Tony Gioventu
Province

Dear Condo Smarts: I have been working with a realtor and trying to find a condo to purchase for investment that I intend to use as a rental.

There seems to be quite a bit of confusion right now over the types of units that can be rented.

I have requested information certificates for two buildings and upon reviewing the bylaws and the number of rentals, there seems to be no logic in the relationship of the limitation on rentals and actual number of rentals.

Could you please tell us how we could find a building where we can buy a unit, rent it out, and have some long-term security over its use.

— Jens Crezma, Vancouver

Dear Jens: There have been some minor changes in the strata legislation that affect rental units.

A strata corporation is permitted to adopt a bylaw that limits or restricts the number of rentals to either a specific number, such as 10 units, or a specific percentage, such as 10 per cent of the total number of units. The changes in legislation now exclude family rentals, as permitted by the act, and hardship exemption rentals. So in the total count of the number of rentals permitted under a bylaw, those are no longer included.

There is no such description as “developer rentals”, but I suspect you are referring to the effects of a rental disclosure statement. There are two different exemptions now that apply to rental exemptions, and they refer to units filed under a rental disclosure before Jan. 1, 2010, and those filed after Jan. 1, 2010.

For strata lots created with a valid, filed rental disclosure before Jan. 1, 2010, the owner developer was permitted to file the proper form with the superintendent of real estate. The form set out a declaration of the units they intended to rent for a prescribed period of time. That exemption, if enforceable, applies only to the first purchaser, and expires on the period of time published on the form or when the first purchaser sells the unit. Many of these forms filed before Jan. 1, 2010, identified the period of time as “indefinite” and a court decision in 2000 found that an “indefinite period” was unenforceable, and the first purchaser was not exempt; however, a recent court decision in December of 2009, of Spagnuolo v. Strata Plan BCS 879, has overturned the previous decision, and found that an “unlimited period” is a valid rental disclosure statement.

If you are purchasing a unit from a developer where the proper rental disclosure form was filed before Jan. 1, 2010, and it identifies the intent to rent the units for an “unlimited” period, then as the first purchaser, you are likely exempt from the rental bylaws. If you are buying from the first or a subsequent purchaser, that exemption no longer applies.

As of Jan. 1, 2010, the rules have changed on new developments, too.

The only way you can have some assurance that your strata lot will be exempt from strata bylaws is by purchasing a unit that falls under a rental disclosure exemption. Even strata buildings that average a high ratio of rentals with no bylaw restrictions often change over the years and adopt rental bylaws. Before you purchase, make sure you have a copy of the rental disclosure from the superintendent of real estate, and seek legal advice on the enforceability of the form. Not all forms grant exemptions or are enforceable, so never assume your unit will be exempt.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. Send questions to him at [email protected]

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Tony Gioventu
Province

Dear Condo Smarts: We are travelling to the Olympics and will be looking for vacation property for our family. We have received several packages from developers and vacation properties to review, and they all refer to different types of ownership, the use of property and different types of covenants that prevent us from using our property at our leisure. We have spoken with our lawyer, but need some idea of what to look for in vacation property and what type of conditions we will come across. Should we consider new or pre-owned? Are there pitfalls?

Jay and Del Heilberg, California

Dear Jay and Del: Investing in a vacation property can be broken into a number of types of properties: freehold detached (single-family, non-strata titled home); freehold strata without restrictive covenants (the typical townhouse or apartment-style condominium); freehold detached or strata with restrictive covenants; and several types of shared interest on title such as one-quarter share or time-share.

All types are available in either new or pre-owned properties, but before you make a decision, consider how often you intend

to use the property, whether

you intend to receive any type of income from the property, your initial investment and what your future monthly costs are going to be.

Before you buy, consult with a legal professional about the terms and conditions of the sale, the terms and conditions of management and rental agreement contracts that affect the property and the bylaws of a strata corporation.

The CHOA website hosts a series of spring seminars and a number of information guides on strata properties at www.choa.bc.ca. The B.C. Real Estate Association has helpful information on buying property in B.C. at www.bcrea.bc.ca.

Tony Gioventu is executive-director of the Condominium Home Owners’ Association. Send questions to him at [email protected]

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Tony Gioventu
Province

Dear Condo Smarts: Our strata had a flood before the holidays where an overloaded washing machine went manic and soaked three units in our building. The council was contacted; it made arrangements for restoration and we had fans in hallways and holes cut in the walls for dryers. The owners were impressed that it happened so quickly.

As for the owner with the manic washing machine, she just received a bill for the deductible amount of $5,000. She was about to pay it, but noticed the bill was not from the insurance company, so called the insurer to see the insurance invoice. Council refused to file the claim and we’ve now found out the council hired themselves to do the restoration work and bill it back to the owner.

There was no adjuster involved, and no report on the scope of the work done, or if even all the restoration was complete. One owner is still left with a wet, stained ceiling and no one coming to her aid. Is it a conflict of interest when council members pay themselves?

— Liz W, Richmond

Dear Liz: Conflict of interest is a common bone of contention in strata corporations when the council executes decisions that result in personal benefits without the consent of the strata owners or exempting the benefited strata council member. The Strata Property Act says in part: “A council member who has a direct or indirect interest in a contract or transaction with the strata or decision that is a subject being addressed by the strata … must 1) disclose fully and promptly to the council the nature and extent of the interest 2) abstain from voting on the transaction or matter, and 3) leave the council meeting with the contract, transaction or matter is discussed and while the remaining council votes on the contract, transaction or matter.”

Here are the basics. Strata council must act in the best interest of the strata corporation; they cannot be compensated for their duties as council members without the approval of the corporation, either in the budget, in the bylaws or by approved 3/4 vote at a general meeting; and a council member cannot vote on the awarding of a contract, transaction, or matter where he or she has some sort of direct or indirect personal or beneficial gain. Strata council can determine who it contracts with, and that could include a council member, but is that person qualified? Would it be a prudent decision to contract with a council member who may not be qualified, covered by WCB, insured or even competent to perform the work? Were the repairs and restoration completed properly?

In addition, the owner affected by the alleged deductible claim likely also now has a problem with her own insurance company’s willingness to cover the deductible claim, as it is not a deductible, but an invoice from the strata corporation of a related repair. Council members who try to cut corners on the cost of claims or who attempt to compensate each other for any of the strata council duties without the strata approval are just opening the door for conflicts.

Tony Gioventu is executive-director of the Condominium Home Owners’ Association. Send questions to him at [email protected]

Note: The Spring list of Seminars across B.C. is now posted on the CHOA website. Public seminars are ideal for strata owners, councils and managers. Space is limited. Visit www.choa.bc.ca for more information.

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If you run a business, you may lose exemption

Tony Gioventu
Province

Dear Condo Smarts: Do strata corporations have to file tax returns? We are a 24-unit townhouse complex. Our budget is limited to insurance, landscaping and building maintenance. Our strata fees are $250 a month and we always break even on the year. An accounting office told us not to bother as we don’t pay taxes. We’re also confused about how to give owners receipts for the home renovation tax credit.

Marjorie Simpson, Qualicum

Dear Marjorie: Strata corporations are mostly classed as non-taxable corporations under tax laws, but not all strata corporations are tax exempt.

Industrial, commercial, retail, food and hotel strata aren’t necessarily tax-exempt. Even a residential one isn’t tax exempt if it’s running a commercial enterprise. Any profits must be included in its income and it will not be considered non-profit.

The following from CRA FORM IT-304R2 is very clear: “Paragraph 150(1)(a) of the Income Tax Act, requires all corporations, including condominium corporations, to file an income tax return each year, even if they are exempt from paying tax under Part I. A residential condominium corporation that qualifies as a non-profit organization under paragraph 149(1)(l) is exempt from Part I tax on its taxable income, but is required to file Form T1044, Non-Profit Organization (NPO) Information Return, with its T2 tax return. Although it is a question of fact whether a particular condominium corporation qualifies for an exemption under paragraph 149(1)(l), most residential condominium corporations qualify as non-profit organizations within the meaning of this paragraph.”

A home renovation tax credit statement from the strata corporation must contain:

– the vendor/contractor’s name, business address and GST/HST registration number

– a description of the work and when it was performed.

In addition to giving owners the above, the strata corporation should keep the following:

– the vendor/contractor’s name, business address and GST/HST registration number

– description of the goods, purchase and delivery date (keep your delivery slip as proof ) and/or when the work or services were performed

– work description, including the address where it was done

– amount of the invoice

– proof of payment — invoices must indicate “paid” or be accompanied by other proof of payment, such as a credit card slip or cancelled cheque.

Visit the CRA at www.cra-arc.gc.ca or CHOA @ www.choa.bc.ca. Tony Gioventu is executive director of the Condominium Home Owners’ Association. Send questions to him at [email protected]

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Tony Gioventu
Province

Our strata is a series of apartment buildings in Burnaby built in 1972. In 2008, we hired an engineering firm to perform building envelope inspection.

Overall, our buildings are in good shape; however, our roofs were in need of replacement on our pool building and one other. With the help of our site manager and consultant, we managed to replace the roofing systems on all three of our buildings for the cost of what originally projected to be two buildings. Overall, we saved over $600,000.

— Robina Gaskell, Lougheed Estates

Dear Robina: It is always more cost-effective and beneficial for the owners to plan in the long term for

financial needs and routine maintenance and renewals. Buyers considering a strata-titled property should always take a look at the maintenance schedules and long-term planning. If the buildings are well maintained and the strata is planning for the financial needs of future repairs, it indicates a mature and competent community.

Lougheed Estates is a mature, model community. The owners support and respect each other, the strata maintains and repairs the property, and the value of each unit is well protected. Congratulations on such a successful project.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. Send questions to him at [email protected]

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Tony Gioventu
Province

Dear Condo Smarts: The unusually warm weather the past few weeks has brought the barbecues out in our strata complex. At the same time, many of us have opened up our units to air them out, and much to our dismay we came home last Friday at dinner to discover our unit filled with greasy barbecue smoke.

We have asked the owner below us — our council president — to make sure our windows are closed before they fire up, but all they say is the strata permits barbecues and they don’t have to listen to our complaining.

What are owners to do when others are so inconsiderate, and the result is a significant inconvenience?

— Molly Wilson, North Vancouver

Dear Molly: Barbecues are becoming a more contentious issue for strata corporations every year. It is not only the smoke damages that are done to homeowners’ units each year, but heat damage to buildings and two very dramatic fires in recent years that are causing so much grief.

If an owner, tenant or resident uses barbecue in any way that unreasonably disrupts your use of your strata lot, or causes damage to your property, that is most likely a nuisance under your bylaws. The strata council has an obligation to enforce the bylaws, yes even against council members, and if they fail to do so, owners frequently seek court orders against the corporation for failing to do so.

The smoke can cause health hazards, property damage to porous fixtures such as carpets, wallcoverings and window coverings, and personal property. The greater risk to all wood-frame or combustible-type buildings is the fire. Many strata owners use barbecues on their decks and balconies.

Outside spaces are still adjacent to combustible materials. Just because the inside of the building has sprinklers doesn’t mean the exterior is protected.

This is a risk-management decision of the strata corporation, and now even that of your insurance companies. Many strata corporations are finding themselves facing much higher policy costs this year, and one of the contributing factors is a history of claims relating to barbecues, and associated fire and water damages.

Every strata corporation in B.C. needs to make a serious evaluation whether they wish to permit barbecues or not, and consult with their insurance provider to understand the implications of costs and insurance coverage.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. Send questions to him at

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Tony Gioventu
Province

Dear Condo Smarts: Our strata council has just sent notice to owners advising that our strata is almost 25 per cent over-budget in our expenses. Council refuses to tell the owners the cause of the deficit and we are only halfway through the year. A group of owners got together on Dec. 15 and decided to submit a petition to the council demanding a special general meeting be convened to elect a new council. Twenty-six out of 97 units signed the petition. Claims that five people who signed the petition were not owners and therefore not eligible to sign the petition, had our petition denied.

We have just received a notice of a special general meeting that does not include our petition requests, and has one item for a special levy of $100,000 to pay for the projected budget shortfall relating to the settlement of a lawsuit. None of the owners knows anything about a lawsuit. We have two questions. Does council have the right to deny the petition?

How can the owners approve the special levy if the council refuses to tell us what caused the deficit?

— Marni K., Kelowna

Dear Marni: If the strata council does not hold the special general meeting within four weeks after receiving the petition, the petitioners may themselves hold the special general meeting. Prior to Dec. 10, all petitions did require the signatures of 25 per cent of the strata corporation’s votes. As of Dec. 10, petitions demanding special general meetings or items be placed on a general meeting agenda have been reduced to 20 per cent of the strata corporation’s votes. That may also include tenants who have been assigned an owners‘ voting rights under the act. Even in your case, with five signatures declined, the petition is still valid as it reaches the 20 per cent requirement.

One part of the act relating to petitions did not change. If less than 50 per cent of a strata corporation’s votes pass a 3/4 vote for items like bylaw amendments, or special levies, then the owners may petition demanding a special general meeting to reconsider the vote. That petition threshold is still 25 per cent.

You are correct regarding the deficit issues. The strata corporation must include the purpose of the levy in the resolution that was sent with the notice. The owners are entitled to full disclosure of the transactions and balances in the operating fund, the reserve fund and any special levy funds. Allocation of funds from the operating account for emergencies or insurance deductibles may create a significant deficit situation; however, the reserve funds may also be accessed in those circumstances.

A court action and settlement are not an emergency and generally provide more than enough time for the strata corporation to hold a special general meeting to approve the settlement, the amount and the method of payment — all by 3/4 vote.

The strata corporation must inform the owners as soon as feasible if it is sued and the strata council does not have the authority to impose a special levy for a settlement without their consent. There are some serious questions that need to be raised with your strata council.

Your owners need a lawyer representing the strata corporation to provide you with legal advice on the legal proceedings to date, and the terms and conditions of a settlement, before you vote on it.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. Send questions to him at [email protected]

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Property Act, privacy regulations must be observed

Tony Gioventu
Province

Dear Condo Smarts: Our strata council passed a rule that it would only receive correspondence through our management company. The rule states that any applications for rentals, hardship applications, requests for alterations, hearings of council, and any related strata business must be addressed only to the strata management company.

As owners, we have been fine with this, except council members themselves don’t abide by the rule, and routinely send out e-mails to owners in the complex regarding bylaw violations and official notices.

We heard that the changes to the Strata Act will permit e-mail as notice, but who does that have to be e-mailed to in order for the e-mail to be valid? What happens if the strata doesn’t provide an address, but the council members e-mail an owner? Can they officially reply back to the council member?

–Karen T, Vernon

Dear Karen: It is easy to understand why a strata corporation wants to maintain only one official address for receipt of notices and sending of notices. If everyone sends their correspondence to council, as well as the strata agent or president, you could end up with eight or more potential mailing addresses and e-mail addresses. It would make it extremely difficult to manage notices of meetings and requests of owners and tenants and agents.

However, the act does permit an owner to leave a notice or request for forms or documents required with a council member by mailing it to the recent address on file in Land Titles for the strata, by putting it through a mail slot or in the mail box used by the strata, by faxing or e-mailing it to a number or e-mail address provided by the strata corporation, or fax number or e-mail address provided by a council member for the purpose of receiving the notice.

An example of the complications of notice often arise when an owner gives a notice of a hardship application to a council member. Under the Strata Property Act, this is deemed to be proper notice, and if the council member ignores the notice and the council does not respond in writing after two weeks of the request, the exemption is automatically allowed.

E-mail is obviously going to become a common method of notice. The strata corporation and council members will only have to officially receive e-mails as notice if their e-mail address functions for the purpose of receiving notice. Likewise, the strata corporation can only send notice to an owner or tenant by e-mail if the owner or tenant has provided an e-mail address for that purpose.

If a strata is considering using e-mail for notices sent and received, it would be a prudent management decision for the councils and managers to create and maintain only one strata-identified e-mail address.

The strata corporation must ensure that the e-mail is checked daily as requests such as a payment or information certificate, or a hardship application, are all time-sensitive.

Council members, owners, tenants and strata agents all need to exercise caution when using e-mail.

Not only do the provisions of the Strata Property Act apply, but also the provisions of the Personal Information Protection Act. Always exercise caution in what you write in an e-mail. You cannot guarantee the security of sensitive or confidential information once you hit the send icon.

The updated changes to the Strata Property Act & Regulations are available on the Internet at bclaws.caor choa.bc.ca.

Tony Gioventu is executive director of the Condominium Home Owners’  Association. Send questions to him at [email protected].

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It’s a quick fix that’s undefined and often leads to greater trouble

Tony Gioventu
Province

Dear Condo Smarts:

Our small apartment building in False Creek had an engineering study completed three years ago. The trigger was a number of leaks from decks into the units below. The cost of the repairs to remove the pavers, seal the decks and replace the materials was going to cost around $15,000 per unit.

The owners voted down the repair, citing that it was too expensive and a Cadillac repair. We ended up hiring an envelope maintenance company that proposed they could do the work for under $3,500 per unit and “re and re” the deck surfaces. Considering it was the only option that the owners would consider, we decided to go for it. That was two years ago. We have just discovered the leaks are back, there was no warranty of any sort, and the waterproof membranes under the pavers were never replaced. Basically, we were lured by a cheap solution and a promise that the problem could be solved with a simple “re and re”. Turns out that “re and re” simply means remove and replace, not actually fix the problem. Now we’re back to a $15,000 repair per unit along with additional damages to four of the lower units. We are struggling over who pays for the drywall, insulation and carpet damages to the three units.

Karin L.

Dear Karin:

To define who pays for the damages requires an understanding of the cause. Similar to a roof, if there has been maintenance and repairs, you may actually have a valid insurance claim for the restoration. If the result is neglected maintenance or repairs, the strata corporation is likely going to end up paying for the restoration to the homes, and in some cases where the strata corporation willingly neglects its obligations, it may also include betterments to a strata lot, such as hardwood flooring or other improvement. The failure of external leaks is usually not the fault of the strata lot owner, but that of the strata corporation for failing to properly address the maintenance and repairs of the common property.

The lure of a cheap, quick job always comes back to haunt homeowners. A common omission of homeowners is to make assumptions that the problems will be solved simply by redoing the affected areas, and the cause(s) of the problems such as poor design, material use, deferred maintenance or substandard construction are ignored.

“Re and Re” has to be the most abused phrase in the construction industry and rarely does anyone know what it really means. It omits all of the secondary issues such as: replacement of damaged surfaces, redesign, demolition, disposal, change in products, compatibility of products, resultant damages to adjacent components, interfacing with other building designs and materials, and even the general use and appearance of the building component.

The purpose of competently engineering the repair is to ensure all of those factors are met, and that the problem is solved. Even the proper sequencing of construction is addressed by the appropriate assessment of the problem and good design. For example, a new balcony rail installed a year after the membrane is complete may result in unnecessary damage to the newly installed surface and new holes that can lead to leaks.

All of the forementioned issues are addressed in an engineered process to ensure that the underlying causes are resolved and the appropriate repairs are detailed. This is also extremely beneficial for the consumer because it creates a published document that provides a clear scope of work for contractors.

They, in turn, can provide accurate proposals and pricing based on the detailed scope of repairs. Don’t fall for undefined terms, verbal quotes or vague or misleading contracts. They are a licence to print money for contractors. The $65,000 cheap option for Karin’s strata has now resulted in a construction budget of $766,000, including $2,500 for a legal review on the contracts.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. Send questions to him c/o At Home, e-mail [email protected].

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strata property act: Room for amendment — within reason — can help fix quorum crisis

Tony Gioventu
Province

Dear Condo Smarts:

Every year, our strata corporation struggles with getting a quorum for our annual meeting. We’re in a large strata so the numbers are even tougher to obtain with over 500 units. The act says we need one-third of the voters, and for us that’s always 176 votes.

It seems that whenever there is no trouble, no one shows up, there are few proxies and we’re stuck.

We’re going to be facing some major costs in the coming years and the few owners who do attend are always against the major repairs, so we’re in a terrible cycle of failed resolutions.

Do you have any suggestions on how we can get the owners to attend the meetings and take an interest in their own property? Is there any way we can overcome the quorum problem?

— J.J. Williams

Dear J.J.: The quorum crisis is one of the easiest problems to solve.

The Strata Property Act gives permission to strata corporations to create bylaws that amend governance. Several sections of the act read as follows: “unless otherwise provided in the bylaws” or “subject to the bylaws” or “the strata corporation may, by bylaw.”

This is an indication that the strata corporation is permitted to amend the act in that section, within the limitations provided. The quorum, for example, is one-third of eligible voters in the act; however, your strata may consider a bylaw that sets a lower percentage or even a fixed lower number, or simply state that those voters present in person or by proxy within a specific period of time will constitute a quorum for the purpose of the meeting.

These are permitted bylaw amendments, requiring a three-quarter resolution at an annual or special general meeting.

As always, I recommend legal advice on the drafting of bylaws to ensure they comply with all relevant legislation.

The other part of your question relates to a healthy and involved community. Most strata-owners want peaceful use and enjoyment of their homes and for their investment to be protected.

Think of your strata as a community, with a better communication, involvement from the owners on operations, and community building events. They all contribute to raising your owners’ and tenants’ participation.

Several strata corporations have instituted a monthly or quarterly online newsletter to keep the residents informed. They host annual summer barbecues to encourage community growth, but most important they ensure their annual meeting is a well run and respectful business meeting.

Owners do not want to participate in acrimonious or confrontational meetings, or meetings that run for five hours.

When agendas are large, by the time you reach the end of the meeting, many voters have left, and that alone is another potential problem. Without a proper quorum bylaw, you may not have a quorum any longer and the question is raised whether you can conduct business any longer? Do you think your owners are likely to return to a future meeting when that occurs?

Tony Gioventu is executive director of the Condominium Home Owners’ Association. Send questions to him at [email protected].

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