Tony Gioventu
Province

Dear Condo Smarts: A word of warning for anyone who is considering or has entered into a presales agreement.

In 2005, I was doing business in Vancouver and fell in love with a proposed development on the waterfront. It was originally planned for occupancy in 2008, but as delays mounted it ended up being available in 2009.

Seems simple enough except I transferred (sold) my presales contract to a Vancouver buyer in 2007 for a $50,000 premium.

They in turn transferred the contract to a Toronto buyer in 2008 for another premium. Well, we thought after our sale, it was the end, never to come up again.

Last fall, the third presales agreement holder defaulted on their obligation to complete the sale. The developer, in an effort to recover the losses from the sale, proceeded with a court action that has ended back at our doorstep. With both the second and third buyers defaulting, the developer has named us in the lawsuit.

Even though we sold or assigned our presales agreement, we did not discharge our obligation to the developer with their written consent, to complete the sale. As a result we may very likely end up having to complete the sale, or face the consequences of the lawsuit.

— J.C. B., Winnipeg

Attention Presales Buyers: If you are unable to complete your transaction of sale, or have assigned your agreement to another party who has not completed the transaction, gather your contracts and documents and make an appointment to meet your lawyer.

Presales agreements are contractual obligations with a developer, where you, the buyer, are compelled to purchase the unit when it is complete, at the fixed conditions in the agreement.

This is not a sales agreement. It binds the rights and obligations of the potential buyer and the developer to the conditions of the contract.

If you have transferred your presales agreement to another party, you may very likely have an obligation to the developer if the assigned buyer defaults.

Sales and marketing commissions might also be at risk, if they were paid as conditions of the completion during the presales period. Brokers and agents may also want to review their contractual relationships with the owner developer.

A growing problem in the development industry is the requirement that lenders impose on developers for presales.

As a condition of financing, developers are often obliged to pre-sell 75 per cent to 100 per cent of the project before the funding is released for the development.

This places a current value on a future product that might or might not be constant, and consumers often pay the price in significantly higher costs at the time of sale or a reduction of products and services.

A project strained by future uncontrollable costs or bankruptcy could also present a problem for buyers and strata corporations in reviewing operations, deficiencies and warranty claims in the early years of their strata corporation.

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

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Tony Giovetun
Province

Dear Condo Smarts: We bought a townhouse in the fall of 2007 in Langley. There are 48 units in the complex and they are all slightly different in design and layout.

Similar to several others, our unit has two skylights, one over the living room and one over the kitchen.

The one over the kitchen has failed and needs to be replaced, but the strata council has told us that we have to change it ourselves because it wasn’t part of the original construction.

We went back to all of our documents and double checked everything and there is no indication in the sale documents, the Form B, or the strata information that this is an alteration.

Does council have the authority to make us responsible for this alleged alteration, even though it was never disclosed or included in any of the documents we requested in the sale?

— Karen and Dave

Dear Karen and Dave: Alterations and alteration records and documents are a complicated problem with many strata corporations.

A strata corporation does have the ability to grant an owner permission to alter common property with an item such as a skylight installation.

Some types of alterations could be significant and require a three-quarter vote of the owners if they affect the use or appearance of common property, but normally the council grants the alteration request.

At the time of the request, the council does have the authority to require that the strata lot applying be held to a number of conditions.

Those may include supplying the strata council with engineering or consulting reports, building permits and inspection reports, environmental studies, plans and drawings, to cover the costs of related services and legal agreements, and to take responsibility for the future costs associated with the maintenance, repair and renewal of the common area alteration, but not the organizing and carrying out of the maintenance and repairs.

The reason for the difference between costs and actual repairs is to ensure the strata corporation still controls, maintains and repairs the common property in the interest of all owners.

If the strata corporation did not require a written alteration agreement, and it did not disclose it with the Form B when it was requested, and there is no reference to the alteration in the bylaws, the alteration is likely now the responsibility of the strata corporation to maintain and repair at its cost.

Strata corporations are far too casual about alteration agreements. Many councils are simply trying to co-operate with owners and support their requests, forgetting that the future may spell costly repairs for the strata.

In your case we found out that the alteration was done three owners ago in 1994.

There was no way that the previous owner could disclose the change as she was unaware of it also.

Buyers need to ask the vendor and the strata corporation about changes to strata lots if they are unsure about the alterations, and strata corporations and strata managers need to maintain suite files that include alteration agreements so that they may be included with a Form B on request.

The records however, are only as accurate as the records provided from the previous council or to the strata manager.

When in doubt, confirm in writing.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. The association’s website is www.choa.bc.ca.

E-mail: [email protected].

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Tony Gioventu
Province

Dear Condo Smarts: We live in a duplex on the Sunshine Coast. Our neighbours had a small fire on their deck that caused about $8,000 damage to the building siding, the deck and patio doors.

They contacted their insurance company, and were told they are not covered for this damage and my insurance company doesn’t cover us. Neither of us realized we are in a functioning strata and did not retain an insurance policy for the buildings. My neighbour has agreed to pay for the cost, but we are asking that you write a column about duplexes and insurance to warn everyone to be aware of the type of building they are living in and buy insurance to fit.

— MB

Dear MB: There are thousands of duplexes, triplexes and fourplexes in the province and it would surprise most owners to know that they are likely a strata. Most are a building-type strata, showing the building on the strata plan.

In a building-type strata, the exteriors are usually common property and the buildings and fixtures built by the owner-developer are part of common assets. The strata corporation, created by the registered strata plan, must have insurance on all perils specified in the act and regulations, and liability insurance for property damage and bodily injury.

Each owner is advised to maintain insurance for their condo unit that covers personal property, betterments not covered by the strata policy for the unit and personal liability.

Don’t assume your personal insurance covers your property. You need a separate policy in the name of your strata corporation. For example, “the owners, strata plan ABC1234.”

A duplex works the same as any other strata. You approve an annual budget, retain insurance, maintain common property, enforce bylaws and maintain records. The only exception to insurance is a bare-land strata, where the buildings are not shown on the strata plan and each owner insures his own building. If you don’t know if your building is a strata, review your purchase documents or have a title search done on your unit. It will be indicated on the title if it is part of a strata plan.

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

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Strata corps hold off on repairs as owners struggle with levies

Tony Gioventu
Province

Dear Condo Smarts:

We purchased our home last July for $385,000 and put five per cent down plus paid for our mortgage insurance and property purchase tax. The term of our mortgage is a five-year open.

Our strata council has just passed a special levy for deck repairs that is going to cost each strata lot between $17,000 and $31,000. Our share of the levy is $23,575.

Our mortgage balance is $363,000 and we need to raise the additional money for our share of the levy.

Here’s the problem: Our recent appraised value is $335,000. We have no equity left to borrow against and, in fact, our property value is below the debt load. We know no one who can lend us the additional funds. Is the only option that we wait till the strata corporation seeks an order for sale against our strata lot? All we can see in our future is financial doom unless there is another option.

— JR

Dear JR: Unfortunately the turn of the economy has created a serious credit crunch for homeowners, especially those living in older strata communities that are in need of major repairs.

If you do not meet your payments by the due dates, the strata corporation will issue a demand notice to you for payment and advise a lien may be filed if you do not pay the amount.

Once 14 days have expired from the notice period, they may then file a lien against the unit. That lien will take a priority charge over things like mortgages, so the strata has a reasonable assurance it will recover the assessment.

The next step is that the strata will instruct their legal counsel in a short period of time to commence an order for sale proceeding if the amount warrants further collection. Eventually, the strata corporation could achieve a court-ordered sale for your strata lot. From the proceeds, the strata would receive the special levy and a portion of the legal and court costs.

The balance of your debt would be paid from the remaining proceeds. If there are not enough funds to cover the remaining mortgage(s), you may have a partial debt to be repaid.

The outcome is horrid for both the strata and the owners involved. The strata council does not want to seek the sale of owners’ homes, but they have a legal obligation to maintain and repair buildings and operate the strata corporation. They do not have the authority to waive or defer the assessment and eventually it has to be collected.

Before any owner contemplates being delinquent in their strata fees or special assessments, they should speak to their financial adviser, bank officer or lawyer to consider their options.

Sadly, strata corporations are now voting down much-needed repairs because many owners cannot afford the levies. Strata corporations may borrow funds for the repairs rather than a special levy.

There are banks, credit unions and private institutions that will lend funds to strata corporations, and the owners pay back the funds either through a special levy or strata fees over a five- to 10-year period. The cost of interest might be higher, but it might also ensure access to funds for the owners, making it easier for owners to repay and approve the resolutions. Legal advice should always be sought in writing resolutions for the purpose of the strata corporation borrowing money.

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: We live in a townhouse complex of 48 units.

Each unit has its own private backyard and patio area, with fences dividing each unit from its neighbours. The fourth side of the yards are not fenced, so someone can walk into our backyard.

Two owners have decided to install hot tubs in their backyards, without the permission of council and now we are being plagued with complaints from all the other owners. Council has sent these two owners a letter advising they needed permission to alter the common property and, as they did not receive permission in advance, they must remove them at once.

One of the owners went to a lawyer and we’ve received a letter advising that the bylaws don’t prohibit hot tubs, therefore we have nothing to enforce.

What can we do?

— A Strata Council in Okanagan Valley

Dear Strata Council: Adding additional furniture or portable items to areas adjacent to a townhouse that may be for exclusive use is not always a violation of the bylaws. Before you can enforce the bylaws, you need to know what is the property designation affected, what bylaw is being violated, and what are the remedies.

In your townhouse complex, like many, the building exterior is common property. The backyard is partially common property in the grass area, and the patio areas are limited common property.

While your bylaws do not prohibit the use of portable hot tubs, garden sheds, barbecues or patio furniture, they do expressly require that any alteration to common property must be first approved in writing by the strata corporation before the owner can proceed.

Both of the hot tubs installed required new 220V electrical services, drains and a gas line. These items did require written permission from the strata council and some required building permits. In this area the strata corporation has the ability to enforce the bylaws, and may consider a number of remedies, including the removal of the hot tubs if the owners do not co-operate.

In addition, nuisance complaints such as noise can still be enforced against the owners if a neighbour is being disturbed by the noise of pumps to the extent that is set out in your bylaws. If you don’t want hot tubs in your strata, adopt a bylaw that prohibits hot tubs.

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: Back in the ’90s, our strata building was an older apartment building in Victoria that was converted to condo units for sale.

Our building is well maintained, the owners comply with bylaws and we never have any problems for funding of special projects or the annual budget.

We do have one bone of contention with the owners that has caused much debate over the years and we would like to resolve this.

The top-floor units have gas fireplaces and gas stoves. The rest of the building, including heating, is electric. Is there any legal way to separate the cost of the gas to just those strata lots who use it?

— JC, Victoria

Dear JC: There are many strata corporations where there are “exclusive” services or circumstances where a “types” bylaw may be considered. If the service, which has to be an annual operating cost, is exclusive to one or more strata lots, the Strata Act makes a provision where your strata may adopt a bylaw that allocates that exclusive operating expense solely to those units. Those units then share that cost based on their unit entitlement and consumption. This would show as a separate column on your annual budget for just those units affected. Gas, fireplaces and hot water services are some of the most common “types” bylaws.

There are two principles that must be adhered to in adopting any such bylaw.

The first is that the cost must be exclusive, not a share of a bill that is otherwise apportioned to another strata lot or section.

The second is that the cost can only relate to operating expenses. Those are expenses that occur once a year or more frequently. In the example of consumption of gas, the bylaw would define the use of the gas with fireplaces and stoves as an exclusive expense of those specific units, to be reflected in the annual budget.

Of course ratifying the bylaw by a 75 per cent vote is still the first hurdle as every eligible voter, including those affected by the bylaw, get to vote.

Remember, a three-quarter vote is based on only those who vote for or against the resolution in person or by proxy at the time the vote is taken and who have not abstained.

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

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Tony Gioventu
Province

Q: Our strata council wants to change the contractor who maintains our landscaping. Our past president claims we don’t have the authority to terminate the current contract without the owners’ approval according to the Strata Property Act.

The owners approved $14,000 in the annual budget and have already obtained three quotes with better service and we will save $3,500 from our annual budget.

We cannot find anything in the Strata Act governing this, but is there anything that prevents council from changing contractors without a meeting of the owners?

— A Richmond Strata Council

A: Under the act, there is one contract that may require termination by a vote of the owners, and that is the agreement of strata management. This requires a three-quarters vote at a general meeting, if there is no other termination condition in your contract.

For all other contracts, the act provides for no specific limitations. However, you also need to review your bylaws and the motions of your owners at general meetings. The bylaws might require contracts be approved or terminated at general meetings.

Also past motions at general meetings might have imposed some limitation or specific direction by the owners. In the absence of any bylaws or motions, the council has the authority to change the services.

A few tips to remember:

– Try to create a specific scope of services and obtain as many quotes as possible.

– Check each bidding company’s references and business history with the Better Business Bureau, any associations the companies may be affiliated with and other stratas in your area using the same companies.

– Contact the B.C. Landscape and Nursery Association for additional information on contracts, standards and performance guidelines. The organization has a toll-free line for B.C. callers (1-800-421-7963) and a website (bclna.com).

– Remember to get everything in writing, double-check who is supplying tools, supplies, removal and waste disposal.

– Check for insurance and current and active WorkSafe coverage.

– If any of your council members has an affiliation or relationship with a bidding company, that member needs to remove himself or herself from the decision process.

– Report your decision in the minutes and inform your owners as soon as possible.

– If in doubt about the terms and conditions of your contract, get legal advice.

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

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Think twice if owner or council won’t give requested warranty or insurance documents

Tony Gioventu
Province

Dear Condo Smarts: We have been viewing a number of condos in the past few weeks to purchase as our new home.

In the process of reading minutes we have found a number of conditions in each of the condos where the strata corporation could not provide us with satisfactory answers, so we did not pursue the sale.

We were faced with the refusal of the property manger and the strata corporation to disclose information on two issues.

The first was insurance claims and what parts of the building were damaged and restored in a major insurance claim, and the second was warranty claims.

Is this a normal practice and doesn’t the strata have to disclose this information when someone requests it?

— MC, Vancouver

Dear MC: A prudent buyer will investigate building history, financial operations, financial reserves, maintenance schedules, the minutes of the meetings, and warranty and insurance claims that might affect your purchase.

As part of the records and documents in the Strata Act, the strata must retain correspondence sent and received by the strata corporation which could be warranty or insurance information, but that is only for a period of two years.

They must also retain warranty documents and records, but if they do not include warranty or insurance claims and reports as part of the minutes of council meetings, there may not be a record of any such claims, other than the correspondence.

Unless you as the consumer specifically request copies of claims history for warranties and insurance claims, you would have no way of knowing that information.

If there was a related claim on the strata lot you are interested in, the vendor would also have a duty to disclose that information, but the conditions and claims of common property would have to be disclosed by the strata corporation, if requested.

Buyers should exercise caution when purchasing a unit if the strata or owner is unwilling to disclose warranty or insurance information.

If there is a history of insurance claims, you may be able to identify this through the deductible amounts shown on the strata insurance policy, but they only relate to history, not the current or future risk of the property.

For example, if the insurance deductible for water escape is $2,500, it is a good indication that there have been few if any water damage claims by the strata or owners, but if the deductible is $10,000, $25,000, or higher, it is obvious that a series of claims have resulted in a greater risk for the insurer and costs for the strata corporation.

Buying a condo today is also about protecting your future investment. Don’t take anyone’s word for anything. Review all the documentation available and confirm your requests in writing for additional information.

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

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Get competitive bids, put all terms in writing and get legal counsel

Tony Gioventu
Province

Dear Condo Smarts: Our strata has run into some troubles trying to get the rest of the damages to our building repaired after a fire started in one unit with a meth lab.

The fire caused minimal damage, but the chemicals in the unit contaminated the strata lot and a number of adjacent units, so the city sent an inspector, who ordered the evacuation of eight suites until the restoration was complete.

That was seven months ago. We still don’t have all the work done, the restoration cost is more than $400,000 and our insurance does not cover the claim. The owner of the strata lot has not co-operated and the seven other owners are desperate to come back to their homes. Is there any way we can force this to complete?

— TW, Vancouver Island

Dear TW: Unfortunately, it’s impossible to prevent illegal operations in strata lots. Strata corporations can be vigilant by conducting annual mechanical and building inspections of common areas and strata lots, but more important is how you deal with the cleanup after the damage is discovered.

The Strata Property Act gives strata corporations a great deal of power to deal with illegal drug activities resulting in building damage; however, this depends greatly on how the order from the local government is issued for the damages.

Most local governments have bylaws that apply to conditions resulting from grow ops, meth labs and other illegal-drug production activities. When a bylaw-enforcement officer visits a site to inspect the damages, he or she will likely issue an order for the repairs and, as happened in your case, evacuation of any suites that are affected.

It is important for the strata corporation to have proper representation at this time to ensure two steps are taken. The first is that all patent and potential damages are itemized on the order, and the second is that the strata corporation is named on the order in addition to the strata lot owner.

This grants the authority to the strata corporation to proceed with repairs to the strata lot, other affected strata lots and other common areas. The costs may then be liened against the offending strata lot.

This permits the strata corporation to take control over the timely repair and restoration to the strata lots and common areas.

Eventually, the strata corporation may seek an order for sale of the strata lot to cover the costs, and hopefully the restored value will cover your losses.

As in most cases, if your strata corporation does not have insurance coverage relating to illegal drug activities and losses, you will be left as the co-ordinator of the restoration.

Before you sign a blank cheque for restoration, set up the scope of work established by the local government order and obtain quotes to obtain a competitive price.

Restoration costs can easily skyrocket out of control if you don’t have a defined scope of construction and fixed price.

When a grow op or meth lab is discovered, immediately contact the police and fire department. Establish a working relationship with your local city bylaw enforcement officer and contact your insurer, your lawyer and any required consultants, such as engineers.

Act quickly and take control of the situation from an informed perspective.

Don’t sign blank restoration orders. Obtain competitive bids for the work and have all terms and conditions of the contracts in writing and reviewed by legal counsel before your sign.

Tony Gioventu is executive director of the Condominium Home Owners’ Association. He welcomes questions at [email protected]

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Tony Gioventu
Province

Dear Condo Smarts: Our strata of 32 units has a rental bylaw that only permits three rentals. Since the economic slump, we have received five applications from owners claiming hardship due to job loss, financial pressures, relocation and loss of value. We can’t find any resources to help us define hardship or how to assess claims. — Jay W, Prince George

Dear Jay: Hardship is a term created under the Strata Act that potentially permits an exemption to rental bylaws; however, it is not defined by the legislation. It is not defined because what constitutes a hardship for one person, may not be a hardship for another. For example, if owners lose their job, and are unable to pay their strata fees and mortgage because they have no other financial resources, that may be reasonable grounds for hardship. If they lose their job, but have no mortgage and substantial financial assets to support their lifestyle, that may not be a hardship. While the Act leaves little interpretation, it does provide you with tools to process the application. When a person applies for an exemption, there is a short window to respond with as little as two weeks after the application is given. If you miss the dates, the exemption is automatically given.

In decision of Als vs NW1067, a number of precedents were established. A strata corporation is permitted to request copies of the owner’s financial information and information regarding other grounds of the alleged hardship that is necessary to establish whether the claim is credible. A loss of property value itself may not constitute hardship, but other compounding circumstances may.

It is necessary for the strata to collect all relevant information before they can make a decision. Remember, you must not unreasonably refuse. The courts have also quashed a bylaw that elevated the test to “undue” hardship. The Personal Information Protection Act also applies in these circumstances if your strata corporation has collected any personal information from the owner to assess the application.

If you deny the claim, ensure that you have maintained copies of those records in accordance with the Privacy Legislation. You may find yourself in court defending such a claim. The strata is also permitted to limit the period of time of the exemption. The strata may limit the period and request that the exemption be renewed before the period would be extended.

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

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