Strata Corporation, Not an Insurer for Strata Owner; Management / Rental Pool Agreement – No Termination Date #341

By Gerry Neely
B.A. LL.B.

Does a strata corporation have an absolute liability to a strata owner to pay for damages to an owner's unit caused by an incident on the common property of the strata corporation? An owner of a ground floor strata unit, in which he carried on his law practice, thought that it did. He sued for damages caused by sewage effluent which backed up into his unit. A sewer pipe on the common property became blocked by roots from a tree on adjoining property, at the point where the line entered the municipal sewer main. This was a new problem for the strata corporation, which did not have a policy of checking to see that the sewer lines remained unobstructed.

Both the former Condominium Act and the Strata Property Act require a strata corporation to repair and maintain the common property. The courts have read into this obligation a test of reasonableness – in other words, did the strata corporation act reasonably in carrying out its statutory duty?

The judge's first conclusion was that, since there were no prior blockages and no evidence that it was the practice of other strata corporations to do regular checks, the strata corporation acted reasonably in not providing for periodic sewer checks. The oddity of this is that if the corporation had a schedule in place and failed to follow it, the corporation could have been liable for its negligence.

The owner argued that in view of the statutory duty to repair and maintain, all owners should share the cost. His reasoning was that the strata corporation had decided not to incur the cost associated with preventing a problem that appeared too remote, or unlikely to occur. The owners therefore had the benefit of lower common expense charges. In accepting this benefit, they assumed the risk that there would be no problems in the common property which would affect an owner. The cost of that benefit to all owners should be the amount required to reimburse an owner who does suffer damages when the remote or unlikely event occurs.

If this reasoning succeeded, strata corporations might have to incur prohibitive costs to prevent every remote or unlikely problem. It was rejected upon the ground that the legislation did not intend that strata corporations were expected to be the insurers of all losses of strata unit owners. ¹

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Graycrest Resort at Parksville on Vancouver Island is one of several well-known resorts that sold fee simple, condominium units under a management / rental pool arrangement. The typical contract does not contain a date when it ends. A Graycrest strata owner, who gave notice of his intention to terminate a contract, was met by the answer that the contract continued in perpetuity. The owner sued for a declaration that the contract was terminable and to establish the period of notice.

An English decision suggested that contracts without fixed termination dates are to be considered as being in perpetuity. Other decisions lean toward inferring that these contracts can be terminated upon reasonable notice, depending upon the circumstances. Those circumstances include commercial contracts and those based upon mutual trust, cooperation and delegation of authority.

All of these elements are found in a contract under which the owner appointed a person to manage the owner's unit effectively, both to provide the owner with income and to preserve the owner's investment. The judge agreed that the management / rental pool agreement was terminable by the owner. The appropriate notice period was set at six months. ²

	1.	John Campbell Law Corporation v. Owners, Strata Plan 1350, S.C.B.C., Victoria Registry, Reasons for Judgment, September 28, 2001.
	2.	Hendry v. Graycrest Resort Ltd.,S.C.B.C., Nanaimo Registry, Reasons for Judgment, December 22, 2000.

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