Strata Alert: BC Supreme Court approves a strata wind up over the objections of minority owners

Strata Alert:  BC Supreme Court approves a strata wind up over the objections of minority owners

By Paul G. Mendes and Amanda Magee

 

                                                                        

Paul G. Mendes, Partner                                                              Amanda Magee, Associate
Phone:  604-685-4894                                                                  Phone:  604-685-5438
Email:   pgm@lmlaw.ca                                                               Email:    amm@lmlaw.ca

 

The Owners, Strata Plan VR2122 v. Wake, 2017 BCSC 2386

The BC Supreme Court’s decision in The Owners, Strata Plan VR2122 v. Wake, 2017 BCSC 2386  is the first decision to approve a wind-up of a strata corporation over serious objections from a group of minority owners.

The strata in this case is a 30-year old, 33 unit condominium building located in Vancouver’s West End, known as The Hampstead. The owners were facing mounting repair and maintenance expenditures, so the council started exploring a possible voluntary wind-up of the strata under the Strata Property Act. The strata hired a commercial realtor who, after soliciting bids, obtained an offer from a developer to buy all the strata lots for $45.25 million.  The offer was ultimately approved by just over 80% of the owners, so the strata corporation applied to court to “confirm” the vote as required under the Strata Property Act.

The owners opposing the wind-up made some good arguments: they argued that the process undertaken by the strata was significantly unfair and not in the best interests of the owners, and that it would cause the owners significant confusion and uncertainty. The court ultimately approved the windup, however, finding that the procedure was in fact fair, and noting that each of the objecting owners would receive somewhere between $1.1 million and $1.6 million for their respective units.  At the end of the day, this money would be more than enough for each of those owners to buy a comparable property in the area, and that was probably the single biggest factor in the court’s decision.

The case is interesting for the Court’s comments on a strata council’s duties in the wind-up process. The opposing owners argued that the strata council members had breached their “duty of good faith” to the minority owners because they were biased towards the ‘yes’ side, failed to present balanced information, and pushed to solicit ‘yes’ votes and proxies. Some of the opposing owners also stated they felt intimidated and fearful to speak up for the ‘no’ side or vote against the wind-up.

The Court found that making calls to promote the ‘yes’ agenda and soliciting proxies was within the rights of the council members and a natural part of a democratic system “where people are free to encourage or persuade others to their point of view”. The fact that council may have emphasized the future repair costs to the owners, or that they failed to consider borrowing money to fund those repairs, did not indicate that the council’s actions were significantly unfair but rather was “reflective of the differing viewpoints that will occur when there are differences of opinion”. The Court found that at the end of the day, the evidence showed that all of the owners were well informed and the process was transparent. The fact that some owners may have personally felt intimidated did not mean that the majority of the owners, or the process itself, was significantly unfair.

Another objection raised by the minority owners was an alleged conflict for the law firm representing the strata corporation.  The minority owners argued that the law firm was in a conflict because it was a firm known to act for developers who had acted for the developer/purchaser in the past. The court carefully reviewed the conduct of the law firm during the whole process and concluded that the firm had conducted itself properly, and there was no conflict.

We understand that this decision is likely to be appealed.

This case gives some insight to how the court will apply the test of “significant unfairness” in the context of strata windups and the importance of ensuring that the process is transparent to all owners. It also gives some guidance to owners who may wish to oppose the windup of their strata. If the evidence shows that the minority owners will be able to “rehouse” themselves in the same area, it will be hard for minority owners to object to the windup on the basis of significant unfairness.

WHAT WE DO:  Lesperance Mendes advises strata corporations and minority owners on windups and court confirmation of windups. Our skilled lawyers can guide you through every step of the process, from retaining a realtor, reviewing bids, and the court process to confirm or oppose a windup.  Our firm acts only for strata corporations and owners, not developers.  If your strata is looking at potential windup, contact Paul G Mendes, partner, at 604-685-4894 or 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.