Leaky Condo Repairs – Townhouse Owners Refused to Pay for Repairs to Apartment-Style Units #332

By Gerry Neely
B.A. LL.B.

Reasons for Judgment were published on February 7, 2001, in the first case I have seen that examines the Strata Property Act (SPA) to settle a dispute as to whether the townhouse owners had to contribute to the cost of repairing the leaky condos in a three-storey block. The strata corporation consisted of 224 residential units made up of 182 low-rise townhouses, which were clear of the problem, and 42 apartment-style units within the block, which were affected by the leaky condo syndrome.

The problem first became apparent in 1997. Subsequent remedial work on the balconies and stucco of the block revealed structural rot, which led to an engineer's recommendation to replace the exterior walls. On December 9, 1999, the cost of repair work was estimated to be approximately $700,000.

The townhouse owners' position was that the units were divided into two distinct types of stratas, and the apartment owners, who benefited from the repairs, should bear the full cost. The strata corporation sued for a declaration that all owners were responsible for the cost.

The first question was which Act applied to the case: the new SPA, which became law on July 1, 2000, or the Condominium Act, which was repealed on that date. The problem and the legal process had taken place before the SPA became law. The answer depended upon whether the SPA grandfathered the relevant sections of the Condominium Act.

The judge decided the SPA applied because it and its regulations provided for the allocation of the common expenses of strata corporations, provisions originally created under the Condominium Act.

The question then was whether the more usual circumstances, which result in all owners contributing to the common expenses, applied to the townhouse owners. An exception to this circumstance is made in the SPA and its regulations for different sections of residential strata lots within a strata corporation. The regulations define the types of sections as townhouse, apartment and detached house.

Two conditions must be satisfied before a section is created. A bylaw change must be approved by no less than 3/4 of the eligible voters in both the section and the strata corporation. In addition, the contributions to the operating fund must relate to and benefit only the strata units in the section.

In this case, a special resolution to create separate townhouse and apartment-type sections was put forward in September 1999. It failed, despite the fact that the townhouse owners had the majority votes needed to gain approval. Since the conditions were not met, the townhouse owners had to contribute to the repair costs.

That failure is significant for another reason. For several years, the strata corporation had allocated different expenses to the two types, upon the authority of section 128 of the Condominium Act. The regulations grandfathered the continuance of these different allocations, at the discretion of the strata corporation. The failure of the vote and the decision of the strata council to assess all owners was held by the judge to be a rejection of the continuance of prior allocations.

In a "cover all bases" remark, the judge commented that if he were wrong in concluding that there was only one section in the strata corporation, he held that the townhouses would benefit from the repairs done to the apartment-style units. The judge based his comment upon appraisal evidence that the values of the townhouses were reduced by the disrepair, to a greater extent than comparable units in the area. The benefit was their increased marketability.

The decision provided another reason to prevent the townhouse owners from meeting the conditions required to limit their contribution to the repair cost. It will be interesting to see if other judges interpret a "benefit" as broadly as had the judge in this case.

1.

Strata Corporation LMS 509 v. Andersen et al., SCBC, Reasons for Judgment, Vancouver Registry, February 7, 2001.

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