.

The post Spotlight on common property, land titles, and fundamental changes for stratas: Should the Strata Property Act require a resolution passed by an 80-percent vote to approve an amalgamation agreement? first appeared on British Columbia Law Institute.

This post is part of a series that spotlights issues discussed in the Consultation Paper on Common Property, Land Titles, and Fundamental Changes for Stratas. To read other posts in the series please click here.

Brief description of the issue

Section 244 of the Strata Property Act contains a long list of requirements for a strata plan, but nowhere among them is an express requirement to depict common property. This is so despite the act’s implicit characterization of common property as an essential ingredient of a strata property. Should section 244 be amended to contain an express requirement to depict common property on a strata plan?

Discussion of options for reform

This issue acts as a bridge between the one set of issues discussed in the consultation paper (on emerging issues in subdivision control) and another set (on common property). Creating a strata plan with no clear depiction of common property is one of the ways in which what may functionally be a bare-land strata plan could be characterized as a building strata plan.

Apart from concerns about subdivision control, the Land Title and Survey Authority for British Columbia is also on the record as disapproving this approach as a matter of land-title practice (PDF). The LTSA’s position is based on an interpretation of section 68 (3) of the act, which deals with strata-lot boundaries. An express provision that is directly on point would add more support for the LTSA’s position.

The downsides of this option for reform differ from those discussed in the preceding issues for reform. Because this option doesn’t involve an expansion of a regulatory process it doesn’t carry with it obvious costs and burdens for real-estate developers and others. The disadvantage is this approach is that it may be too modest. It isn’t clear that anyone is calling for this specific amendment. It also isn’t clear that it is needed. An argument could be made that section 68 (3) already gives the LTSA enough authority to deal with the issue. Finally, such a provision could be sidestepped by a rogue developer by simply including a trivial amount of common property on a strata plan.

The committee’s tentative recommendation for reform

The committee favoured this proposed reform. It would help to bring some clarity to the act’s requirements. In addition, this proposed reform, coupled with the preceding tentative recommendation, should provide some assistance in stamping out questionable subdivision practices.

The committee tentatively recommends:

The Strata Property Act should expressly require a strata plan to include a depiction of common property.

To respond to this tentative recommendation or to read more about issues like this one, please visit the Strata Property Law Project—Phase Two webpage.

The post Spotlight on common property, land titles, and fundamental changes for stratas: Should the Strata Property Act expressly require a strata plan to include a depiction of common property? first appeared on British Columbia Law Institute.

This post is part of a series that spotlights issues discussed in the Consultation Paper on Common Property, Land Titles, and Fundamental Changes for Stratas. To read other posts in the series please click here.

Brief description of the issue

Despite general provisions imposing duties and restrictions on owner-developers, there are still specific concerns about transactions involving common property. These concerns relate to long-term leases tying up a strata’s common property after the owner-developer has left the scene. Should the act be amended to directly address this concern?

Discussion of options for reform

There is a range of options that could be considered in response to this issue, which would run from proposing a robust power for the incoming strata council to terminate leases entered into by the owner-developer to retaining the status quo.

Enacting legislation that would create an enhanced termination power for leases entered into by the owner-developer would directly address concerns raised about such leases binding strata corporations to unfavourable terms far into the future. It would also be a simpler mechanism to exercise than litigation over whether an owner-developer has failed in its duty to act in the best interests of the strata corporation.

But such an amendment would also have downsides. The main downside of a broadly framed termination power is that it would cast a chill over all contracts that the owner-developer would attempt to enter into on the strata corporation’s behalf. Contracting parties could decide that the uncertainty created by such a power would make it not worth their while to enter into contracts with the owner-developer. Or they could insist on concessions to make up for the perceived loss of contractual certainty. Either development could have significant long-term economic consequences for the strata corporation.

These disadvantages could lead to the conclusion to retain the status quo. It could be argued that the current legislation strikes the right balance. It gives strata corporations some tools to combat the worst abuses but doesn’t go so far as to create contractual uncertainty.

The drawback of this approach is that it leaves any concerns about the current law unaddressed. There are indications of frustration within the strata sector about leases of common property. The current law appears to lack an answer to this frustration.

Between these two ends of the spectrum there is any number of intermediate options that could be considered. It may be possible to craft a narrowly tailored provision that would weed out concerning leases while not doing much to unsettle contractual certainty. But the downside of such an approach is that it might only provide temporary relief. Frustrations could re-emerge if some new practice, related to but distinct from the current approach, were to grow up as a way to get around a narrowly tailored provision.

The committee’s tentative recommendation for reform

In the committee’s view, there are serious concerns arising from this issue, which should be met with a legislative response. But the committee was unwilling to go so far as to propose an enhanced power to terminate leases of common property. The advantages of such a power are outweighed by its disadvantages.

In the committee’s view, there are problems arising from certain leases of common property and common assets. These problems can be addressed by a tailored provision. Such a provision should be directed at the term of the lease. In the committee’s view, the real problems arise from leases that stretch out far into the future, binding the strata corporation long after the owner-developer has left the scene. A provision that limits the term of such leases would clear up much of the current frustration.

The committee favours five years as the length of a statutory limitation on lease terms. Some arbitrariness would attach to any number selected here. Five years is a common lease term, and would appear to strike the best balance between being a reasonable length and not excessively binding the strata corporation. But to address cases in which some flexibility would be desired, the committee also favours building a mechanism into the legislation, allowing for a longer term.

The committee also favours limiting the reach of this proposed provision to common property and common assets that can be classified as fixtures.

The committee tentatively recommends:

The Strata Property Act should provide that any lease, entered into by the owner-developer, of a fixture that is common property or of common asset must not have a term that exceeds five years.

To respond to this tentative recommendation or to read more about issues like this one, please visit the Strata Property Law Project—Phase Two webpage.

The post Spotlight on common property, land titles, and fundamental changes for stratas: Should the Strata Property Act provide a lease of a fixture that is common property or of a common asset entered into by the owner-developer may not exceed five years? first appeared on British Columbia Law Institute.