Interest went to management firm

Tony Gioventu
The Province

Dear Tony: 

 At our annual general meeting in February, an issue was raised about the amount of interest our strata earned on our contingency fund this year. Our strata had a $900,000 investment in 2017 that showed only $4,500 in revenue, but the rate of interest on the investment was posted at 1.85 per cent, which should have shown $16,650 in revenue. 

When challenged, our property manager advised the rate of interest paid is only .05 per cent because the strata signed a management agreement in 2013 whereby the management company acts as our investment agent and retains as a fee everything above .5 per cent.

The owners who attended this meeting were furious when they were informed council signed this type of agreement. None of our current council members was aware of this condition, so we were quite embarrassed. Is this legal? 

Mark D., Vancouver

Dear Mark:

When your strata corporation signs a strata-management services agreement, it also agrees to a schedule of fees for the management and operations of your strata corporation. While the strata corporation may agree to certain types of fees and services, this fee in particular may not be in compliance with the Strata Property Act unless certain conditions have been met. 

Under the Real Estate Services Act and rules of the Real Estate Council, funds held by strata-management companies for strata corporations must be held separately in trust in the name of the strata corporation. This applies to the operating fund, the contingency fund and any special levy funds that may arise. As a result, your annual tax return and financial statement must show the full amount of the interest and revenue that was generated by the fund for the fiscal year and any expenses relating to that fund.

The Strata Property Act specifically requires that any interest earned on the money in the contingency fund becomes part of that fund. Any expenses from the contingency fund are approved under one of the following methods: an emergency expense, an expense recommended as part of the depreciation report and approved by majority vote, an insurance deductible, or any other expenses approved by a three-quarters vote at a general meeting.

As this fee is part of a contract, the strata corporation would have an obligation to pay the amount; however, it would also be required to have the owners at a general meeting by three-quarters vote resolution ratify the expense of the contingency management fee negotiated with the strata-management company. 

The essence of the payment and approvals is: the strata council cannot waive mandatory provisions of the act. While the council in 2013 may have signed this agreement, the current owners will still be required to vote on this part of the fees as a contingency expense.

For strata councils that are newly elected or negotiating strata-management service agreements, review the schedule of fees closely. Your monthly rate may seem to be a real bargain, but when you look closely at the details of service costs and fees that are published in the service agreements, you may be paying a much higher rate for fewer benefits.

Your strata corporation is always in a position to renegotiate or terminate the agreement. Before you sign a strata-management services agreement, have a legal review of the contract so your council fully understands the implications of the fees and services being provided. A fully disclosed and fair strata-management services agreement will go a long way to creating a harmonious relationship between your corporation and your management company. 

Likewise, council members who are fully informed are empowered to make prudent and responsible decisions on behalf of the owners. Every council member should have an operations binder or online platform that makes all service agreements and contracts, bylaws and rules of the strata, and all financial and operational information available. 

© 2018 Postmedia Network Inc.

Confirm installation cost before you proceed

Tony Gioventu
The Province

Dear Tony:

We put in a written request to our strata council to install a charging station for our new car and the strata council has refused to give us permission. Our parking is common property and the council has said it doesn’t want to open the door on alterations in the garage as it will just lead to a mess.

We were under the impression that if we agreed to pay all the costs, the strata council couldn’t refuse our request and had to agree to the alterations. The property manager told us to apply again and detail all the other alterations people have been allowed to make so they could hang kayaks, bikes and storage lockers. This would force the council to allow the alteration, but council has said it doesn’t have to give permission. 

Would it help if the parking was limited common property?

Sharon M., Vancouver

Dear Sharon: 

First, it is helpful for readers to understand the differences between common and limited common property.

Common property is all those portions of a strata corporation that are not designated as part of a strata lot or identified as limited common property, either on the strata plan or through an amendment correctly approved and filed in the Land Title Registry by strata corporation.

The Strata Property Act requires the strata corporation to maintain and repair common property and does not permit a corporation to create a bylaw that makes owners responsible for the maintenance and repair of common property.

Alterations to common property are determined through the Schedule of Standard Bylaws of the act or through bylaws amended by the strata corporation. Most strata bylaws, like yours, require a written application before any alteration is considered or approved to common property and does not require the strata to grant permission for the alteration.

If the strata corporation approves the alteration to common property, the strata may require all current and future alteration and maintenance costs be paid by the applicant. 

Limited common property is common property that has been designated for the exclusive use of one or more strata lots identified on the strata plan or as amended and filed by the strata corporation. These are spaces designated for horizontal use that can be easily identified on a two-dimensional plan.

Both the Schedule of Standard Bylaws and your bylaws permit alterations to limited common property and require the strata council to act reasonably when considering the application. In exchange, the strata council may require all alterations and future costs related to the alteration be paid by the applicant and the bylaws require the designated owner perform custodial maintenance on the designated areas.

The bylaws could also be amended to require a higher standard of maintenance and repair of limited common property by designated strata lots. The strata corporation may, by a three-quarters vote resolution at a general meeting, designate common property, provided it is filed in the correct form and meets the requirements of the Land Title Registry. 

Your property manager has raised a valid point regarding other alterations. Strata corporations have a reasonable expectation to act fairly for all owners. If the strata corporation has permitted other types of alterations to the common property, there may be a valid argument why you should also be permitted to install charging station. There may be sufficient evidence to challenge the decision of council. 

If the alteration does result in a major electrical upgrade or significant change in the use or appearance of common property or the acquisition of an asset greater than $1,000, the approval will require the passing a three-quarters vote at a general meeting.

Depending on the age and design of your building, a charging station may be a simple installation or a complicated and costly venture. Whether you are a strata council or an owner, confirm all the costs associated with the installation before you proceed.  

This is an excellent time for both owners and strata corporations to consider the installation, as there are grants available for the stations and improvements. The incentive amount is up to 75 per cent of project costs up to $4,000 per level-two charging station with a maximum of two stations per property.  For more information go to: http://www.pluginbc.ca  

© 2018 Postmedia Network Inc.

Bad ventilation causes bigger problems than odours

Tony Gioventu
The Province

Dear Tony:

How do we get our strata council to keep the interior fresh-air system in our building? To save money, the owners decided last year to put the system on a timer and that resulted in more frequent breakdowns and maintenance. Our service company has advised that the system needs to be replaced as parts are not longer available. Unfortunately, our owners have chosen to ignore this advice and we have been without a system for six weeks. The odours in the building are disgusting and the hallways are now humid. How do we get this issue moving forward?

Irene M., Coquitlam

Dear Irene:

All modern multifamily buildings have some sort of air-management system. The systems are commonly known as “make-up air units, hallway/corridor pressurization or fresh-air blowers”. They are managed to deliver fresh air into the building to control odours, humidity, the buildup of potentially harmful gasses and to provide a pleasant living environment.

If your building has an elevator lobby in the parking garage, fans must operate continuously to prevent carbon monoxide from migrating to the business and homes. 

In highrises, corridor pressurization systems play an important role during fires. Each building, depending on age, design and use, will have different demands for air-management systems and different locations and types of pressurization units. Many older buildings still have gas-fired systems that come winter, owners discover haven’t been working for years when the hallways are flooded with icy air. A customized service contract for your building will ensure predictable cost and performance of your system.  

In your situation, your building does have a vestibule and lobby in the parking garage and your strata is required to maintain your hallway pressurization system 24/7, so in addition to the increase in odours in the building, the owners are unaware they are likely being exposed to other hazards. After all, elevator shafts are simply large chimneys.  

All strata corporations must maintain and repair common property and common assets, which includes hallway pressurization systems. If your strata corporation does not meet its obligations under the Strata Property Act and the bylaws of your strata corporation, an application to the Civil Resolution Tribunal may be a solution. The CRT, at civilresolutionbc.ca, has the authority to issue orders that require strata corporation to maintain and repair common property and there is no limit to the cost of the repairs that may be affected. 

Metro Vancouver just launched a strata energy advisor program to help councils look at their options for increasing performance, reducing cost and reducing energy consumption. For more information, go to www.strataenergyadvisor.ca/Pages/default.aspx. For more information on hallway pressurization systems, go to www.choa.bc.ca, and join us May 12 for an energy symposium and visit the Metro kiosk.

© 2018 Postmedia Network Inc.

Making a case for energy upgrades

Tony Gioventu
The Province

Dear Tony:

Our strata council has been trying to convince our owners to upgrade our lighting in the building to all LED’s to save electrical costs. We have had several assessments with projections of a $5,500 a month savings, but our owners keep defeating the special levy to pay for the upgrade cost, which is $100,000. Several owners have continued to challenge the technical reports of the companies, claiming the savings are not realistic. Do you have any advice how we can get the owner’s support?

Terri-lynne B. Burnaby

Dear Terri-lynne:

Financial management of strata resources and annual budget planning is just as important as contributing to your long-term planning for major renewals. Cost savings from operating budgets can offset strata fee increases, be used to increase contributions to contingency funds or increase services to your owners. Financial management is not only about investments and planning, but also technology upgrades and negotiations of contracts and services that manage future costs of energy and operations. There are now a number of case studies for building performance that have verified the significant cost savings and recoveries within a short period of time. At $5,500 a month, your strata will recover its cost to upgrade to LED lighting in 20 months.

A possible solution to funding the upgrade is by using your contingency fund. If your strata corporation has sufficient funds and no pending major repairs that require funding, your strata may decide to use contingency money by 3/4 vote to ease the pressure on the owners for a special levy.

If you then convert your monthly savings into your contingency contributions as part of your annual budget, you will restore the expense within two years without increasing strata fees. If you continue to convert the savings to your contingency, your contribution to your contingency fund will increase by $60,000 annually. That increase alone will be sufficient to cover the cost of your roof replacement in 5 years projected at $300,000.

LED upgrades are an excellent opportunity for significant cost savings, they reduce long term maintenance cost, increase light levels in target areas such as parking garages, and reduce the electrical demand for your building that may enable electric vehicle charging stations without the need for electrical upgrades.

As electrical costs rise the savings will also rise. If you are undertaking an upgrade try to complete all conversions at the same time including exterior common areas and take advantage of the highest possible savings. Verify the life span of the lamps that are being installed. Longer life bulbs may cost marginally more but the reduction in labour for replacement is worth the initial cost.

In partnership with BC Housing CHOA is publishing case studies on LED upgrades, converting roofing systems to solar collectors and the management of makeup air units and hosting a one day research symposium for technical and legal requirements on LED conversions, Solar Roof Top Installation, Make Up Air Units, Electric Vehicle Charging Stations and Insurance Deductibles, May 12 at the Italian Cultural Centre. To register email [email protected]. ca or call 604-515-9672.

© 2018 Postmedia Network Inc.

Council can?t change policy

Tony Gioventu
The Province

Dear Tony:

Our strata council and strata manager have sent the following notice to owners advising that the only way we can give notice or request any items from the strata corporation is through the property manager.  The council claim they have made a policy change with the instruction of the strata manager that no one may deliver a notice to any council member, and any such notices would be deemed to be void.

We have read the strata act and cannot find where the strata council or property manager has the authority to change how notice is issued or how it is received.

As a result of this change, several owners have had their requests for hearings declined and have been denied access to information. To the owners this looks like a slick way of preventing access to our strata information.

Could you please clarify how notice can be issued?

Devon M. North Vancouver

Dear Devon:

No, neither the strata council or manager may make a policy change to how notice is issued or received. A notice, record or other document that is required or permitted under the Strata Property Act or Regulations must be given to the strata in one of the following methods:

1. a) by leaving it with a council member
2. b) by mailing it to the strata corporation at its most recent address filed in the Land Title Registry
3. c) by faxing or emailing to the strata corporation to the contacts provided or to a council member if a fax or email has been provided for the purpose of receiving notice or by putting it through the mail slot or in the mail box used by the strata corporation for this purpose.  

When a strata management company is contracted, they are acting as an agent of your strata corporation, and they may also be a destination for giving notice if they have provided an address, fax or email address. The Act in this section does not permit strata corporations to change or amend the form of notice that is provided or received.  The strata corporation must inform the owners who the council members are, and the council members must receive notice if it is delivered to them.  It is then up to the council member to inform the other council members the details and purpose of the notice.

Strata council members need to be vigilant about the procedures of having received notice.  The best solution is one location for address, email and fax so the council and manager can closely monitor what requests and notice have been received; however, because notice can be served on any council member, they need to be educated to understand the requirements for processing the notice immediately as many notices have requests that are time sensitive and could adversely affect your strata corporation. 

For strata corporations with rental bylaw limitations, a request for a hardship exemption requires a written decision within two weeks if no hearing is requested, or within one week of a hearing, otherwise the exemption is automatically granted.   Requests for hearings require the hearing must be held within four weeks after the request and notice of a Civil Resolution or Court action requires a response within the prescribed time period otherwise judgements may be made without the strata corporation involvement.  Requests for documents must be filled within 14 days of the request, seven days for a request of bylaws and rules, and a Form F Payment Certificate and Form B Information Certificate must be provided within seven days.  

© 2018 Postmedia Network Inc.

Tony Gioventu
The Province

Dear Tony:

I purchased a condo two years ago before it was constructed. At the time, the price was negotiated at $595,000 and we paid 10 per cent down as a deposit.

The property is now coming available for us to move in, but we have received a notice from the developer that there have been additional costs of construction and development and they are increasing the price by 20 per cent, so we will have to pay an additional $120,000 if we want to purchase the unit. If we don’t, they have offered to refund our deposit, including the interest earned for the two years.

We were told by the developer this was in our contract, but is this legal?

Jenny C.

Dear Jenny:

A pre-sales agreement is a contractual agreement where you, the buyer, agrees to complete a purchase agreement upon completion of the project. It is not an actual purchase of a unit, it is simply a contract where you have agreed to purchase the unit when it is complete.

Developers often use a pre-sale as a method of securing buyers to ensure the project is financially viable. While a pre-sale of a condo can be a great way of entering the market as an owner or investor, you must look closely at the terms and conditions of the agreements. As the buyer, you must be provided with a copy of the disclosure statement where the developer explains what they are selling and describes your right under the Real Estate Development Marketing Act (REDMA) to cancel a pre-sales contract within seven days of signing the agreement with no penalties.

It is critical that you read the agreement closely and understand the terms and conditions of the contract, along with what you are actually purchasing However, it is easy to understand how buyers become highly motivated to purchase when there is so much excitement and pressure around the pre-sales process.

Buyers have either been pre-qualified for advance purchases at a posh evening event or you have possibly lined up for hours hoping to have the opportunity to secure one of the units, and once you are in the sales centre, if you don’t purchase, someone else in the lineup likely will. The seven-day cooling off period ensures buyers have the opportunity to contact their lawyer and closely review the details of the agreement.

When you review the agreement, pay close attention to the dates of completion and if there are any penalties associated with the deadlines. This will help you plan for your possession dates and identify what happens if the developer misses the deadlines. 

If you pay a deposit, identify who will get the interest on the deposit. Look for additional costs or increases the developer may be permitted to charge for construction, inflation or development. If you have agreed to a possible increase of 25 per cent of the purchase then, yes, the developer is likely in a position to charge the greater amount.

Don’t forget to review what you have purchased. How many parking spaces are identified in the agreement? Did we secure a storage locker? Have we confirmed the finishing details in the unit? Everything should be in the pre-sales agreement. Remember this is a contract to purchase and you may change or negotiate conditions with the agreement of the developer at the time of purchase, and you still have a seven-day period of recession. 

Review the conditions of common expenses. If the projected development subjects your future strata to leases for elevators, parking lots, storage lockers, entry and security systems or use of shared facilities or air-space parcel agreements, those future costs can easily double or triple strata fees once you have taken ownership of your unit.

The disclosures and pre-sales agreements are sophisticated documents. You are about to commit to a purchase that will likely cost in excess of half a million dollars. Isn’t it worth a $1,000 dollars for legal review and the peace of mind of a sound purchase?

If there is a breach in the agreement or compliance with REDMA, act quickly to exercise your rights and seek legal advice. Delay may result in the loss of your rights or a significant weakening of any legal claim you may have.

© 2018 Postmedia Network Inc.

Act applies to stratas throughout B.C.

Tony Gioventu
The Province

Dear Tony:

We purchased a Victoria condo in December and thought we did all of the right things. We requested copies of three years of minutes, the strata bylaws, an information certificate, copy of the strata insurance, and we read all of the documents, including the depreciation report.

We have just been informed of an order for repairs to fourth-floor balconies that was not disclosed. There was nothing in the minutes and the court decision was not disclosed on the information certificate.

The seller, who was a council member, clearly knew and did not inform us. ‎There is now a notice for a special general meeting with each strata lot having to vote on a special levy that will cost us $7,800. Can we sue anyone to cover this cost? 

JP Pritchard

Dear JP:

Record-keeping and disclosure of information is a growing problem for strata corporations in B.C. Many owners and strata councils forget that most properties, from duplexes to the largest of strata corporations over 1,000 units, are covered by the same legislation, The Strata Property Act and Regulations. 

I recently assisted a strata corporation in a small interior city where the council and owners claimed the act only applied to strata corporations in the Lower Mainland. There are also many small strata corporations that claim they are “non-conforming” strata corporations and have never had meetings and have no records, so the law doesn’t apply to them. Not true, there is no such condition as regional exemptions or non-conforming strata corporations. The laws apply equally to every strata corporation in B.C.  

Strata corporations have obligations to the owners when it comes to court/dispute actions.

First, the strata corporation must inform the owners as soon as feasible if the strata corporation is being sued or responding to a claim in provincial court, B.C. Supreme Court, The Civil Resolution Tribunal, through arbitration or a claim through the Human Rights Tribunal.

Informing the owners is a written exercise that is easily accomplished by including the notice in the minutes of council meetings and making them available to owners. Any decisions against the strata corporation as a result of an action must be disclosed on any Form B Information Certificate request. 

There are numerous complaints where strata corporations are not disclosing orders or decisions that are issued by the Civil Resolution Tribunal and arbitration. These decisions or orders are no different than court decisions and must be disclosed.

As a buyer, you rely upon the information provided by the strata corporation before you make your decision. As a council member, the seller was aware of the decision as she participated in the arbitration and the strata corporation received a copy of the decision ordering the repairs so it had the same obligation to identify the decision in the strata documents.

When a strata corporation or a seller fails to disclosure information required by the act, affected parties are in a position to commence an action to recover their losses or costs against either or both parties. The real estate agent of the seller may also be exposed if they were aware of the order.

As an owner, you may consider an application to the Civil Resolution Tribunal to address the dispute with the strata corporation and a claim may be filed in the provincial court against the seller and their agent. If there is evidence of non-disclosure by the agent, a complaint may also be filed with the Real Estate Council of B.C.

Strata corporations, councils and strata managers must remember that any decisions against the strata corporation must be retained permanently and must be identified on any request of a Form B Information Certificate. Buyers may want to search the strata plan number through the court registry, the Civil Resolution Tribunal, the Human Rights Tribunal or by going to www.canlii.org, which is a national registry of decisions. While not all decisions (such as arbitrations) are necessarily registered, it is a public registry where you can download copies of the decisions.   

© 2018 Postmedia Network Inc.

Don?t delay on maintenance

Tony Gioventu
Times Colonist

Dear Tony: I am a council member of a new highrise building in Metro Vancouver that was completed in 2017. In the fall, several owners in the penthouse units complained about water stains on their ceilings that have developed since they have moved in. The developer was contacted and, as far as we know, someone was sent to look at the roofing system and reported back that there was an overflowing drain. During recent rainfall, a number of new leaks have popped up and there is more evidence of water. The council president and property manager were satisfied with contacting the developer, but the majority of council are concerned we are not approaching this correctly.

Clearly it is a roofing and drainage problem and there might be greater problems than we realize. We still do not know if the original call out was a repair or what happened. What is our duty as a strata council?

Gord A.

Dear Gord:

The regulation of warranties in British Columbia falls under the Homeowner Protection Act, administered under the umbrella of B.C. Housing, Licensing and Consumer Services Branch. The owner-developer at the time the strata corporation is registered and occupied, must provide the owners with the warranty documents for their strata lots and the strata corporation with the warranty documents along with a maintenance manual that includes the names of all contractors and products and maintenance obligations. The warranty on the common property of the corporation begins on the earliest date of occupancy on completed sale of a strata lot.

It is important to document that date for future reference. Whenever the strata corporation has a defect that requires a claim, you must respond as soon as possible and mitigate damages. If a claim is filed, the warranty provider must to respond to the claim. They might require the owner developer execute the repairs or they might hire a separate contractor to perform the repairs. If you do not file a claim with the warranty provider, they have no record of the problem and a future problem on the same issue or relating to the defect might be frustrated by unreported failures and claims. For every claim, review the warranty and identify the method how a claim has to be filed. In most policies, the claim has to be in writing and filed to a prescribed address or contact.

You may still contact the developer; however, always copy the warranty provider. If the owner- developer or the warranty provider have conducted any repairs, they must provide the strata corporation with a written report on the repairs that were conducted. This will form part of your warranty records.

It is critical your strata council closely monitor and document all warranty claims and repairs. The warranty for your building has a value of $2.5 million and if properly administered will ensure your owners are not paying for needless repairs and you are properly managing your assets. A detailed independent warranty review at least a year before the five-year building envelope and 10 -year structural coverage is well worth the investment.

Both the strata council and the property manager have a fiduciary responsibility to act in the best interest of the strata corporation. If you willfully fail to follow the requirements set out in the warranty documents and miss deadlines or fail to file claims, owners in your strata have reasonable grounds to sue council members in the event of a loss. As there are no limits to the amount of claims, this could be a claim filed in the Civil Resolution Tribunal.

The obligations for council are simple. Gather all warranty documents. Maintain copies of all records and communications. File and copy all claims for building defects with the owner-developer and warranty provider, and document all repairs following a warranty claim.

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Strata Property Act amended to make fees for charging stations more straightforward

Tony Gioventu
The Province

Dear Tony:

We are a 118-unit strata in Vancouver with plenty of extra parking. We have four owners who are asking for the installation of charging stations so they may purchase electric vehicles.

Council would like to grant the permission, but the changes and upgrades to the electrical system require some significant changes and the owners voted against the upgrades at our annual meeting. The majority of owners have questioned why we are paying for the upgrade for only four people. A fair question, but if we can manage the upgrade, we could accommodate 12 stations and make them accessible to everyone.

We are getting conflicting information from the city, the manufacturer and our property manager as to how we can recover this cost. Are there simple steps we can implement? 

John K.

Dear John and all strata councils across B.C:

The past week has brought a number of changes to the regulations and programs for the purpose of installing charging stations and implementing user fees. 

First and most important, the Strata Property Act regulations were amended on March 7 to include user fees for services or costs of service that only apply to common property and common assets.  User fees may be determined in either a bylaw or rule that has first been ratified by the owners at a general meeting and can now include a fixed amount or an amount determined on a reasonable basis the user’s rate of consumption, the recovery of operating or maintenance costs by the strata corporation, the number of users and the duration of use. 

Simply put, a strata corporation could adopt a bylaw or rule that sets out a cost for electric-vehicle charging at a fixed rate per hour of charging, which would include both the reasonable cost of electricity and the cost of any upgrades or maintenance requirements of the strata corporation.  It is intended to be a user-pay system if the rates and use are adjusted correctly.

For those eager councils, this does not mean you can charge strata lots for more hot water because they have more occupants. 

The province has also launched a charging solutions and incentives program that will provide rebates towards the cost of electric-vehicle (EV) charging equipment and provide support services for planning and installing EV chargers. The application needs to be completed by the strata corporation if the installation and upgrades are part of the common property or common assets of the strata corporation; however, the additional funding to install charging stations is an excellent funding source for strata corporations considering the installation of charging stations. Go to https://pluginbc.ca/  and  select charging solutions and incentives.

Not all installations are simple. If your strata corporation has surplus common area parking that can easily accommodate charging stations and is close to electric service, the installation and cost may be easily accommodated, but many strata corporations have assigned parking by licences and limited common property and no surplus parking. This may require stations in dedicated parking only for those owners requiring charging.

That may require an alteration agreement where the owner takes responsibility for the cost of the station and installation and any other related costs. For the ease of strata corporations and car owners, the future will be much easier as local governments (as the City of Vancouver has recently done) adopt bylaws that require electrical services be available at parking spaces to facilitate the ease of installation and management.   

For more information and instruction on installing charging stations go to www.choa.bc.ca and download the bulletin EVCS Report.   

© 2018 Postmedia Network Inc.

On budget deficits and deductibles

Tony Gioventu
The Province

Dear Tony:

Our strata has not replaced the plumbing, and with a number of common area leaks in the last two years, our deductible is at $100,000. With another pipe break in early January, the strata was faced with a $100,000 deductible for the claim that the property manager charged to our 2017 operating account, which ended Jan. 31. 

Our strata is a 105-unit highrise in east Vancouver. As an owner, we are being faced with a substantial increase in strata fees as part of our annual budget. There are already petitions going around to defeat the budget. 

Did we not have choices or alternatives to pay the deductible? We have looked at the council minutes for January and February, and there is no mention of the claim or the approval of the proposed budget. Who decides where an expense is made from the strata corporation’s funds?

Nicole M.

Dear Nicole: 

You have identified a perfect governance question. The Strata Property Act would deem this as an unapproved expenditure as it was not approved as part of your 2017 budget or contingency fund. As a result, the act gives the strata corporation the authority to expend this money from either the contingency reserve fund or operating fund.

This does not give the strata corporation the ability to simply dump all types of unapproved costs on the owners in the operating fund and force them into a deficit each year. 

You might follow the simple rule not to spend money that doesn’t exist. The act permits expenses from either fund and in the case of an insurance deductible, the act grants a rare provision for the council to approve a special levy without the need for a three-quarters vote resolution or special general meeting for an insurance deductible. 

At a properly convened council meeting, the strata council, by majority vote, approves the amount of the special levy, the date it is due and the amount each strata lots pays.

If you issue a special levy, those owners who have homeowner or landlord insurance may qualify to claim on their policy the deductible/special levy, which may be substantially less than the levy. This is also the rare occasion that an insurance deductible may form part of a lien against a strata lot because it was an authorized special levy.

The decision to charge this cost as an unauthorized expense to the operating fund is a majority decision of council. The decision must be included in the minutes and the owners must be informed of the expense as soon as feasible. Unfortunately, your owners were not informed until the notice package for the annual general meeting was sent out. 

While a strata corporation may delegate some of its authority through a strata-management agency agreement, there are still decisions the council needs to retain as it is obliged to give notice of those decisions to the owners. Major expenses, emergency expenses, bylaw enforcement decisions, unapproved expenses, insurance deductible allocations and the approval of the proposed annual budget are all council decisions. 

The complication of this decision to place the deductible in the 2017 budget put the strata corporation in deficit and the strata must pay back the deficit in the next fiscal year. If the owners defeat the budget at the AGM, the new council should seek advice on its options to cover the cost of the deductible before it holds a special general meeting within 30 days. It is always possible to reallocate an expense to correct an error or as instructed by the owners. 

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