Strata Property Law 101
Strata development has flourished in British Columbia . Since 1966, developers have created approximately 840,000 strata lots in this province. In 1998, the Barrett Commission described the strata system as a significant form of property ownership in our province.1 The Barrett Commission found that the strata market is an important source of affordable family and retirement housing.2
To understand the complexities of strata development, it is helpful to first review some of the fundamentals.
HOW THE STRATA CONCEPT WORKS
A strata development is a special way of subdividing and owning portions of buildings and land.
Historically, the law allowed landowners to subdivide their land into two or more separate pieces. The owner of any piece of land also owned the buildings on it.
What if the owner of a building wanted to subdivide it into several parts with separate owners? Though owners could subdivide land, the law did not permit them to subdivide their buildings into separately owned pieces.
For example, suppose two people, a brother and sister, own a piece of land. A duplex sits in the middle of the property and the owners want to subdivide the land and duplex into equal halves. Afterwards, the brother and sister will each own one of the subdivided pieces. Can we subdivide the duplex so that the brother owns one side, while the sister owns the other? Traditionally, the answer was, "No."
The strata concept is the solution. In a strata development, individuals can own separate parts of the property, but share common areas and related expenses.
The part of the property which an individual owns separately is called a "strata lot." Informally, this part is often called the "strata unit." The remainder of the property is called the "common property." The strata owners own their strata lots, plus their proportionate share of the common property.
TYPES OF STRATA DEVELOPMENT
Strata developments occur with and without buildings. Developers can also create strata developments in phases.
Strata developments usually involve buildings. These projects are created by constructing new buildings or converting old ones into strata ownership. Typical examples include:
> Residential Uses . Apartments
> Non-Residential Uses
• Warehouses and other industrial property
• Recreational facilities
We call a strata development without buildings a "bare land strata." A good example is a manufactured home park where individuals own their pad and share in the ownership and maintenance of common areas, like a tennis court within the park. Ownership of the strata pad entitles the owner to put their manufactured home on it.
Some strata developments serve multiple uses. For example, a development may be partly residential and partly commercial.
A developer who wants to build in stages can deposit the strata plan in phases over a period of time. This is called a phased strata development. For example, suppose a developer has a piece of land large enough for five buildings, but can only afford to build the first building. The developer needs the proceeds from the sale of the units in the first building to finance construction of the second one, and so on. In this case, the developer would create a phased development.
In 1966, strata development began in British Columbia when the province enacted the first Strata Titles Acf.3 In 1974, the province replaced the first Strata Titles Act1- with the second one. Since 1974, the province has amended the Act many times. In most cases, the amendments have been minor. Since 1980, the Act has been called the Condominium Act.5 In 1997, the province published its most recent version of the Condominium Act,5 consolidating into one document all the changes in the statute to the end of 1996.
The Strata Property Act
In 1998, the province passed the Strata Property Act7 (hereinafter referred to as the Act), whose purpose is to replace the Condominium Act and make a number of improvements to the old legislation.
It is important for realtors to understand how the Strata Property Act affects strata corporations.
This seminar emphasizes the new legislation governing strata properties. Unless otherwise slated, all section references in this material refer to the Strata Property Act.
When necessary, we will also refer to other statutes which play an important role in strata matters, like the Heal Estate Act.8
HOW A STRATA DEVELOPMENT IS CREATED The Strata Plan
To create a strata development, a developer must first subdivide the land, including any buildings, into designated parts for separate ownership. This is done by depositing a document called a "strata plan" at the land title office.9
The plan must show which parts are strata lots for purchase by individual owners and which portions are common property.
Though the requirements for depositing a strata plan are very technical, every plan must show, among other things, the following:
> a unique registration number (e.g., Strata Plan No. VR 150),
> the boundaries of the land,
Strata Properly Law for REALTORS
> the location of any buildings,
> a drawing distinguishing the strata lots from one another by numbers or letters in consecutive order,
> the area of each strata lot in square meters, > a schedule of unit entitlement,
> a schedule of voting rights, if there is at least one non-residential strata lot owner, and
> any bylaws that differ in any respect from the standard bylaws.'0 This is an essential document for all strata owners and their realtors.
If you don't have a copy of the strata plan for your unit, you can get one at the land title office in the district where the land is situate. Many real estate companies use private land registry search services to obtain copies of documents registered at the land title office.
Bare Land Strata Plan
A bare land strata plan lacks buildings at the time of its development. In a bare land strata plan, the boundaries of the individual strata lots are defined by survey markers.
The Strata Corporation
A corporation is a fictional legal person. In general, a corporation has the same ability as a real person to do things of a legal nature. A corporation can enter into contracts to buy or sell property or services, and a corporation can sue or be sued.
The deposit of the strata plan triggers the creation of the strata corporation. Section 2 of the Act says:
2 (1) From the time the strata plan is deposited in a land title office,
(a) a strata corporation is established, and
(b) the owners of the strata lots in the strata plan are members of the strata corporation under the name "The Owners, Strata Plan [the registration number of the strata p/an]".11
Though a strata corporation and a company are both corporations, the similarity effectively ends there. Unlike a company, in a strata corporation:
> the Company Act does not apply, except as specifically provided;12
> an individual member's liability is not limited to the same extent as in a company;13 and
> individual members do not hold shares in the strata corporation. Duties
The Act imposes various duties on the strata corporation, including the following responsibilities:
The strata corporation must manage the common property and common assets of the strata corporation for the benefit of the owners.14
The strata corporation must repair and maintain its common property and common assets.15
If the strata corporation receives a work order from a regulatory authority over common property or land that is a common asset, the corporation must carry out the work,15 If the strata corporation receives a work order respecting a particular strata lot, the corporation must promptly notify the owner. If the owner fails to do the work, the strata corporation may do it and charge the owner for its cost.17
The strata corporation must obtain and maintain property insurance on the common property, including any buildings shown on the strata plan, the common assets, and any fixtures built or installed on a strata lot by the owner developer as part of the original construction of that strata lot.18 In addition, the strata corporation must maintain insurance against liability for property damage and bodily injury.19
Every year the strata corporation must review the adequacy of its coverage -and report to the owners on the insurance coverage at each annual general meeting.20
n Lalji-Samfi v. Strata Plan VR 213521 the court found that a strata corporation could not claim against an owner for damage to common sroperty where the corporation had failed to insure the property under the ondominium Act
rug in the lobby of the complex was common property. The rug was ruined when bleach leaked from a box belonging to one of the owners. Apparently, the strata corporation lacked insurance for damage to the rug.
The strata corporation sued the owner, who argued that the Condominium Act and the general principles of insurance law prohibited the corporation from claiming against him.
Section 54 of the Condominium Act required the corporation to insure the common property against fire and other perils, which are usually the subject of insurance in similar properties. Section 54 (3) also provided, in part:
54 (3) Notwithstanding the terms of the policy, . . .
(b) the owners and tenants from time to time of every strata lot ... shall be deemed to be included as the named insured on a policy of insurance in force under (this section).22
The court held that the strata corporation could not sue the owner. The court found that if the strata corporation had properly insured the rug, there would be no claim against the owner. A fundamental principle of insurance law prevents an insurer from claiming against the insured to recover legitimate losses paid by the insurer. In this case, the statute deemed every owner to be an insured.23 If the strata corporation had insured the rug as it was supposed to do, an insurer standing in the shoes of the strata corporation would have no claim against the owner because the owner is a beneficiary under the policy. Since the strata corporation failed to meet its statutory duty to insure the rug, it could not sue the owner for the damage in these circumstances. The strata corporation must bear the loss.
The strata corporation must prepare and keep copies of the following records for the periods set out below:24
> A list of council members and their telephone numbers;
> A list of owners, with their strata lot addresses, mailing addresses if different, strata lot numbers as shown on the strata plan, parking stall numbers, if any, and unit entitlements;
> A list of names and addresses of mortgagees who have filed a Mortgagee's Request for Notification under section 60 of the Strata Property Act,
> A list of names of tenants;
> A list of assignments of voting or other rights by landlords to tenants under sections 147 and 148 of the Strata Property Act;
> The Strata Property Act and the regulations; and > The bylaws and rules.
For at Least 2 years:
> Correspondence sent or received by the strata corporation and council.
For at Least 6 years:
> Minutes of all annual and special general meetings and council meetings, including the results of any vote;
> Books of account showing money received and spent and the reason for the receipt or expenditure;
> Waivers and consents under sections 41, 44 or 45 (These sections govern the procedure for waiving notice of a general meeting, or waiving the necessity of holding a general meeting.);
> Written contracts, including insurance policies, for at least 6 years after the termination or expiration of the contract or policy;
> The budget and financial statements for the current year and the previous years;
> Income tax returns, if any;
> Bank statements, cancelled cheques and certificates of deposit;
> Information certificates issued under section 59 of the Strata Property Act;
> All contracts, including insurance policies, entered into by or on behalf of the strata corporation that the developer delivered to the strata corporation under section 20 of the Strata Property Act. The strata corporation must keep the contract for at least 6 years after its termination or expiration; and
> Copies of financial records obtained from the developer for at least 6 years after the transfer of control from the developer to the strata corporation referred to in section 22 of the Strata Property Act.
Until the Disposal or Replacement of Certain Items:
> Documents obtained from the developer in the nature of warranties, manuals, schematic drawings, operating instructions, service guides, manufacturer's documentation or other similar information respecting the construction, installation, operation, maintenance, repair and servicing of any common property or common assets, including any warranty information provided to the developer by a contractor, subcontractor or supplier to the project. In the case of a warranty, the strata corporation must keep the document until the disposal or replacement of the relevant item, or the expiry of the warranty, whichever comes first. The strata corporation must keep the rest of these documents until the disposal or replacement of the relevant items to which they relate.
> The registered strata plan and any registered amendments;
> Any resolutions dealing with changes to the common property, including the designation of limited common property;
> Decisions in court or arbitration proceedings; > Any legal opinions; and
> Some of the information obtained from the developer under the Strata Property Act, including names and addresses of all contractors and the like who supplied labour or materials to the project, plans required to obtain building permits, any plans showing the actual location of pipes, wires and the like (sometimes called "as built" plans), and the disclosure statement and amendments, if any.
Upon request by the owner, or his or her delegate authorized in writing, the strata corporation must permit them to inspect and obtain copies of the corporation's records. Section 36 (3) of the Strata Property Act and section 25 of the Interpretation Act, when read together, require the strata corporation to comply with the request within 15 days, unless the request is for access to the bylaws and rules, in which case the corporation has eight days to comply. As part of the listing contract, the licensee should ensure that the owner has authorized the licensee, in writing, to obtain from the strata corporation all the section 35 records and an Information Certificate. Using this authorization the licensee should request the records and documents listed.
Section 4.2 (2) of the regulations prohibits any charge to an owner, or his or her authorized delegate, for inspecting the strata corporation's records. Section 4.2 (1) of the regulations sets 25 cents per page as the maximum permitted charge for providing copies of the strata corporation's records. Licensees should be aware that this new provision may change the amount charged by strata corporations or their managers for providing copies of this type of information. Section 36 (4) of the Strata Property Act allows the strata corporation to refuse to supply copies to the owner, or his or her authorized delegate, until the copy fee is paid.
Information Certificate (Form "B")
Section 59 of the Strata Property Act entitles owners or buyers, or persons authorized by them, to request an Information Certificate from the strata corporation in Form B, being the form prescribed by the regulations. The Certificate must disclose all of the following concerning the strata corporation, and the strata lot for which the request is made, as at the date of the Certificate:
> The monthly strata fees payable by the owner;
> Any amount that the owner owes the strata corporation, other than disputed amounts paid into court or to the strata corporation in trust under section 114 of the Strata Property Act.
> Any agreements under which the owner takes responsibility for expenses relating to alterations to a strata lot, the common property or the common assets;
> Any amount that the owner is obligated to pay in the future for a special levy that has already been approved and the date by which the payment is to be made;
> Any amount by which the expenses of the strata corporation for the current fiscal year are expected to exceed the expenses budgeted for the fiscal year;
> The amount in the contingency reserve fund minus any expenditures which have already been approved but not yet taken from the fund;
> Any amendments to the bylaws that are not yet filed in the land title office;
> Any resolution passed by a 3/4 vote or unanimous vote that is required to be filed in the land title office but that has not yet been filed in the land title office;
> Any notice that has been given for a resolution that has not been voted on, if the resolution requires a 3/4 vote or unanimous vote or deals with an amendment to the bylaws;
> Any court proceeding or arbitration in which the strata corporation is a party and any judgments or orders against the strata corporation;
> Any notices or work orders received by the strata corporation that remain outstanding for the strata lot, the common property or the common assets;> The number of strata lots in the strata plan that are rented; and
Strata Property Law for healtors
> Any other information required by the regulations.
The strata corporation must also attach copies of its rules, the current budget, and the developer's Rental Disclosure Statement, if any, to the Information Certificate.
Section 59 (1) of the Strata Property Act and section 25 of the Interpretation Act, when read together, require the strata corporation to comply with the request for an Information Certificate within 8 days. Section 4.4 of the regulations restricts the maximum fee that the strata corporation may charge for an Information Certificate, including the required attachments, to $35 plus the cost of photocopying at no more than 25 cents per page. (These rates are subject to change by regulation.)25
A strata property manager that represents a strata corporation is bound by the same restrictions. The strata property manager must not charge an owner, or buyer, or their authorized delegate, any fees in excess of those permitted by the Act. If the property manager wishes to recover any costs associated with this service, the manager must build that charge into the management fee that the manager charges to the strata corporation.
Like the former Section 36 Certificate, the new Information Certificate shows, among other things, the monthly strata fees, any expected budget deficit, any bylaw amendments which have not yet been filed at the land title office, and information about court or arbitration proceedings to which the strata corporation is a party.
In addition to the bylaws, copies of the strata corporation's rules and its current budget and the developer's Rental Disclosure Statement, if any, must be attached to the Information Certificate.
Buyer agents should advise clients to make their offers subject to obtaining and approving an Information Certificate.2B For example, » licensees may use the following clause:
Strata Property Law for realtors
Subject to the Buyer receiving and being satisfied with the documents referred to below on or before the earlier of
A current Information Certificate (Form "B") attaching the strata corporation's rules, current budget and the developer's Rental Disclosure Statement, if any;
A copy of the registered strata plan, any amendments to the strata plan, and any resolutions dealing with changes to common property;
The current bylaws and financial statements of the strata corporation, and any section to which the strata lot belongs; and
The minutes of any meetings held between the period from (date) to (date) by the strata council, and by the members in annual, extraordinary or special general meetings,27 and by the members or the executive of any section25 to which the strata lot belongs.
Include any other information, document, record or report the Buyer needs before being committed to buy:
* Licensees should insert number of days that is reasonable in the circumstances in the event the documents can be made available earlier than the allowable time period.
** Insert date that is 18 days after the date of acceptance.
Immediately upon acceptance of this offer or counter offer, the Seller will authorize the (Seller's/Buyer's agent), to request, *** at the (Seller's/Buyer's)"** expense, complete copies of the documents listed above from the strata corporation or other source and to immediately, upon receipt, deliver the documents to the Buyer (or the Buyer's agent).
This condition is for the sole benefit of the Buyer.
*** Use an authorization such as Appendix B for this purpose.
**** The wording of this clause allows for the parties to negotiate who will pay for the cost of obtaining these documents.29
The Strata Council
Since the strata corporation is a fictional legal person, it can only carry out activities through its members, the strata lot owners.
The law recognizes the need for an executive body to generally oversee the strata corporation between general meetings of all the members. This executive body is called the strata council. It is effectively a board of directors. Section 26 of the Act says, in part:
26 Subject to this Act, the regulations and the bylaws, the council must exercise the powers and perform the duties of the strata corporation, including the enforcement of bylaws and rules.30
Each year, the owners of the strata lots must elect from among themselves the members of the strata council.31
The owners of the strata lots are the members of the strata corporation. Generally speaking, the strata corporation must hold an annual general meeting of the members every year.32 All other general meetings of the members are called special general meetings.33
The members control their destiny by electing the strata council and making major decisions like approving the annual budget, amending the bylaws and the like.34
With some exceptions, the members can direct or restrict the strata council in the exercise of its powers by a majority vote at a general meeting.35
TYPES OF STRATA PROPERTY
When a developer deposits the strata plan to create the strata development, he or she subdivides the land, including any buildings, into designated parts for separate ownership called strata lots. The boundaries of each strata lot are shown on the strata plan.
The people who buy the strata lots become the owners who are the members of the strata corporation.
Every strata lot owner also owns a proportionate interest in the common property and common assets of the strata corporation.36 The owner's interest in the strata lot is tied to their proportionate interest in the common property and the common assets. The owner cannot separate these interests, except as permitted by the Act.37 Any document which deals with the strata lot also deals automatically with the owner's share in the common property and common assets of the strata corporation.33
Freehold Versus Leasehold Strata Lots
Generally speaking, a developer who intends to develop a strata project will either purchase the necessary land or lease it.
If the developer purchases the land, the developer becomes the registered owner in fee simple. After the developer subdivides the land by depositing the strata plan, they can sell fee simple.title to the buyers of the strata lots. We call these "freehold" strata developments, because the buyers acquire fee simple title to their strata lots.