The amendment came into force on 14 August 2020, which was the date on which Bill 14 received royal assent. The bill contains a series of other amendments affecting insurance for stratas and depreciation reports. These amendments will be brought into force by regulation, at a future date. Implementation of amendments to the Strata Property Act can be tracked on the legislation page of the ministry of municipal affairs and housing’s strata housing website. Information on insurance for stratas can be found on the ministry’s strata insurance website.

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The bill’s amendments include requiring disclosure of “a summary of the strata corporation’s insurance coverage” on a Form B Information Certificate. In addition, a strata corporation will be required to “inform owners and tenants as soon as feasible of any material change in the strata corporation’s insurance coverage, including any increase in an insurance deductible.”

Another amendment will clearly enable strata corporations to make payments for obtaining and maintaining mandated insurance coverage out of the contingency reserve fund. This legislative amendment works hand-in-hand with a recent change to the Strata Property Regulation.

Bill 14 will also amend the act to enable a cap on an owner’s responsibility for a strata corporation’s insurance deductible, “if the owner is responsible for the loss or damage that gave rise to the insurance claim but not as a result of any act or omission by the owner.” Under the proposed amendment, “the owner’s liability for the loss or damage is limited to the amount, if any, prescribed in respect of the class of the strata corporation and the class of the insurance claim.”

As the word “prescribed” in this quotation indicates, much of the bill’s legislative amendments amount to enabling provisions for future regulatory changes. The subjects addressed in these proposed regulatory changes were summarized in a government news release:

• identify when stratas are not required to get full insurance coverage;
• strengthen depreciation reporting requirements, including limiting the ability to use existing loopholes in the legislation to avoid completing depreciation reports;
• change the minimum required contributions made by strata unit owners and developers to a strata corporation’s contingency reserve fund;
• require brokers to disclose the amount of their commission, which has been reported to be at times in excess of 20%; and
• strengthen notification requirements to strata corporations of changes to insurance coverage and costs, or an intent not to renew.

The government notes that “[t]hese regulatory changes will be made after further consultation with strata community stakeholders.”

In addition to amendments to the Strata Property Act, Bill 14 also amends the Financial Institutions Act to “end the practice of referral fees between insurers or insurance brokers and property managers or other third parties.”

The government characterizes Bill 14 as “taking a first step” in response to interim findings (PDF) on insurance in the strata-property sector made by the BC Financial Services Authority. Further steps may be taken when the BCFSA delivers its final report, which is scheduled for fall 2020.

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The first amendment sets out a definition of “prevent significant loss” for the purposes of section 98 of the Strata Property Act. Section 98 deals with “unapproved expenditures,” which are expenditures that haven’t “been put forward for approval in the budget or at an annual or special general meeting.” Section 98 sets out a procedure that governs how and in what circumstances a strata corporation may make an unapproved expenditure.

This amendment to the Strata Property Regulation is intended to clarify section 98 (3), which provides “[t]he expenditure may be made out of the operating fund or contingency reserve fund 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.” The amendment makes it clear that paying the premium for a mandated insurance policy meets this condition, by defining “prevent significant loss” to “[include], without limitation, the obtaining and maintaining by the strata corporation of insurance that is required under section 149 or 150 of the Act or the strata corporation’s bylaws.”

The second amendment deals with the challenges of trying to hold a general meeting during a declaration of a state of emergency or a declaration of a state of local emergency. It allows for a two-month delay in holding the general meeting.

The amendment provides that “[i]f a declaration of a state of emergency or a declaration of a state of local emergency is in effect where the land in a strata plan is located and at any time during the period of one month that ends on the last day on which a general meeting of the strata corporation must be held under any of the following provisions of the Act, the meeting may be held up to 2 months after the last day on which the meeting must be held under the provision”:

• section 16 (1) [first annual general meeting to be held by owner developer];
• section 40 (2) [annual general meeting];
• section 43 (3) [special general meeting called by voters];
• section 43 (3.1) [special general meeting to consider winding-up resolution];
• section 51 (6) [special general meeting to reconsider resolution passed by 3/4 vote];
• section 159 (1) [general meeting to decide not to repair or replace damaged property];
• section 230 [annual general meeting after deposit of subsequent phase].

While these two changes are intended to help strata corporations during the COVID-19 pandemic, they aren’t limited to this specific state of emergency. Unlike the recent ministerial order on electronic meetings, these amendments won’t expire when the current state of emergency ends.

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The order applies to any “strata property meeting,” which is defined as “a meeting authorized or otherwise provided for under a strata property enactment [i.e., the Strata Property Act, a regulation made under that act, or a strata corporation’s bylaws], including, without limitation, an annual or special general meeting.” Under the order, any strata property meeting may be held electronically, even if a strata corporation lacks a bylaw enabling electronic meetings.

The order refers to individuals participating in a meeting “by telephone or any other electronic method, if the method permits all persons participating in the meeting to communicate with each other during the meeting.” In a news release announcing the order, the ministry of municipal affairs and housing provides some more detail on holding a meeting electronically:

Each strata corporation will need to determine what electronic meeting method works best for them. The strata council may choose from options such as Zoom, Skype or telephone conference calls, as long as it allows everyone to communicate with each other during the meeting. If an online meeting platform is chosen, alternatives for owners without a computer could include:

• attending by telephone;
• participating by proxy by giving their voting instructions to someone who will be attending the meeting; or
• attending in person, ensuring the two-metre physical distancing order is followed.

The order is only in force temporarily, for the duration of the provincial state of emergency declared in response to the COVID-19 pandemic.

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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.

For more information, visit the Strata Property Law—Phase Two Project webpage or read the Report on Common Property, Land Titles, and Fundamental Changes for Stratas.

The post 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? first appeared on British Columbia Law Institute.