Mar 13, 2018

Strata Termination Petitions: Proceeding with Caution

The Owners, Strata Plan VR2122 v Wake, 2017 BCSC 2386 (CanLII)

In 2013, the British Columbia Law Institute (BCLI) undertook the provincial legislature’s recommendation to survey issues in strata property law.[1] During this multi-year review process, the legislature learned of the growing problem of condominium owners trapped in the costly, time-consuming, and often unsuccessful strata wind-up process. This issue became increasingly pronounced across British Columbia because of the high number of strata developments requiring extensive repairs after the leaky condo crisis of the late 1990s and early 2000s. Many owners found repair levies financially unbearable.[2] This crisis, combined with the dramatic and continuing rise in housing prices throughout the lower mainland, pushed owners to want to cash in on the increased value of their properties, and it pressured the provincial government to ask the BCLI to investigate strata termination requirements.[3] In 2015, the provincial legislature introduced changes recommended by the BCLI to the Strata Property Act (SPA) that reduced the dissolution voting threshold from 100% to 80%.[4] The amendments also require strata corporations with five or more lots to secure a successful dissolution vote confirmation from the BC Supreme Court.[5]

After the SPA amendments came into force in July 2016,[6] many strata corporations began the winding up process. This culminated in multiple contested court applications from strata corporations with non-unanimous voting on the issue of termination. The only reported decisions so far are the petitions for dissolution of the “Bel-Ayre”[7] and the “Hampstead”[8] (Wake) stratas.

The former concerned a 36-member strata corporation that required the replacement of the building waterproofing membrane at a cost of over $500,000, [9] with strata council members anticipating future costs of approximately $711,880.[10] Prompted in part by the significant costs that the owners would have to endure in the coming years, the strata council met with real estate agents to discuss the possibility of a wind-up and sale to a developer.[11] The contemplated sale price would have given owners a 25-40% premium over the then-assessed value of their lots.[12] The strata council, on behalf of the strata corporation, executed a sales contract with a developer subject to the proper completion of the dissolution SPA provisions.[13] The dissolution vote passed at 83.3%, but the Court declined to confirm the vote and allow for the wind-up of the strata.[14] The reason for this declination centred around an error in the process and the refusal of the Court to disregard the error because it felt that it was essential to the incoming liquidator’s mandate.[15] The owners approved a resolution that did not have the required information in the interest schedule (missing value estimates), which would have been used by the liquidator to distribute the proceeds of sale.[16] The Court took a very process-oriented approach to come to its decision. It reasoned first that the process to be followed for winding up a strata should be complied with “according to law”, with care not to ignore a “clear, mandatory provision in the legislation”[17] because the process takes homes away from a dissenting minority, and the legislation has specifically identified select requirements that can be overlooked (i.e., the 60-day deadline for bringing the confirmation application).[18] It also reasoned that value estimates in the interest schedule are an essential term of the liquidator’s mandate[19] and that even though the deficiency in the interest schedule does not seem to oust the jurisdiction of the Court to confirm the resolution (as the legislation only directs the court to consider the weighing of the “best interests”, “significant unfairness” and “significant confusion, and uncertainty” factors when confirming a resolution, which doesn’t directly require compliance with s. 278)[20], the Court reasons that it would cause significant confusion and uncertainty to the owners and not be in their best interests for it to confirm the resolution notwithstanding the deficiency as the liquidator will later need to obtain a vesting order which it could not do without the proper value estimates.[21]

The Hampstead case concerned an aging 33-member strata corporation. It too had burdensome repair costs and the strata council also solicited offers to buy the building outright for redevelopment. With offers coming in considerably above market price, the owners passed the requisite 80% vote for the wind up and sale of the building.[22] By contrast to the Bel-Ayre strata, Justice Loo confirmed the Hampstead’s application, and relied on the court’s duty to consider (a) the best interests of the owners, (b) the probability and extent of significant unfairness to one or more owners, or holders of registered charges, and (c) the probability and extent of significant confusion and uncertainty in the affairs of the strata corporation or the owners in determining whether to make an order confirming the dissolution of the strata corporation, rather than denying the application on a procedural defect.[23] In considering these factors, Justice Loo weighed the individual property rights of the owners against the collective rights of the owners as strata members.[24] The primary arguments of the dissenting owners were that (a) owners who bought before the SPA amendments came into effect had a reasonable expectation to be able to stay in their units for as long as they wished,[25] and (b) to confirm the vote would cause significant unfairness because they would be displaced from their units and communities.[26] The consenting owners’ primary argument revolved around their desire to take advantage of the increased profit to be made as a result of rezoning and redevelopment of the land on which the strata sat.[27]

Comparing the Bel-Ayre decision to the Hampstead decision is informative because of their markedly different approaches to the procedural aspects of a wind-up resolution. Justice Loo in deciding Wake demonstrates a willingness to tackle the balancing of interests, whereas Justice Millman in deciding Bel-Ayre seems focused on strict adherence to legislative process. Specifically, Justice Millman views the balancing of interests as a secondary step of analysis that can only be accessed after meeting the stringent legislated requirements because dissenting individuals are at risk of losing their homes to the will of the majority, while Justice Loo takes a more holistic approach and disregards some procedural defects to focus primarily on interest balancing to make a final decision. The argument made by Justice Loo regarding the setting aside of the procedural defect is that it is of a less important nature in Wake as compared to Bel-Ayre. This begs the question: where should the line be drawn with respect to procedural defects which can be ignored, and those which are essential to the legislative scheme? In both cases discussed above, arguments were presented suggesting that the Court could disregard defects in the provisions and move to the balancing stage, but the latitude ultimately given to the courts will likely be decided by Wake’s upcoming appeal. As the law currently stands, the courts appear to have significant discretion in determining which procedural aspects may be disregarded and which would be fatal to a confirmation.

The second aspect to analyze is the discretion afforded to the Court during the balancing process. The only case that has dealt with this thus far is Wake. In balancing the interests, Justice Loo dismissed the dissenting owners’ interests primarily because they would be able to buy property back in the same neighbourhood and there is no reasonable expectation to be able to live in the same property forever. She instead prioritized the majority’s interest to cash in on investment. This appearsto be a permissible manner of balancing the interests, but the latitude afforded to the Courts by this process is significant. A court could have just as reasonably emphasized the classical individual property rights of the dissenting owners to override the wishes of the majority. It could have also emphasized the broader social issue of a general lack of housing when considering the “best interests of the owners”. Allowing for redevelopment could increase gentrification and prevent access to affordable housing. However, actually allowing for redevelopment with designated social housing units could possibly address this problem in an even more effective way, meaning that the issue of social housing could have favoured the balance in completely the opposite way if the court had wanted it to.

Thus, the broad discretion afforded to Courts both procedurally, as well as in the balancing stage, is problematic both in its unpredictability, and its potential use as a conduit for bias. The complex nature of housing issues, and the emotion riding on rapidly increasing housing prices, militate in favour of a nuanced approach to policy decisions that will affect prices and the availability of housing. As citizens who are aware of the issue, judges will have biases that risk coming through given their significant role in the wind-up confirmation process. At present, the model requires clarification and judicial latitude should be restricted in subsequent cases (or through future legislation) to afford owners predictability and to curtail opportunities for inappropriate judicial activism.

[1] British Columbia, Official Report of Debates of the Legislative Assembly (Hansard), 40th Parl, 4th Sess, Vol 31, No 3 (5 November 2015) at 10100 (Hon R Coleman).

[2] Glen Korstrom, “New condo-sale rule brings relief to many, grief to some”, Business in Vancouver (14 March 2017), online: <> accessed 5 Feb 2018.

[3] British Columbia, Ministry of Natural Gas and Development and Minister Responsible for Housing, Proposed Amendments to Residential Tenancy and Strata Property Acts, News Release (Victoria: Ministry of Natural Gas and Development and Minister Responsible for Housing, 2015), online: <> accessed 5 Feb 2018.

[4] Bill 40, Natural Gas Development Statutes Amendment Act, 2015, 4th Sess, 40th Parl, British Columbia, 2015 (assented to 17 November 2015), SBC 2015, c 40.

[5] Strata Property Act, SBC 1998, c 43, s 273.1(1)(b) [SPA].

[6] British Columbia, Ministry of Natural Gas and Development and Minister Responsible for Housing, Termination (Winding Up) of Strata Corporations (Victoria: Ministry of Natural Gas and Development and Minister Responsible for Housing, 2017), online: <>accessed 5 Feb 2018.

[7] Re: The Owners, Strata Plan VR 1966, 2017 BCSC 1661, 4 BCLR (6th) 199 [Bel-Ayre].

[8] The Owners, Strata Plan VR2122 v Wake, 2017 BCSC 2386, 287 ACWS (3d) 483[Wake].

[9] Bel-Ayre, supra note 7 at para 11.

[10] Ibid at para 12.

[11] Ibid at para 13.

[12] Ibid at para 14.

[13] Ibid at para 20.

[14] Ibid at para 55.

[15] Ibid at para 51.

[16] Ibid at para 49.

[17] Ibid at para 41.

[18] Ibid at para 37.

[19] Ibid at para 51.

[20] Ibid at para 52.

[21] Ibid at para 54.

[22] Wake, supra note 8 at para 25.

[23] SPA, supra note 6 at s 273.1(5)

[24] Wake, supra note 8 at para 131.

[25] Ibid at para 133.

[26] Ibid at para 135.

[27] Ibid at para 129.