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.

Brief description of the issue

Even though the deposit of a strata plan is considered to be a subdivision of land, the Strata Property Act currently allows many strata plans to be deposited without the approval of an approving officer. While bare-land strata plans require approving-officer approval, most building strata plans do not. (The small number of building strata plans that involve conversion of a previously occupied building do require approval—by an approving authority.)

This differential treatment of strata plans creates an incentive for developers to characterize what are functionally bare-land strata plans as building strata plans to avoid the requirement for approving-officer approval. The development of such building strata plans (in name only) skirts subdivision controls that form the cornerstone of land-use regulation in British Columbia. Should the Strata Property Act be amended to require that approval of all strata plans by an approving officer, as a means to reduce the incentive to characterize strata plans as building strata plans?

Discussion of options for reform

Concerns about the use of building strata plans to circumvent aspects of subdivision control can be traced back to before the advent of the Strata Property Act. In the 1990s, the Union of British Columbia Municipalities endorsed a series of resolutions that addressed aspects of this issue. One of these resolutions called for legislative amendments that would, in essence, require approving-officer approval of building strata plans.

The advantage of such an amendment is that it would directly address a problem that has dogged strata properties since at least the 1990s. There is a trail of developments that have used the building-strata form as a means to create what are functionally bare-land strata subdivisions without complying with the requirements for depositing a bare-land strata plan. Treating all strata plans on the same footing when it comes to approving-officer approval would dramatically undercut the incentive to attempt such a manoeuvre.

Other advantages to this approach include its simplicity and directness relative to other means that could be tried to address the issue. A more focused and limited provision—aimed just at the worst abuses, for example—would pose a more complex drafting problem. It would also run the risk of failing to address the underlying motivation of developers to characterize a strata plan as a building strata plan, which is the relatively lighter regulatory burden that such plans face.

The provincial response to the UBCM resolution did a good job of spelling out the disadvantages of this option for reform. This response noted that the days of the Condominium Act were numbered, as the new Strata Property Act had just passed the legislature, but without a provision that responded to the UBCM’s concern. As the ministry of finance argued in its portion of the response, implementing the UBCM resolution would potentially have the following drawbacks:

• costs and delay: “A municipal approval requirement for all new strata developments would add considerable cost, as well as delay, to the development process.”
• availability of other legal tools: “Currently, municipalities have considerable control over new strata developments because of their jurisdiction over zoning bylaws and the issuance of building permits.”
• response is out of proportion to the scale of the problem: “Indeed, it is likely, in large part due to the successful enforcement of [municipal] bylaws, that the overwhelming majority of new strata developments are built in compliance with the applicable municipal bylaws. . . . Given the incidence of non-conforming developments is relatively low, and that municipalities have the means with which to deal with the occasional non-conforming developments, [the ministry is of the view that] the imposition of a requirement for municipal approval for all strata developments would not appear to be warranted at this time.”

Finally, it’s worth noting that rejecting this approach doesn’t necessarily lead to the conclusion that the status quo is acceptable. It’s possible to tackle this issue with a targeted approach, rather than the general approach used in this option for reform.

The committee’s recommendation for reform

The committee saw some merit to this proposed reform. It would clearly address the subdivision problem. But it would come with significant drawbacks, mostly in the form of added costs and delays. The committee also had a sense that the underlying problem varied across the province. Large urban governments likely already have the tools to address this problem. But local governments in less densely populated areas might welcome provincial legislation. While their concerns shouldn’t be cast aside, the committee wasn’t convinced that a general approach was the best way for provincial legislation to deal with these concerns.

While a majority of consultation respondents agreed with the committee, a sizeable minority disagreed, favouring legislation that would require approving-officer approval for all strata plans.

The committee recommends:

The Strata Property Act should not provide that all strata plans require the approval of an approving officer.

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 all strata plans require the approval of an approving officer? first appeared on British Columbia Law Institute.

• project term: 6 years (July 2013 to June 2019)
• number of reports published: 5
• number of consultation papers published: 5
• number of recommendations for reform made: 206
• number of reports implemented by legislation: one, Report on Terminating a Strata (see Natural Gas Development Statutes Amendment Act, 2015, SBC 2015, c 40, ss 37–55—in force 28 July 2016)
• number of committee members: 18 (maximum 13 at any one time)
• number of committee meetings held: 60
• number of project funders: 9
• number of responses to public consultations: 596
• number of supporting documents (media releases, backgrounders, summaries, booklets) published: 39
• number of items posted on the project or strata-property law to the BCLI blog: 220
• number of pageviews of the project webpage: 12 985 (4 July 2013 to 4 July 2019)
• number of pageviews of most-popular blog post: 10 583 (as of 4 July 2019)
• number of downloads of most-downloaded publication (the Report on Insurance Issues for Stratas): 392
• number of engagements with the project on social media: 474 (as of 4 July 2019)

The post Quick facts about the Strata Property Law Project—Phase Two first appeared on British Columbia Law Institute.

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 (items such as enterphones and security cameras often figure as examples) after the owner-developer has left the scene. Sometimes, the concerns extend to service contracts entered into on the strata’s behalf by the owner-developer. Other provinces have enacted legislation that reins in these transactions. Should British Columbia follow their lead and amend the Strata Property Act to directly address these concerns?

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 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. Consultation respondents supported the committee’s proposal on this issue, by a solid majority.

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 that can be classified as fixtures and to common assets.

The specifics of these last two points are addressed later in the report.

The committee 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 a common asset must not have a term that exceeds five years.

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 provide that 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.

Strata plans are at the heart of this report. Even though the reach of this report is more expansive than a systematic examination of strata plans, as the report considers common property, land titles, and fundamental changes for strata properties it ends up spending much of its time looking at legal issues in those three subjects from the standpoint of the issues’ effects on strata plans.

The report contains 25 recommendations for reform, on following topics:

• common property: the definitions of common property and limited common property, long-term leases of common property, and amending a strata plan under section 258 of the act to designate parking spaces (and, as the report proposes, storage lockers) as limited common property;
• land titles: emerging issues in subdivision control, depicting common property on strata plans, and Certificates of Payment;
• fundamental changes: lowering the voting threshold for some fundamental changes from a unanimous vote to an 80-percent vote.

The report also tackles how these recommendations may be implemented, in a chapter setting out draft legislation and regulations.

The report comes after the close of a three-month consultation process, held in winter 2018 and 2019, which garnered 51 responses. The committee fully considered these responses in making its final recommendations.

This report is the fifth and final report in BCLI’s Strata Property Law Project—Phase Two.

Quote

“The committee decided that there is some room for improvement with how the act deals with some of the building blocks for the strata-property legal framework. From the planning and conception of a strata property by its owner-developer through to the fundamental changes that strata-lot owners in a mature strata property may encounter, this report identifies a number of areas where the law may be changed for the better.”—Patrick Williams, Chair, Strata Property Law Project Committee

Quick links

• Report on Common Property, Land Titles, and Fundamental Changes for Stratas
• Backgrounder no. 16—Summary of Report on Common Property, Land Titles, and Fundamental Changes for Stratas
• Backgrounder no. 17—Report on Common Property, Land Titles, and Fundamental Changes for Stratas Legislative Fact Sheet
• Media Release no. 12—BCLI recommends reforms to the Strata Property Act’s legal framework for common property, land titles, and fundamental changes
• Strata Property Law (Phase Two) Project webpage

The post BCLI recommends reforms to the Strata Property Act’s legal framework for common property, land titles, and fundamental changes first appeared on British Columbia Law Institute.