So you want to liquidate your aging condo building
Michael Geller
Vancouver Courier
Do you live in a well-located older condominium complex in need of extensive repairs? Have you been thinking of buying into an older condominium complex, or know someone who is? Read on.
Although condominium legislation was first approved in the late 1960s, it was not until the early 1970s that condominium developments were built in Vancouver. While many early projects continue to provide wonderful accommodation, others have been poorly maintained and require significant repairs, often costing more than the homes are worth.
Other projects are in locations ripe for redevelopment, making them two times or more valuable as vacant sites.
Until November 2015, an older condominium development could not be wound up or liquidated without the approval of 100 per cent of the residents. While a few projects were sold to developers with unanimous approval, many sales did not proceed because one or more residents did not want to sell.
After all, these were their homes. Many were elderly and wanting to live out their final days in the apartment they had enjoyed for 40-plus years.
However, in November 2015, Bill 40 received royal assent from the British Columbia legislature. It amended the Strata Property Act with respect to the winding up of a condominium project.
The Bill 40 amendments resulted in two important changes. The threshold required to terminate a strata development was reduced from 100 per cent to 80 per cent of the strata’s eligible voters. Secondly, when there was not unanimity, the strata must apply for a court order to provide some protection for dissenting owners.
Since the legislation was passed, it seems like every older condominium along a major road or near SkyTrain has a realtor knocking on the door. Increasingly, strata corporations are considering a potential windup and sale. Sadly, this is also causing major strife between those wanting to sell, and those wanting to stay.
Increasingly, legal firms are specializing in this aspect of property law.
In March 2017, the B.C. Supreme Court approved the first sale of a condominium complex. Although owners of two of the building’s 30 units previously voted against selling the building, no one was in court to oppose the sale.
I’m told another 10 projects are now going through the court process. However, in some cases, the dissenting owners are hiring their own lawyers to challenge the majority decision.
A key issue for many owners is how the proceeds from a sale will be distributed.
Three different formulas could apply depending on when the project was built. They are unit entitlement, interest on destruction, or B.C. Assessment valuation. A strata corporation may also create its own custom-made formula through unanimous vote.
Unit entitlement is the number assigned to each strata lot that determines its share of common property and assets, and is used to calculate strata fees and special levies. It is generally based on size, not value. However, if a project was developed in the 1970s, this is the formula that was used to distribute proceeds if a building burned down.
For those projects developed in the 1980s or 1990s, prior to registration of the strata plan, a schedule of “Interest on destruction” was prepared. This set out the value of a strata unit compared to the whole building, usually based on its initial sales price in relation to the total sales prices.
For more recent projects developed under the current Strata Property Act, B.C. Assessment values are to be used to determine each unit’s share of the proceeds in the event a building is destroyed.
However, there is a problem using B.C. Assessment’s valuations, since for many projects, they have been found to be skewed and inconsistent.
Furthermore, since so many condominium projects are now being viewed as redevelopment sites, B.C. Assessment no longer values their units based on current use. Rather, they are valued as part of a future vacant redevelopment site.
Consequently, property taxes are rising significantly, even though the buildings may need extensive repairs. While many planners, realtors, and developers may view this as a good thing, it is not for those wanting to stay in their homes.
It’s time for a public conversation on this.
© 2017 Vancouver Courier
