BC Legislature to Reverse Judgement Invalidating Leaky Condo Suit

The B.C. Legislature is poised to amend the statute that led to dismissal of the plaintiff strata corporation's leaky building case in, The Owners, Strata Plan LMS 888 vs The City of Coquitlam et al 2003 BCSC 941 (the "LMS 888" case). The legislative change will affect many other leaky condo lawsuits.

The dismissal in the LMS 888 case hinged on the provisions of the Strata Property Act (the "SPA") dealing with the authorization a strata corporation must obtain to commence lawsuits affecting common property and individual strata lots. Section 171(2) of the SPA says a strata corporation must obtain a 3/4 vote of the owners before commencing a lawsuit concerning common property. Sections 172(1) and 172(2) of the SPA state the strata corporation may sue on behalf of individual owners for matters affecting their strata lots if the corporation first gets written consent from those owners and 3/4 authorizing vote from all owners.

Since the dividing line between common property and individual strata lots is halfway between the outside and the inside of the exterior walls and because at least some damage in most leaky condo cases continues past the halfway mark, strata corporations may need authorization under both SPA sections 171 and 172 before commencing a leaky condo lawsuit.

Under the old Condominium Act (in effect until July 1, 2000), a strata corporation only required a 3/4 vote to authorize actions on behalf of individual strata lot owners and there was nothing in that Act about the sequence of the authorizing vote and commencement of the lawsuit. In a case considering the old Act, the BC Supreme Court ruled that it was implied the authorization should come first but doing it in the wrong order was merely a procedural error that could be corrected by getting the vote afterward. Because of this, many assumed that a lawsuit started before the authorizing votes under the SPA would be treated the same way - as a correctable procedural error. In the LMS 888 case, the BC Supreme Court ruled that under the SPA it was more than a procedural error and declared the strata corporation's lawsuit invalid. Suddenly, numerous strata corporations with lawsuits commenced under the SPA but without prior authorizing votes were facing the prospect of having their lawsuits thrown out.

The LMS 888 case is under appeal with a hearing scheduled for April, 2004. Rather than wait, the BC Legislature is taking steps to neutralize the lower court ruling. Bill 90 is entitled Miscellaneous Statutes Amendment Act (No. 3). The section concerning the SPA reads as follows:

Division 2.1 -- Validity of Suits and Arbitrations

Validity of suits and arbitrations undertaken by strata corporation

173.1 (1) The failure of a strata corporation to obtain an authorization required under section 171 (2) or 172 (1) (b) in relation to a suit or an arbitration

Note proposed sections 173.1(2) and 173.1(3) in particular. Retroactivity means the LMS 888 case will be revived and other cases commenced without authorization and prior to these SPA amendments are saved.

The bill has gone through second reading and is off to committee for final review before third reading, when it will become law. We do not know the final form of proposed changes to the SPA or precisely when they will become law. For that reason, we do not know if the LMS 888 appeal will proceed. We will keep you posted on developments.