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Professional Standards Manual

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5. Strata Sales

(a) Strata Developments – The Basics - View Entire Section

(III) Strata Governance and Compliance

The Strata Property Act regulates the creation and operation of strata corporations. A strata corporation is a unique form of real estate development that permits multi-unit developments, each with an individual title, to be created on a single parcel of land. Strata plans may be filed to create multi-unit developments ranging in size from two to hundreds of units. The units may be for residential, commercial, industrial, or recreational use or some combination of these various uses. When a strata plan is filed in the Land Title Office, a strata corporation is created. Thus, a two unit duplex may be a strata corporation.

The Strata Property Act and Regulation govern the operation of all strata corporations created in British Columbia. Some of the operational requirements are that every strata corporation must have bylaws, it must hold annual general meetings and keep minutes of the meetings, it must retain records relating to the strata corporation, the owners must approve a budget annually and the strata corporation must maintain operating and contingency reserve funds.

Regardless of the size or way in which the units are to be used, the Strata Property Act and the Regulation apply to govern the strata corporation’s operation. Although provincial legislation applies to all strata corporations, there is no government body that enforces the legislation to ensure that strata corporations comply with the legislative requirements. As a result, some strata corporations will comply diligently with the governance requirements, while others will consider the legislation as a noncompulsory guide and others, particularly smaller strata corporations, may ignore the legislative requirements completely.

A strata corporation that retains a third party management company to assist in the management is more likely to comply with the legislative requirements, however there are many self-managed strata corporations that are well informed regarding the requirements of the legislation and are diligent in their efforts to comply. Small strata corporations tend to be less familiar with the requirements of the legislation, and in some cases may deny that the legislative provisions are applicable. It is not uncommon, for example, for duplex owners to deny that they are part of a strata corporation and thus fail to hold general meetings, approve budgets and maintain operating and contingency reserve funds. Some owners even believe that the legislation exempts smaller strata corporations from the need to comply with the legislation. Others believe that the Strata Property Act does not apply to strata developments used for commercial or industrial purposes. Such beliefs are incorrect. Neither the Strata Property Act nor the Regulation contains exemptions from the governance requirements for any strata corporation.  

Some licensees refer to strata corporations that do not hold meetings, or maintain the necessary operating and contingency reserve funds as “non-compliant.” In such strata corporations, meeting minutes, budgets, and/or financial statements may not exist. To ensure that sellers will not be held liable by buyers for the strata corporation’s failure to comply with the legislation and will not be liable to produce documentation that does not exist, listing licensees should insure that any subject clauses requiring the production of documents (other than the request for insurance documents which is discussed below) are deleted. Additionally, listing licensees may wish to include the following clause in the Contract of Purchase and Sale when selling these properties but care must be taken to ensure the strata corporation is “non-compliant” prior to using the following clauses or some variation thereof.

Properties without a Strata Council Clause

The Buyer acknowledges that this strata corporation has not been run in compliance with the Strata Property Act and, in particular, there is no active strata council, there have been no strata meetings, there is no budget, no strata fees have been collected, and there is no operating or contingency reserve fund or financial records.

In such cases, buyer’s agents should recommend that buyers obtain legal advice before becoming committed to buy and may wish to include the following clause making the contract subject to obtaining legal advice.

Subject to Legal Advice

Subject to the (select either Buyer or Seller) obtaining legal advice satisfactory to the Buyer or Seller concerning (select easement, builders’ lien, financing or define applicable issue) _________ by (date).

This condition is for the sole benefit of the Buyer.

Ω If not using the standard form Contract of Purchase and Sale refer to ‘‘Contracts under Seal” ….

However, notwithstanding general non-compliance by the strata corporation with the legislative requirements, a buyer’s agent should obtain a copy of the strata plan and related schedules (if any) from the land title office and the agent should insist on obtaining a copy of the strata corporation insurance documents. The Strata Property Act requires every strata corporation to maintain property insurance on the buildings on a strata plan and to maintain liability insurance. This means that the insurance policy should be in the strata corporation’s name, i.e., The Owners Strata Plan (alpha/numeric sequence identifying the strata corporation). Owners in smaller strata corporations and particularly duplex owners may believe that obtaining personal insurance is sufficient; however, such insurance does not meet the requirements of the Strata Property Act and may mean that the property is NOT insured.