As part of building envelope, roof has a five-year warranty

Tony Gioventu
Province

Dear Condo Smarts: We live in a new strata development of 33 units in Surrey that was built in 2007. A roofing problem has come up with four units, so we filed a warranty claim with our developer. The developer has come back to us and advised that the roof is not part of the building envelope and was only covered under the first two years of the warranty, which expired in April 2009.

— BR

Dear BR: The statutory requirements for warranty coverage are set out by the Homeowner Protection Act and its regulations. The roof is most definitely included in the building envelope as part of the definitions under the legislation and is covered by warranty for a five-year period.

Here is part 23 of the act, which defines building envelope under the regulations that sets out the mandatory warranty protection:

“A residential builder or an owner builder and a vendor of a new home are both deemed to have agreed with the owner of the new home, to the extent of the labour, materials and design supplied, used or arranged by the residential builder, owner builder or vendor, that the new home, except to the extent prescribed by the regulation,

(a) is free from defects in materials and labour and will remain so for a period of at least two years after

(i) the date an occupancy permit with respect to the new home was first issued, or

(ii) if no occupancy permit has been issued with respect to the new home, the date the new home was first occupied,

(b) is free from defects in the building envelope, including defects resulting in water penetration, and will remain so for a period of at least five years after

(i) the date an occupancy permit with respect to the new home was first issued, or

(ii) if no occupancy permit has been issued with respect to the new home, the date the new home was first occupied, and

(c) is free from structural defects, and will remain so for a period of at least 10 years after

(i) the date an occupancy permit with respect to the new home was first issued, or

(ii) if no occupancy permit has been issued with respect to the new home, the date the new home was first occupied.”

“Building envelope” means the assemblies, components and materials of a new home which are intended to separate and protect the interior space of the new home from the adverse affects of exterior climatic conditions.

It is important for any new strata council or owner of a warranty-covered home to a) make sure to keep copies of the warranty documents, b) review the documents and determine when the warranty periods of two, five and 10 years run out; c) annually meet your warranty obligations of inspection and maintenance; d) provide documentation in the strata minutes and reports verifying the inspection and maintenance; e) file all warranty claims in writing to both the owner-developer and the warranty provider.

The warranty period is going to start running from either the first transaction or the first occupancy, so the first two-year period and the five-year envelope period may come sooner than you think.

Your strata might also want to retain a qualified consultant specific to the claim to ensure the repairs are completed to your satisfaction.

E-mail: [email protected]

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surprise levy: Overbudget project is causing property values to plummet

Tony Gioventu
Province

Dear Condo Smarts: A year ago, our strata council engaged a contractor to remove the landscaping and waterproof our parking deck and replant our grounds.

The project is still not complete, the costs have run over by 30 per cent and we’re now being asked to pay another special levy, which none of us can afford.

The whole point of seeking bids from different contractors was to find a reliable company for the project and to guarantee this mess wouldn’t happen. Now we’re left with plummeting property values because of the mess and the overruns, and the contractor won’t continue unless we pay another $200,000 advance.

One of the reasons that we chose this company was because they advertised that they were fully insured and fully bonded. That seems to have been totally for nothing.

How do we get out of this disaster?

— MK, Burnaby

Dear MK: You have two issues going on here: construction procedures and the bonding/insurance issue.

The first task is to get a competent construction manager to sort out the construction mess and at the same time have your lawyer review the contracts to find out if the contractor is meeting his agreed terms and conditions.

The sooner your council understands the scope of the work and the terms of the contract, the sooner you can put an end to the nightmare.

Just having contractors bid on a contract is not sufficient to protect your interests as a consumer, unless you have a qualified third party write the specifications for the scope of work.

Make sure the terms and conditions of the contracting process and the subsequent contract format are part of the bidding process.

I have yet to see the downside of sound, tendered specifications or well-negotiated construction management contracts.

When you publish competent specifications along with the contractual expectations, you will achieve a good level of security in the outcome of the project and what you end up paying.

Now for bonding and insurance.

There are many types of bonds. Construction bonds are basically insurance policies to protect you or the contractor in the bidding and performance of a contract.

All bonds have specific terms and conditions that must be in writing and should be reviewed as part of your contract process by your lawyer, before you issue tenders or sign the contracts.

Fidelity/employee bonds are often for employees or staff where there may be an issue around theft of money or products.

Once again, if the contractor claims his staff is fully bonded, get a copy of the bond to verify what it implies, the validity of the bond and who it protects.

The same conditions apply to the term “fully insured.”

Obtain copies of the insurance policy if the implication is that you, as the consumer, will be protected by the insurance, and find out if the insurance is valid, who it covers, what the limitations are, what the exclusions are and how you file a claim in the event you have to gain access to the insurance.

Any legitimate consultant or contractor will gladly provide verification of their insurance and bonding as part of the contractual process.

This is just a thumbnail summary of a complex part of the industry, so remember: Get everything in writing.

Verify accuracy and validity, and seek legal advice before you start the process. Whether your project is $25,000 or $2.5 million, do it right.

There is no protection in 20/20 hindsight.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. E-mail: [email protected]

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prepare for new tax: Owners to pay more for maintenance, landscaping, labour

Tony Gioventu
Province

Dear Condo Smarts: Several of our owners have heard on a number of talk shows this week that strata owners are now going to have to pay the harmonized sales tax on their strata fees. Is this true?

This will immediately add 12 per cent to all of our costs at a time when we can hardly get the owners to approve a one-per-cent increase.

— Wendy Neilsen, Vernon

Dear Wendy: The HST is basically being applied to those goods and services where GST and/or PST were applied. Until the tax guide for HST is published for B.C., it will be difficult to establish the total impact, but it will have an impact on strata corporations.

Residential strata corporations and residential strata lots, if they qualify, are deemed to be non-taxable corporations under the Income Tax Act. 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.

As a result, there is no GST or PST charged on residential strata fees, so the HST will not be applied to residential strata fees.

Commercial strata corporations and those residential strata corporations that are used for commercial purposes, such as a hotel, may be subject to GST and, as a result, HST on their strata fees.

The strata corporation in these situations is likely already registered for a GST number and will modify their collections for HST.

Now for the real costs.

If your strata is a small 10-unit, self-managed complex and you maintain your own buildings, your increase on costs is likely going to be around 0.5 to two per cent of your total costs.

But look at a large 350-unit, three-tower complex where there is a range of labour services that are currently only subject to GST. On a $1.5 million budget, the strata probably pays $100,000 in management fees, and another $200,000 to $400,000 in contracts for janitorial, landscaping, building maintenance, inspection services, labour and consulting.

The potential impact on the total annual budget is going to be an increase of two to four per cent of the total budget. Don’t forget, when it comes time to do that new roof., when you paid only five per cent GST on the labour, it will cost you 12 per cent HST after July 1, 2010.

The coming year will be an important time for strata corporations to review services, cost allocations for labour and administration and prepare for the possible increases.

For more information on taxation and condominiums (strata properties in B.C. ) go to: www.cra-arc.gc.ca , type in the word condominiums and select the first bulletin IT304R2 — Condominiums.

Tony Gioventu is executive director of the Condominium Home Owners’ Association (CHOA)

E-mail: [email protected]

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Tony Gioventu
Province

Dear Condo Smarts: Our strata corporation voted to repair condo leaks on July 28. There was an expectation that those in financial hardship could apply to the Homeowner Protection Office for interest-free loans.

On July 31, we learned that the loan program was cancelled by

the provincial government. Now we find at least 20 owners will not be able to pay the assessments on

Oct. 1. The property manager

told us that we must enforce the resolution and, if an owner doesn’t pay, we must proceed with a court-ordered sale.

Surely, there are other options.

— Karen Richardson, Burnaby

Dear Karen: There are several options but, first, I recommend that the strata council has a discussion with its lawyer to determine which funding options are legally permitted and, if an owner defers, amends or delays his repairs, he still meets his obligations under the Strata Act.

The strata corporation does have an option of convening a special general meeting so that members may contemplate amending the 3/4 resolution that you passed earlier, and consider funding alternatives.

A strata corporation is permitted to borrow funds in the same manner as a person.

In your strata, repairs are $3.8 million, with a property estimate value of $15 million. You will likely be seeking a commercial loan through a lending institution or private lender, with a five-year term that can be amortized over as long as 25 years.

The current average market rates for a strata are averaging six to nine per cent, and the strata corporation may decide to either repay the amount monthly, as either a special levy or as part of a budget item included in the strata fees. This would add $200 to $300 per month to the average strata fees.

One benefit of the strata corporation borrowing is that the loan does not reflect the personal titles or credit of each owner. But beware of predatory lenders that hide commissions, financing fees and high rates.

The council could also phase the repairs over a longer period, with a scaled payment schedule in smaller amounts, or simply phase the payment schedule over a longer period.

Each of the options has associated pitfalls.

Borrowing funds increases monthly fees and adds costs. Phasing a project drags out the repair time and elevates construction and site costs, and phased payments on the full repair may not resolve the financial crisis for 20 of your owners.

If you don’t amend your resolutions, then yes, you will be

proceeding with collections and repairs and, eventually, owners may lose their homes.

In addition to legal advice, it may be time to call an information meeting of your owners before the clock runs out on payment deadlines.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. E-mail Tony at [email protected] or check the association’s website at www.choa.bc.ca

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Tony Gioventu
Province

Dear Condo Smarts: What do you do when you have an owner that is always costing your strata money? At our annual general meeting in June, we almost elected a great council. The exception was an owner who caused so much trouble that when she was nominated and elected (because we didn’t have more than seven nominated), the five remaining council members immediately resigned. The last lawsuit she caused left us $20,000 poorer because she refused an alteration to the interior of a unit for a special needs person. Help.

— Jenny, Abbotsford

Dear Jenny: If you apply the Standard Bylaws and Section 50 of the Act, you will discover two distinct provisions that will help you . The first is that in the Standard Bylaws, there is only a requirement for your strata to have a minimum of three and a maximum of seven council members. It is not mandatory to elect seven. Many strata corporations feel obliged to accept everyone just because they are nominated. This is not true unless your bylaws specifically require that all seven positions must be filled.

Section 50 of the Act is the second part. At general meetings, matters are decided by a majority vote, unless a higher vote is required for a 3/4 vote or unanimous resolution in the Act or regulations.

So the strata corporation by majority votes, then decides who is elected to council. Whether you do this by secret ballot or by show of hands, the result is that those persons who are elected by a majority of the votes cast for or against the resolution will determine who is elected to council.

There is no provision in the Act or the bylaws for acclamation by nomination. It still requires a majority vote of the owners to elect those nominated.

A word of caution: Many strata corporations have adopted different governance bylaws that address elections, nominating committees and voting thresholds for council election or removal, so double-check your bylaws first. It is also helpful for strata corporations to adopt bylaws that address voting eligibility. If the strata corporation is entitled to file a lien against a strata lot, a nominee is not eligible to be elected to council or to continue to sit on council with the proper bylaw amendments.

Lastly, before you elect someone to council, make sure they are eligible. I did a title search on the unit of this council member and discovered she is not on title. She is the spouse of an owner and, because the strata have no bylaws permitting the spouse of an owner to be elected, she is ineligible to be on council. The strata could have saved a lot of time and trouble just by asking her ownership status.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. E-mail [email protected]

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Tony Gioventu
Province

Dear Condo Smarts: I have a dog in a strata in Kitsilano. I bought my unit two years ago, and ever since moving in have been harassed by owners constantly about having a dog, even though the bylaws permit one dog per strata lot.

A group of owners have allegedly complained about the noise my dog makes during the day when I am at work, and council has notified me that I will be fined if I do not get rid of my dog.

My dog goes to work with me every day, so I am challenging their claims. I have requested a hearing as the Act permits, and requested copies of the complaints.

Council claims that due to privacy laws they cannot release the complaints. The Act requires that they identify the particulars of the complaint(s), yet at the hearing they could or would not identify any valid complaint, other than their desire that I remove my dog.

How do I access the complaints if council won’t release them?

If they don’t release them, how do I have any sense they are even valid?

— SJ

Dear SJ: Our offices receive hundreds of calls regarding privacy matters every month. The privacy legislation is not intended to protect strata councils or owners from the requirements of the Strata Act.

The particulars of a complaint can include a number of issues, such as the time and date of the complaints, the duration of the alleged violation and the frequency of the violations.

For strata councils to release complaints, they might insist that they be in writing and that the complainant consent to the release of that information, although it isn’t always that simple.

For example, if an owner notices that someone has made an alteration to common property without written approval and submits a complaint, the council may want to first investigate the claim and photograph the alteration.

Then the complaint itself is no longer necessary.

There may also be concerns about retribution over the complaint or personal security issues.

The strata council will have to decide on the limit of information they can release to both ensure they can prove they have a credible claim and also protect the privacy of owners.

Remember, the council has only informed you of an allegation. They have a duty to provide credible information or evidence proving the allegation, and you still have the option to dispute the claim, or proceed with arbitration or a court action against the strata corporation.

The Office of the Information and Privacy Commissioner has posted a new information guide on privacy matters for strata councils, owners and strata agents. While these are only guidelines, they do provide insight into the complexity of balancing the requirements of the Strata Property Act and the needs of protecting privacy and personal information.

Go to: www.oipc.bc.ca. The guidelines are found under “what’s new.”

Tony Gioventu is executive director of the Condominium Home Owners’ Association. E-mail [email protected]

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Demand that strata sign agreement to limit liability is not reasonable

Tony Gioventu
Province

Dear Condo Smarts: Our strata council received a letter from our insurance broker demanding that we sign an agreement to limit insurance liability.

In the letter, the insurance company insists that we have to sign a document to declare that our insurance values are 100 per cent true, otherwise our insurance may be limited in value.

So what’s the point of hiring an appraiser who was recommended by the insurance company in the first place?

As far as our council and owners are concerned, this was a total waste of money and nothing but a scam.

— HD, Victoria

Dear HD: You are absolutely right, there is a potential for a scam here.

But the real issue is whether the request is reasonable or not. The reason strata corporations have an appraisal is to ensure that the values you are insuring are for full replacement value required by the Strata Property Act.

For example, in the event your building is destroyed or damaged by a fire or water break, the property must be insured for what it would cost to replace the portion of the building and the common fixtures at today’s costs and under today’s building code requirements.

To determine the full replacement values, the strata corporation engages an appraiser, who is licensed and insured to conduct business in British Columbia.

You may wish to request verification of their qualifications and insurance before you engage them, all of which is for your own protection.

However, in the event there is a defect in the appraisal value, the insurance of the appraiser would then come into play to cover the variables in the losses.There are two obvious reasons why a strata council cannot determine the appraisal values or sign a declaration that they are accurate.

First, they are not qualified. What makes the insured capable of assessing the values and assets of their own property?

The second point, however, and most important is that if you did sign such a declaration, and the values did not sufficiently meet the insured claim amount, your claim might be limited to as little as half of its value. This would leave your strata with a massive liability.

Here’s the catch: Underinsured claims are not insurable under the strata policy, so the strata owners could be entirely on the hook for the remainder.

If your insurer cannot meet your obligations of replacement value, or they are asking you to waive or assume liability in a written declaration, go to a company or broker that will treat you fairly.

For information on Insurance Performance Requirements, contact the Insurance Council of B.C. (www.insurancecouncilofbc. com).

Tony Gioventu is executive director of the Condominium Home Owners’ Association.

E-mail: [email protected].

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Being ‘creative’ with procedures paves way for future disputes

Tony Gioventu
Province

Dear Condo Smarts: We think our strata council pulled a fast one on us at the last annual general meeting. We voted on our proposed annual budget, and the budget was defeated.

The strata council for the next year was elected, and then most owners, including us, left the meeting while they counted the ballots for council elections. Once the new council was announced, an owner suggested that the owners reconsider the budget, with some amendments, and vote on it again.

Instead of voting on the budget, the owners decided to adjourn the meeting for seven days and vote on a new budget.

The meeting was held last week and the new budget was passed, but now several owners who were on vacation are challenging the decision. They claim it was illegal for the council to adjourn the meeting. We’ve looked through the [Strata Property] Act but can’t find any definitive answer.

— J.S., Kelowna

Dear J.S.: Legislation does not always provide a direct answer to a specific scenario.

The Strata Property Act, Regulations and Standard Bylaws, grant only one possible provision for adjournment: In the event the strata does not obtain a quorum for a meeting, and does not have an alternative bylaw, the meeting would stand adjourned and reconvene at the same time and location seven days later, with the same agenda.

There is no provision in the legislation to adjourn a meeting to vote on new materials or a new agenda.

The act requires that matters to be voted on, including a proposed budget, must be included with the notice. The purpose of the legislation is to ensure that registered owners receive proper notice of all matters that the strata corporation is voting on at general meetings. Any such decisions could significantly affect the use, enjoyment, economics or the salability of a strata lot.

The agenda on the standard bylaws does not use the word adjourn to end the meeting. The terminology is “terminate.” Your bylaws also use “terminate” to end a meeting.

If a new meeting needs to be convened, council must send out a new notice, in the prescribed time period, to the registered owners along with Form C requisitions. (A mortgage holder who has issued this formal request for notification could also challenge the lack of notice for the meeting.) Also, if a resolution does not pass at the beginning of the meeting, there is no provision to reconsider that resolution later in the same meeting.

In your situation several owners had already left the meeting, therefore, if the strata corporation had decided to proceed with the proposed amendment to reintroduce an agenda item it would have placed your strata corporation in a complicated situation. It would have created a situation where you had not given proper notice of the amended budget to all registered owners, plus, there was no provision on the agenda to reconsider the item after it had been defeated.

Annual budgets can be amended by majority vote before they are voted on. Try to seek some consensus with the owners before you take the final vote on the budget. If the budget is not approved, the strata must, within 30 days, prepare a new budget and place it before the owners at a special general meeting for consideration. A properly ratified 3/4 vote at a general meeting may permit a longer period before the new budget is voted on.

Another issue that complicates adjournments is the matter of proxies. Most proxy votes are date specific. If a meeting is adjourned, or a new meeting is required, those proxies are no longer valid, unless the date and time has been amended in writing by the owner of the strata lot issuing a proxy.

Budgets, bylaws and major decisions can all be jeopardized by attempting to be creative with the legislation. Stick to the proper procedures and save yourself from future disputes.

Tony Gioventu is executive director of the Condominium Home Owners’ Association E-mail [email protected]

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Tony Gioventu
Province

Dear Condo Smarts: Our strata owners terminated our strata management agreement in April, and as of July 1 we have a new company.

The new company presented a new contract to the council in May with a direction that they must sign it as a standard agreement and cannot make any changes.

One of the clauses in the contract is a serious concern to our strata, and until we fully understand the implications, we do not want to sign the agreement.

The clause basically says that if the strata agent does anything that results in our proceeding with court action against them or filing a complaint against them with the regulators, that we will be responsible for all of the their legal costs, court costs, and any losses they incur. Is this part of a standard contract agreement in the management industry?

— Fairfield Strata Council

Dear council members: Before you sign any contract that directly affects your property or services ask yourself: Why would you enter into a contract with a service provider or contractor if you are somehow going to end up paying their bills for breaching the contract or breaking the law?

As would be the case in any type of contractual agreement I would strongly recommend that you take the contract to a legal professional familiar with agency agreements and have it reviewed for your protection.

There is no such standard contract for management services that cannot be negotiated. Everything from termination provisions, terms and conditions of the services, reporting requirements, and schedules of fees may be negotiated.

There are some parts of the contract that are required by the Real Estate Service Act, and Regulations and Rules of the Real Estate Council that are required. However, the provision to cover court costs or disciplinary actions is not one of them.

In the event that your strata corporation did file a complaint with the Real Estate Council, along with the delivery and gathering of evidence, section 123 of RESA limits the liability or actions that the contractor may take.

It says:

RESA Communications privileged 123 (1) Subject to subsection (2), all information supplied and all records and things produced to the real estate council, a hearing committee, the superintendent, the insurance corporation or the compensation fund corporation with respect to a licensee, a former licensee or an applicant for a licence are privileged to the same extent as if they were supplied or produced in proceedings in a court, and no action may be brought against a person as a consequence of the person having supplied or produced them.

(2) Subsection (1) does not apply to a person who supplied information or produced records or things maliciously.

Remember, as your agent, it is important that the strata manager is indemnified and protected to act as your agent.

In the event of court actions or lawsuits, mangers are frequently included in claims and they need to ensure they too are covered for costs and liability insurance, but it doesn’t imply that you would forfeit your own protection.

Likewise, if a contract is not compliant with the relevant legislation, the enforceability of the contract may also be called into question.

Tony Gioventu is executive director of the Condominium Home Owners’ Association.E-mail [email protected]

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timing is everything: You could pay twice the price if you let naysayers put you off timely work

Tony Gioventu
Province

Dear Condo Smarts: Could you please explain to strata owners a way to convince them that deferring maintenance is just a waste of money and destructive to our communities?

Our townhouse complex is fixing decks and balconies at a cost of about $20,000 per unit because we waited until things started to rot before we fixed them.

At our first meeting in June of 2001, our owners voted down a motion to replace membranes and railings at a cost of $3,750 per unit. The contractor at the time warned us that if we didn’t do the work, we would be facing serious damages.

Unfortunately, a few fear-mongers in our strata convinced enough owners that the contractor was only trying to scare us into a repair we didn’t need.

In hindsight, we should have challenged the decision and gone to court.

In addition to the damages and costs, we have a small group of owners who cannot raise any funds for the special levy because their debt/mortgage value exceeds the value of their townhouses.

— CG

Dear CG: The first thing we need is a change in legislation that ensures strata corporations are saving sufficient funds for future repairs.

The government recently moved the administration of the Strata Property Act from the Ministry of Finance to Housing.

CHOA will continue to work with government to bring reasonable changes in the legislation, and you as homeowners need to contact your MLAs to encourage them to support a public consultation process on future amendments.

We completed a study several weeks ago into the exact issue you raise. The outcome of the study is that it can easily cost more than double when you defer repairs.

The study involved a 50-unit, 17-year-old, wood-frame building that required a roof replacement this year. As a result of forgoing maintenance and inspections, the roof defects — which could have easily been remedied in the early years — resulted in shortening the roof life by five years, $27,000 in emergency repairs, an increase in their insurance deductible to $25,000, and $26,000 in additional repairs resulting from the damage.

The total special levy was $201,000 and the average unit cost was $4,020.

Averaged over 17 years, that means each unit paid $24.90 per month, and the owners had to deal with the conflicts, nuisance and personal financial crisis all because they deferred repairs.

If the strata had planned the maintenance and repairs, the cost would have been $175,000. Plus they could have allocated $16,500 for maintenance and inspections over 22 years.

If the strata had amortized a monthly contribution and reinvested their reserve, compounding the non-taxable interest, the owners’ monthly contribution over 22 years would have been only $8.82.

This is economics in its simplest form. Long-term planning costs less than half of deferring.

Notwithstanding all of the other complications, it’s the only choice and it’s never too late.

Until we have a mandatory regulation on funding for future repairs, your strata can pick your greatest future costs or risks — such as roofing, windows, cladding, plumbing or elevators — and find out what the future cost of maintenance and replacement will be and start saving today.

Don’t let agents of discord in your strata discourage long-term planning.

Your future investment really is worth the effort.

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

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