I am often asked by my friends who are not in the strata property industry how I will keep myself busy once condominiums stop “leaking”. My simple answer to that question is that I will be quite busy doing what I did before the leaks started – namely dealing with the three “p’s”. My friends are aghast to learn that the three “p’s” are people, pets and parking. I am also often asked what I do and how long have I been doing it. My answer is that 27 years ago I was a trial lawyer, I became a dispute resolver 10 years ago and I am now a therapist. I describe myself as a therapist due to my attendances at strata corporation meetings.
For whatever reason, reasonable, experienced and knowledgable persons seem to lose all reason, knowledge and perspective when dealing with the emotions of disputes that occur within strata corporations. We all know that strata corporation governance operates on the doctrine of democracy. However, democracy can and does break down and the effect of such meltdown can be far reaching. Strata fees are not paid but the required significant majority to commence action to collect strata fees cannot be obtained. Property managers in frustration give termination of contract notice and walk away – who can possibly blame them as we already know that good strata managers get paid far less than what they are worth.
Pets and parking. I have discussed those concepts in past articles and I am sure that I will be discussing them again in future articles. However, for the purpose of this article I am going to discuss people. We all know that the government, at times, can be quite unwise. There are parts of the Strata Property Act that create problems. However, in its wisdom, the Legislature of the day, when it passed the Act included section 174. Section 174 allows a strata corporation, an owner, a tenant or any person with an interest in a strata lot to apply to the Supreme Court of British Columbia for the appointment of an administrator to exercise the powers and perform the duties of the strata corporation. The Court may appoint an administrator if, in the court’s opinion, such appointment is in the best interests of the strata corporation. When democracy melts down, owners lose all perspective and the council becomes dysfunctional, it is obvious that something must be done. The appointment of an administrator is in the best interests of the strata corporation.
Under the Condominium Act, an owner could allege oppression or unfair prejudice and the court could regulate the affairs of the strata corporation. Now section 164 of the Strata Property Act provides for such regulation if the Court considers it necessary to prevent or remedy a significantly unfair action or threatened action of the strata corporation or the strata council. The test for the appointment of an administrator is a much easier one – namely if it is in the best interests of the strata corporation. Once the Court determines that it is in the best interests of the strata corporation the court may, pursuant to section 174(3):
- appoint the administrator for an indefinite or set period;
- set the administrator’s remuneration;
- order the administrator exercise or perform some or all of the powers and duties of the strata corporation, and
- relieve the strata corporation of some or all of its powers and duties.
As can be seen from a review of subsection 174(3), the administrator can be granted sweeping powers by the Court. It has been my experience that the Courts are not reluctant to appoint administrators when the ability of a strata corporation to govern itself is impaired. To date administrators who have been appointed are property managers. They must be property managers with patience and people skills as invariably they are assuming the duties of a strata council that has become deadlocked for one reason or another. Often, the administrator must immediately deal with emotional disputes and jerks. The leading case on the test whether it is in the best interests of a strata corporation that an administrator be appointed is the case Lum et al v. Strata Plan VR 519. In that case Justice Harvey ruled that an administrator was not in the best interests of the strata corporation. In reaching that conclusion on April 2, 2001 his Lordship noted the factors to be considered included:
- whether there has been established a demonstrated inability to manage the strata corporation,
- whether there has been demonstrated substantial misconduct or mismanagement or both in relation to affairs of the strata corporation,
- whether the appointment of an administrator is necessary to bring order to the affairs of the strata corporation,
- where there is a struggle within the strata corporation among competing groups such as to impede or prevent proper governance of the strata corporation, and
- where only the appointment of an administrator has any reasonable prospect of bringing to order the affairs of the strata corporation.
Mr. Justice Harvey also commented that a consideration must include the problems presented by the costs of involvement of an administrator. The Judge rejected the application for the appointment of an administrator in VR 519 because the concerns noted did not in a substantive sense relate to mismanagement, substantial misconduct or an inability to manage the affairs of the strata corporation.
It has been this author’s experience that in most cases all parties will agree to an administrator due to dysfunction and inability to govern. What then becomes a contest is who the administrator shall be and what are the terms of reference of the appointment. As noted earlier the administrator should be a seasoned veteran in strata corporation governance and management. The terms of reference can include dealing with leaks and building envelope engineers, alleged misuse of funds, budget problems and the like. The key is that the administrator basically operates as the council and the council exists in name only until the administrator’s term is completed. Of course the objective is for the administrator to “right the rudderless ship” so that in the not too distant future the strata corporation is once more able to function as it was intended.
The administrator is paid by the strata corporation. The administrator can retain professionals such as lawyers and forensic accountants if necessary. For all intents and purposes, the operation of the strata corporation is conducted by the administrator. In conclusion, it is my belief that the frequency of appointments of administrators will increase and that strata lot owners will see the rewards that can be obtained by such appointments. At the same time, it must be acknowledged that there is a financial price to pay and that once a strata corporation is once more running smoothly, the term of the appointment should cease.
Property managers managing strata corporations and dealing with councils that become dysfunctional should be aware of the possibility of the appointment of an administrator and in the proper circumstances make the council or owners aware of this option. Also, it should be noted that if a strata corporation is managed by a property manager, the appointment of an administrator does not end such management. Typically the property manager in those circumstances will be subject to performing duties at the direction of the administrator and will remain the property manager upon completion of the term of the administrator.
You will recall I wrote earlier that this article was intended to discuss people. When people cannot function with each other, the administrator administers. I guess it is a little like herding cats. Regardless of how one describes the situation an independent party governing for a period of time appears to be the tonic necessary for people to once more become reasonable.