[Section References noted in square brackets refer to Bill 8]
Note: Numerous Sections of Bill 8 came into force as of December 10, 2009 as a result of Order in Council 707
After many months of discussions and waiting, a number of significant changes to the Strata Property Act (the “SPA”) have now been brought into force. In late October 2009, Bill 8, the Strata Property Amendment Act, was adopted by the government. However, it was not until December 10, 2009 that some, but not all, of the amendments were brought into force. There remain a few sections (which will be discussed further below) that are not yet in force, due to the need to either amend other legislation or to pass extensive regulations. In addition, there have been a few minor changes to the Strata Property Regulation (the “Regulation”), which will also be addressed in this article. This edition of STRATAgies will outline the changes that have been made, and in some instances, a discussion on what we at Clark Wilson LLP think the ramifications of those changes might comprise. As usual, it will likely take considerable time and a few court decisions before we understand completely the effect the changes will have on strata living and governance.
A. Amendments to the SPA in force as of December 10, 2009
- [Section 2]: This is minor change to section 11 of the SPA addressing amendment of bylaws before the first AGM.
- [Section 3]: Section 27(2)(b) of the SPA is amended by adding the following circumstances to those issues for which owners cannot direct or restrict council:
- whether a person should be required under s. 133(2) to pay the reasonable costs of remedying a contravention of the bylaws or rules,
- whether an owner should be exempted under s. 144 from a bylaw that prohibits or limits rentals.
- [Section 4 and 5]: Section 32 and 33 of the SPA has been amended to include matters being addressed in a council meeting in which a strata council member might have a conflict. The amendment includes the following:
- A council member who has a direct or indirect interest in
- (b) a matter that is or is to be the subject of consideration by the council, if that interest could result in the creation of a duty or interest that materially conflicts with that council member’s duty or interest as a council member …
- Concerns that arise from this amendment include:
- Any unhappy owner can easily go to Provincial Court on any matter in which they think a council member may have a conflict.
- What does “materially” mean?
- “Could” result – not “does” result. This means that the conflict need not be there or even proven, just that there “could” be such a result.
- [Section 6]: Section 34.1 – Request for Council Hearing – has been added to the SPA:
- 34.1 (1) By application in writing stating the reason for the request, an owner or tenant may request a hearing at a council meeting.
- (2) If a hearing is requested under subsection (1), the council must hold a council meeting to hear the applicant within 4 weeks after the request.
- (3) If the purpose of the hearing is to seek a decision of the council, the council must give the applicant a written decision within one week after the hearing.
- This section is identical to Standard Bylaw 15, which bylaw has now been repealed. In enacting this provision as part of the SPA, the Legislature wanted to prevent a strata corporation changing Standard Bylaw 15 to deny an owner or tenant the right to a hearing before council.
- [Section 7(b)]: This is an extremely minor change to s. 35 of SPA.
- [Section 8]: Section 36 of the SPA has been changed to add to the list of persons entitled to access to strata corporation records. A former owner or tenant now has access to records of the strata corporation that, whenever created, relate to the time they were an owner or tenant. As you can imagine, many councils and existing owners will not be happy with the concept that they must pay the cost of an agent monitoring an inspection (or many inspections) by a person who is no longer an owner or tenant as such costs cannot be passed on to the person requesting access. What a draconian way for a former displeased owner to get retribution!
- [Section 9]: Section 43 of the SPA has been amended to provide that an SGM can be requisitioned by persons holding 20% of the strata corporation’s votes, rather than the 25% that presently exists. The Legislature looks at this as a significant change, although we at Clark Wilson think there is little difference between thresholds of 20% and 25%.
- [Section 11]: This is a minor amendment to s. 53 of the SPA. It just confirms that if a bylaw exists (and it does exist as Standard Bylaw 27(5), so unless a strata corporation chooses to repeal such a bylaw it will continue), the president, or failing the president, the vice president, may cast a second, deciding vote at an AGM or SGM.
- [Section 13]: This is an amendment to s. 61 of the SPA, noting that notice may be given by email by the strata corporation if an owner or tenant has provided an email address for the purpose of receiving notices, records or documents. As a result of this amendment, property managers will be entitled to send out documents, such as general meeting notice packages, by email, if an owner has provided an email address.
- [Section 14]: This is an amendment to s. 63 of the SPA noting that a strata corporation will receive notice by email if the strata corporation or a council member has provided an email address. Strata corporations and property managers must establish protocols for the handling of email, particularly email of a time sensitive nature (such as hardship rental exemption requests).
- [Section 17]: Section 108 of the SPA, which deals with special levies, has been amended to specifically allow for the charging of interest on special levies if a bylaw is in place for that purpose. Many strata corporations that purchased our firm template will have this bylaw in place, in contemplation of this amendment eventually being made. Clark Wilson recommends that strata corporations nonetheless re-adopt the interest on special levies bylaw because it is arguable that such bylaws were not enforceable when first adopted. Also note that the interest will form part of the levy and is lienable under section 116.
- A further change to section 108 identifies who is entitled to any surplus from a special levy. Formerly, surpluses were to be paid back to owners “in amounts proportional to their contributions“. This created huge headaches since a person who contributed might no longer be an owner, and might not have been an owner for some time. The amended sections read:
- (5) If the money collected exceeds the amount required, or for any other reason is not fully used for the purpose set out in the resolution, the strata corporation must pay to each owner of a strata lot the portion of the unused amount of the special levy that is proportional to the contribution made to the special levy in respect of that strata lot, and
- (7) In subsections (4) and (5), “money collected” means the money collected on a special levy and includes any interest or income earned on that money.
- This wording is much better as it clarifies that the refund will go to the owner of the strata lot at the time of refund, rather than the person who paid the levy. While a purchaser can still agree with a vendor to pay the vendor any refund, that arrangement should no longer have any impact on property managers, who will have to provide it to the owner at the time, per the legislation. Note the refund also includes any income earned on the levy amount.
- [Section 20]: Section 127 of the SPA as it existed provided that no bylaws could be amended before the first AGM unless by unanimous resolution. That limitation has been amended so any amendment to the bylaws before the second AGM will require a unanimous resolution. The stated intention of the Legislature was to ensure that developer-controlled strata corporations would get some breathing room. In speaking in favour of the changes in the Legislature, Minister Coleman also expressed the view that the change would bring “stability” to the buildings.
- [Section 21]: Section 128 of the SPA stated, in part, that bylaw amendments had to be had to be filed within 60 days. The SPA did not, however, say that bylaw amendments were not enforceable if they were not filed within the 60 day period – in fact, there was no reference at all to the consequences of not filing within 60 days. The amended section 128 drops the 60 day filing requirement, leaving no time limit at all, but confirms that bylaws must be filed in the LTO and will have no effect until they are filed. This is a good amendment. It also takes the pressure off property managers and strata corporations that did not file within 60 days, or managers who inherited strata corporations that had not filed bylaw amendments. However, one potential downside could be the registration of bylaw amendments that were passed by a strata corporation a year previously, or longer, particularly if those bylaw amendments are not properly noted in Form Bs.
- [Section 22]: This provision amends section 142 of the SPA dealing with rentals to family members and hardship rentals. For the purposes of determining whether the rental limit has been reached where a rental restriction bylaw is in place, the strata corporation cannot include lots rented to exempted family members or lots rented pursuant to a hardship exemption as part of the calculation. This has been a debatable issue for many years. Clark Wilson has been of the view that such exempted rentals should not be included in the calculation of lots rented. This amendment supports that view.
- [Section 23]: The Government considers the amendments to section 143 of the SPA to be the most significant policy change. The new subsection (2) reads as follows:
- (2) Subject to subsection (1), if a strata lot has been designated as a rental strata lot on a Rental Disclosure Statement in the prescribed form, and if all the requirements of section 139 have been met, a bylaw that prohibits or limits rentals does not apply to that strata lot until,
- in the case of a Rental Disclosure Statement filed before January 1, 2010, the earlier of
- the date the strata lot is conveyed by the first owner of the strata lot other than the owner developer, and
- the date the rental period expires, as disclosed in the Rental Disclosure Statement as it read on December 31, 2009, and
- in the case of a Rental Disclosure Statement filed after December 31, 2009, the date the rental period expires, as disclosed in the Rental Disclosure Statement.
- (3) Even if a Rental Disclosure Statement filed before January 1, 2010 is changed under section 139 (2) after December 31, 2009, subsection (2) (a) of this section applies.
- (4) Subsection (1)(b) does not apply to a bylaw that is passed under section 8 by the owner developer.
- The addition of subsection (4) is intended (we think) to ensure that the one year grace period does not apply to a rental restriction bylaw passed by a developer. We therefore read subsection (4) as saying: “If, when you buy it, the bylaws prohibit or limits rentals, and that bylaw prohibiting or limiting rentals was passed by the developer, there is no grace period and the bylaw immediately applies to all owners“.
- Owner-developers do not typically pass rental restriction bylaws because their market includes investors. However, given the changes to section 143(2), which will be discussed in the next paragraph, demand may grow for complexes that limit or prohibit rentals, much like there is a market for age-restricted complexes. As a result, we may end up seeing new strata corporations where the developer has passed a bylaw that limits or prohibits rentals.
- The key change to section 143 appears to be with respect to the Rental Disclosure Statement of the Developer. Presently section 143(2) provides that, if a strata lot has been designated as a rental strata lot, then a bylaw prohibiting or limiting rentals does not apply to that strata lot until the earlier of the date the first purchaser conveys the strata lot and the expiry date noted in the statement.
- The amendment creates two situations – those before January 1, 2010 and those after December 31, 2009:
- For disclosure statements issued before January 1, 2010, nothing has changed – a rental restriction bylaw will not apply until the earlier of the date the strata lot is conveyed by the first owner after the owner developer (there had been confusion previously on whether this was the case) and the date the rental period expires, as the Rental Disclosure Statement read on December 31, 2009; and
- If the Rental Disclosure Statement is filed after December 31, 2009, the rental restriction bylaw will not apply until the date the rental period expires as set out in the statement.
- In other words, for disclosure statements issued after December 31, 2009, the number of subsequent owners of the strata lot is irrelevant and the ability of all subsequent owners to rent continues until the date the rental period set out in the statement expires. This means that developers can now create complexes that effectively have no ability to prohibit or limit rentals. The Form J Disclosure Statement has been amended to specifically provide that “indefinitely” will not suffice as a date for the expiry of a rental period.
- It is easy to understand where the Government was coming from in making this policy change. Minister Coleman stated that the amendment will allow new strata developments to better meet the market demand for rental units and thereby limit the number of situations where strata corporations pass rental restriction bylaws that, in the views of some, negatively affect both the rights of owners and purchasers and the marketability of the units.
- [Section 24]: At present, section 144 of the SPA states that, if an owner requests a hearing for an exemption from a rental restriction or prohibition on the basis of hardship, that hearing must be held within 3 weeks of receipt of the request. That timeframe creates problems for strata councils, which typically meet less regularly than every 3 weeks, and therefore requires a “special” council meeting, rather than a scheduled one, to consider a hardship request. The new legislation increases that period for the holding of a hearing to 4 weeks, and confirms that if the council meeting is not held within 4 weeks of the request, the exemption is allowed. The rest of the rental hardship exemption section continues as before.
- [Section 26]: This amendment of s. 174 of SPA confirms decisions from the BC Courts that an administrator cannot, unless the court otherwise orders, act in situations which normally require resolutions of owners to be passed before such acts can be conducted.
- [Sections 28 and 29]: Very minor word amendments.
- [Section 32]: This is an amendment with respect to restrictions on leasehold strata plans and will have no relevance to the vast majority of strata corporations.
- [Section 33(b)]: This amendment permits the establishment of a maximum rate of interest chargeable with respect to strata fees or special levy arrears.
- [Section 35]: Standard Bylaw 15 (attendance for hearing before council) has been repealed since it is now a provision of the SPA.
- [Section 36]: This amendment is minor and deals with transition.
B. Regulation Amendments in force as of January 1, 2010
- Section 4.01 states that, for the purposes of s. 34.1 of the Act, “hearing” means an opportunity to be heard in person at a council meeting.
- Section 6.8 states that the maximum interest rate for arrears of special levies is 10% per annum compounded annually (this is the same as interest rate maximum for arrears of strata fees).
- Section 6.11 expands the permissible investment vehicles for contingency reserve funds and special levy funds.
- Section 6.12 states that a strata corporation need not comply with special levy investments with respect to special levy funds before the section came into force.
- Section 17.15 (respecting applicability of rental restriction bylaws and the expiry of rental disclosure statements) is repealed due to the change in the Act provisions.
- Forms I and J are amended to reflect the change in the Act provisions.
C. Amendments Not Yet in Force
Many of the major amendments set in the Strata Property Amendment Act have not yet come into force. These include the provision of audit reports, depreciation reports, revamping of the arbitration process, permitting applications by owners and strata corporations to Small Claims Courts, identification of parking stall and locker assignments in Form Bs and dispute resolution processes other than arbitration. When additional sections or new regulations are brought into force, Clark Wilson will provide a further update.
The views of Clark Wilson are not intended to be considered legal opinions and the views are based upon our understanding of the rationale behind the amendments to the Strata Property Act. There has been much commentary that the Government did not consult owners of strata lots, council members, etc. We understand that a number of law firms and industry organizations were consulted, but such consultations were subject to confidentiality agreements.