May 7, 2012

Strata Law

Renewing our Cities: The Strata Stepping Stone

Maureen Enser is executive director of the Urban Development Institute

With the introduction of strata title laws in the late 1960s – and a new model of home ownership in British Columbia – provincial lawmakers at the time provided a legal foundation that has had a profound impact on the sustainable development of our cities. With a land-base limited by geography, these new rules provided homebuyers the lifestyle choice that comes with a more urban style of condo and townhome living.

Strata ownership rules have also enabled the ensuing development of walkable, vibrant and low ecological footprint communities that reflect the urban fabric of our cities today. However, as many existing buildings age, fall into disrepair and approach the end of their effective lifespan – where the cost of maintenance outweighs the value that comes with redevelopment – there is an inevitable need to facilitate the modernizing of such buildings and thereby renew our urban fabric.

This cannot be done unless now out-of-date provisions in B.C.’s strata law are modernized to align with today’s urban evolution. In particular, how certain rules govern owners in a strata scheme (the strata corporation) and the vote threshold needed from owners to terminate a scheme and redevelop a building.

Current rules require a 100-per-cent or unanimous vote by owners in a building, to either undertake significant renovations or redevelop completely. For example, in a four-unit complex that is at the end of its effective lifespan, where three of the owners wish to improve their financial and living circumstances and sell for the purpose of redevelopment, one owner (representing 25 per cent of votes in the complex) may dissent and thereby impose an unfair and disproportionate financial and living burden on the other three owners (75 per cent of voters).

Current rules require a 100-per-cent or unanimous vote by owners in a building, to either undertake significant renovations or redevelop completely.

This is a significant hurdle to urban renewal, the property rights of condo owners, improving the safety and livability of deteriorating buildings, and sustainable urban growth and development. Although dissenting owners may have reasons for not wanting to terminate a scheme, for reasons of hardship, there certainly is no reason that a mechanism that protects a minority owner from experiencing hardship cannot be provided for in law.

What is needed though, is a more balanced approach to strata rules that can support the rights and investments of a substantial majority of owners in a condo development over a small minority. If we do nothing we would not be protecting the rights of the vast majority of condo owners in B.C. – along with their financial well-being and living conditions.

Unless the laws are changed, there will also be an increase in costly litigation between neighbours in condo buildings, as evidenced by a recent case heard by the B.C. Supreme Court. In this particular case, the judge ruled against a majority of owners wishing to sell in the Cypress Gardens development in North Vancouver – a 50-year-old jointly owned development built just prior to the original strata legislation but with a similar ownership structure to strata title.

Despite a majority of owners wishing to sell, an offer of purchase to all owners that was far above market rates, and crippling ongoing maintenance bills, the judge ruled in favour of the minority dissenting owners mainly for reasons of perceived hardship amongst the dissenting owners. Fair judgment, considering that is what is required by applicable law. However, these laws have far outlived their use-by date, encourage unnecessary litigation, are prejudiced against the majority, and no longer practically serve B.C.’s housing needs or the broader community.

It is time for B.C. to modernize its strata title laws and follow in the footsteps of other places with limited land supply, large stocks of aging apartment buildings and a more modern approach to strata legislation – such as New York, Washington, Singapore, Hong Kong and Japan.

 

 

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