Townhome and Apartment-Style Strata Units - Significantly Unfair Allocation of Expenses and Section Creation #399
By Gerry Neely
Section 164 of the Strata Property Act (SPA) gives the Supreme Court of BC the authority, upon application by a strata owner or tenant, "to prevent or remedy a significantly unfair action or threatened action by, or decision of, the strata corporation, including the council, in relation to the owner or tenant." The townhome-style owners referred to in column 392 used this section successfully to reverse a significantly unfair allocation of common expenses that resulted in their paying for services supplied directly to them, and contributing to the cost of the same services supplied to the apartment-style owners.1
A similar remedy was requested in a recent case of a strata corporation comprised of 17 townhomes and 33 apartment-style units, with voting rights of 34 and 64 per cent, respectively. From 1994 (when the strata corporation was created) until the 2005 budget year, the common expenses and contingency reserve funds attributed to each style were allocated to them. The budget recognized that each style had many different expenses.
This changed in 2005 following the strata council's belated realization that, after January 1, 2002, the SPA had required a budget based solely on unit entitlement. Common expenses were now to be shared 54/46 per cent between apartment-style and townhome-style, respectively, substantially increasing the townhome owners' common expenses.
Between 2001 and 2003, the existence of "leaky condo syndrome" was confirmed in the buildings. Engineers presented two options for the cost of remedial repairs. A special assessment was required and, because of the unequal costs of the buildings, one style would subsidize the other no matter which option was chosen.
One option would result in an over-contribution of $8,018 by an apartment-style owner, and the other would result in an over-contribution of $20,611 by a townhome owner. Neither option received three-quarters' majority approval, nor did two separate resolutions to create sections under s. 193 of the SPA. Since neither style could obtain a majority without the defection of some owners from the other style, both sides petitioned the court.
The townhome owners said they faced a significantly unfair allocation of expenses formerly paid by apartment owners, and an unequal treatment of repair costs under a single budget based on unit entitlement. They asked for an order creating a townhome section and an apartment section, under s. 193 of the SPA, based on the historical division of the common expenses between townhome and apartment-style units.
Sectioning would create two corporations with the same powers and duties as the strata corporation. Each section would elect an executive with identical powers and duties, with respect to that particular section, as the strata council had to the strata corporation. This would include the obligation to have a section budget and the power to make rules. The apartment-style owners accepted the division of common expenses, but rejected sectioning, perhaps because of the additional administration and the potential for conflict.
The judge decided significant unfairness did exist, and warranted a remedy. He also decided the rancorous divisions of the previous three years did not bode well for future harmony. He concluded that separating the two groups' interests justified creating separate townhome and apartment sections, and so ordered.2
|1.||See column 392 for a discussion of the meaning of "significantly unfair."|
|2.||Chow v. The Owners, Strata Plan LMS 1277, SCBC, Vancouver Registry, Reasons for Judgment, February 28, 2006.|
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