Strata Alert: BCSC Confirms that “strict compliance” required for court approved windups under the Strata Property Act

Strata Alert:  BCSC Confirms that “strict compliance” required for court approved windups under the Strata Property Act

 
Paul G. Mendes, Partner
Phone:  604-685-4894
Email:  pgm@lmlaw.ca

 

The Owners, Strata Plan VR 1966, 2017 BCSC 1661

Ever since the Provincial Government amended the Strata Property Act last July to allow for easier strata windups, developers and realtors have been circling around older stratas hoping to “cash in” on the dramatic increase of BC land values over the past decade.  If you live in an older strata, especially one in the Lower Mainland with big ticket repairs looming on the horizon, your strata has probably been solicited for a possible windup by a developer or a realtor.

Under the new regime, 80% of the owners may vote to windup the strata provided that the decision is later “confirmed” by the BC Supreme Court. If the Court confirms the vote, title is transferred to a liquidator who then has the power to sell the strata lots to the developer.

In considering whether to confirm the windup vote, the Court must consider factors (s. 278.1):

(a)        the best interests of the owners, and

(b)        the probability and extent, if the windup vote is confirmed or not confirmed, of “significant unfairness”  to owners, registered charge holders, other creditors and “significant confusion and uncertainty in the affairs of the strata corporation or the owners”.

To date, we do not have a legal test for the phrases “best interests of the owners”, “significant unfairness” or “significant confusion and uncertainty in the affairs of the strata corporation or of the owners”.  We do now know, however, that the Court requires “strict compliance” with the SPA before it will confirm a windup vote.

The strata in this case was a three-storey, 36 unit wood-frame complex built in 1974. Faced with significant repair levies, the strata retained a commercial realtor to market the property. The realtor told the owners that the strata had a redevelopment value in the $14-16 million range. At that price, the owners would have stood to earn a premium of 25-40 percent above market value on the individual units.  The strata signed a listing agreement and the brokerage marketed the property and received four bids, ranging between $16 and $18.7 million. The highest bidder later increased its bid to $19 million. At a subsequent meeting, 35 of 36 eligible voters were represented in person or by proxy and more than 80% voted to accept the offer.

As required by the Strata Property Act, the resolution to approve the windup included an “interest schedule”. The schedule listed all the information required under the legislation except for “the estimated value of the interest of each holder of a registered charge against the land,” as required by s. 278(1)(d).

When the strata applied to the Court to confirm the windup, one owner opposed the confirmation because the interest schedule attached to the resolution did not include “the estimated value of the interest of each holder of a registered charge against the land”.  The strata responded by arguing that the omission of this information from the interest schedule was “a procedural irregularity” that should be overlooked by the Court.

The Court disagreed and dismissed the application to confirm the windup vote.

The Court held that the value estimates were one of the key ingredients in winding up the resolution and that there was no mechanism in the Strata Property Act to “rectify” this kind of omission after the fact, even if the omission affected no one.

So a casual reader might wonder, why would an owner oppose a windup vote on the basis of a technicality?  For example, the owner did not oppose the windup because it was “not in the best interests of the owners” or that the windup would cause “significant unfairness” or  “significant confusion”.

Well, perhaps it had something to do with market forces?  Land values continued to climb astronomically between the date of the developer’s offer and the strata’s application to the Court.

In any event, this case underscores the importance of two things when it comes to strata windups. The first is that strata’s applying to the Court to confirm a windup vote should move quickly. A lot can happen between an accepted offer and a court date. The second is that owners wishing to oppose a windup should get legal advice from an experienced strata property lawyer.

WHAT WE DO:  Lesperance Mendes has been advising strata corporations and strata property owners on strata law matters since 1997. If your strata is considering a windup, or if you are looking for independent legal advice concerning a possible windup of your strata, contact Paul G. Mendes, partner, at 604-685-4894 by email at pgm@lmlaw.ca.

 

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