Sunday, February 22, 2015

British Columbia Law Institute Report on Terminating a Strata

The British Columbia Law Institute  has just published its Report on Terminating a Strata recommending reform of the Strata Property Act provisions allowing a strata to wind up its strata corporation and cancel the strata plan.

Under current legislation, there are very stringent requirements that must be met before a strata may be terminated. The Strata Property Act requires a unanimous vote to terminate a strata, which effectively requires that all owners consent. On an application authorized by three-quarters of the votes, the court may allow a termination in very limited circumstances despite dissenting votes. Pursuant to section 52 of the Strata Property Act, if a strata corporation is comprised of 10 or more strata lots, and the vote in respect of one strata lot, or if more than one strata lot, “the court may, if satisfied that the passage of the resolution is in the best interests of the strata corporation and would not unfairly prejudice the dissenting voter or voters, make an order providing that the vote proceed as if the dissenting voter or voters had no vote.”

For most termination applications, the consent of the mortgagees and other registered charge holders is also required.

Why would the owners want to terminate their strata? One of the reasons is that as buildings age, they may become obsolete. The cost of repairs and maintenance of apartments and other buildings may become disproportionately high in comparison to what the owners might be able to receive if the strata is terminated and the property sold for redevelopment.

If the threshold for terminating a strata is too high, there is a risk that a small minority may unreasonably withhold consent to termination in circumstances where it is clearly in the best interest of the owners as a whole to terminate.

On the other hand, too low a threshold may be unfair to those who disagree with the majority, particularly for the owners of residential strata lots who occupy their units, for whom termination will require finding a new residence.

In the Report, the Strata Property Law (Phase Two) Project Committee, chaired by Patrick Williams of the law firm Clark Wilson LLP, sought to balance the collective interests of a strata, with the need to provide safeguards for minority dissenting owners and charge holders.

The Report recommends that the threshold for terminating a strata be lowered to 80% of the eligible votes. The consents of charge-holders would not be required. On the other hand, unless the strata consists of fewer than five strata lots (in which case the 80% threshold would effectively require unanimity), the strata corporation would also require court approval to terminate the strata. The requirement for court approval would give any dissenting owners, and holders of charges registered against the land the opportunity to oppose the termination. The court would then have to determine whether the termination is in the best interests of the strata corporation.

The Report contains a detailed analysis of the relevant provisions of the Strata Property Act and earlier British Columbia legislation, a comparison of the law in other jurisdictions, a discussion of the policy implications, and 21 specific recommendations. 

No comments: