Strata Alert: The CRT Clarifies How to Manage Conflicts, Repairs and Renovations for Strata Corporations

The CRT Clarifies How to Manage Conflicts, Repairs and Renovations for Strata Corporations


Alex J. Chang, Associate
Phone:  604-685-1255
Email:  ajc@lmlaw.ca

 

We recently successfully assisted the residential section of a strata corporation in the Civil Resolution Tribunal (CRT) case of Page v. Section 1 of The Owners, Strata Plan NW 2099, 2017 BCCRT 84 regarding how the section executive managed a major repair and renovation project. The project involved significant landscape renovations, including the demolition and replacement of decks and canopies.

The owner brought a number of complaints against the residential section regarding how the project was managed, including that:

  1. the section executive improperly approved changes to the project.
  2. one of the executive members was in a conflict of interest because:
    a. he is a professional architect who provided design input for the project; and
    b. his was one of the limited common property decks being affected by the repairs.

Approval of Changes to Projects by Councils

As with the many major repairs, the project was approved and financed by a ¾ vote resolution of the owners at a general meeting. However, the claimant alleged that after the vote the executive should not have approved changes to the project.

Change orders are common in large scales projects. The change orders in this case were approved by the section executive. The owner alleged that these changes were significant and should have been approved by a ¾ vote pursuant to s. 71 of the Strata Property Act (SPA), which provides that significant changes to the use or appearance of common property require a ¾ vote resolution.

The CRT accepted the section’s argument that requiring all change orders to be voted on by ¾ vote would be impractical, holding that:

…if every change needed to be approved by a ¾ vote during the course of such a Project, then work would inevitably stop, delays would occur, and costs to a strata or section would significantly increase.

The CRT held that a ¾ vote was only required if the change order contemplated was a significant change from the project plans that had already been approved by ¾ vote. Considering the factors for what is considered significant, the CRT concluded that the change orders did not cause significant changes from the original design and therefore did not require a ¾ vote.

Stratas should provide in their resolutions that their councils or executives have express authority to make reasonable changes to their projects. However, this CRT decision clarifies that the council also has implicit authority to authorize reasonable changes even without such a resolution.

Council and Executive Conflicts

The SPA provides that a council or executive member has conflict if they have a “direct or indirect interest” in the matter. However, that language on its face is too broad to be practical because councils are typically made up of owners who by definition have a direct or indirect interest in every decision the council makes. Where a conflict arises the member must must (1) fully disclose the conflict to the council, (2) abstain from voting, and (3) physically leave the meeting while the final discussion and vote takes place. So obviously not every direct or indirect interest can give rise to a conflict because if it did, everyone would have to abstain!

The CRT decision helpfully accepted this point by saying “if the conflict provisions apply to any interest of a council member then the strata council’s work would be stymied because everyone would be in a conflict.” The CRT then concludes that executive decisions involving the executive member’s limited common property deck did not in itself give rise to a conflict.

With respect to the owner’s other allegations, the CRT concluded that there is nothing inappropriate in an executive member providing free professional services. However, the CRT also found that the member was correct in recusing himself when voting on his own architectural suggestions. The suggestion that he correctly abstained is paradoxical because the CRT held he had no underlying conflict. If there is no conflict then why would abstaining be correct? A possible interpretation is perhaps that even where a conflict does not exist it can be proper to abstain from a vote where it could give rise to the appearance of a conflict.

What is and is not a conflict is fact specific and sometime nebulous. If a council member feels there vote is necessary, he or she should seek legal advice if they are concerned if they have a conflict. However, as a practical matter, council members that are more directly impacted by decisions should consider recusing themselves in order to avoid any conflict or appearance of a conflict.

WHAT WE DO: Lesperance Mendes has been advising strata corporations on major repairs and strata corporation governance since 1997. To make an appointment to discuss your strata matter, please contact Paul G. Mendes, Partner, by email at pgm@lmlaw.ca or Alex J. Chang, Associate, email at ajc@lmlaw.ca.

 

THIS ARTICLE IS NOT LEGAL ADVICE:  This article provides general information and should not be relied on without independent legal advice.