Strata Termination #509
Where strata owners choose to terminate their strata development, two recent cases clarify when a strata council might list the project for sale or contract to sell it to a buyer.1
Many of our earliest strata developments are roughly 50 years old. An aging strata building may need so much remedial work that it is more cost effective to sell the project to a developer for redevelopment. Or, a strata project may be located in an area rezoned for higher density development. The owners may prefer to profit by selling the land to a developer who will maximize its potential.
In 2016, the province made it easier for owners to choose to terminate their strata development, lowering the threshold to pass a winding-up resolution to 80%. An 80% vote is a vote in favour of a resolution by at least 80% of the votes of all the eligible voters.2 Since then, the Supreme Court of British Columbia (the "Court") has decided several important termination cases.
Part 16 of the Strata Property Act creates three termination methods. In the first two methods, owners choose to terminate by passing an 80% vote to approve a winding-up resolution, either to terminate without a liquidator (called a "Division 1 wind up") or with one (a "Division 2 wind up"). Either way, in most cases the strata corporation must ask the Court to confirm the winding-up resolution, giving each dissenting owner an opportunity to object. In the third method (a "Division 3 wind up"), the Court orders the strata to terminate, typically because the strata corporation is too dysfunctional to continue; there is no winding-up resolution.3
In the first method, the strata plan is cancelled and the underlying land reverts to one or more large parcels of land, now owned by all of the owners together as tenants in common. In the second method, all of the land shown in the strata plan is vested in a liquidator, who causes the strata plan to be cancelled, the land reverting to one or more large parcels of land. Either way, the strata corporation is also dissolved, the relevant land ultimately sold, and any personal property formerly belonging to the strata corporation converted to cash. Everyone who was formerly the owner of a strata lot will receive their share of the proceeds, subject to the amount due, if any, to their respective mortgage lenders or other secured creditors.
In Buckerfield v. Strata Plan VR 92, several REALTORS® approached strata council to ask about selling the 41-unit complex.4 Strata council then organized a presentation to the owners about the termination process. In an informal poll, a majority of owners favoured hiring a real estate brokerage to market the complex to developers for redevelopment, all subject to later passing a winding-up resolution. When strata council announced its plan to ask the owners at a general meeting to vote whether to retain a brokerage, some dissenting owners sued for a declaration that the proposed resolution required an 80% vote, just like a winding-up resolution. The Court dismissed the dissenters' objection, refusing to require an 80% vote to engage a brokerage. The Court held that a strata corporation may solicit offers before voting on the winding-up resolution.
The owners could decide by majority vote at a general meeting to engage a brokerage. Later, if the owners obtain an acceptable offer, they can vote on a winding-up resolution. If that resolution passes by an 80% vote, in most cases there will be a confirmation hearing where any dissenting owner may still oppose the wind up.
In Strata Plan VR2122 v. Wake, several dissenting owners opposed a wind up with a liquidator on the ground that strata council had no authority to market and sell the property, subject to the eligible voters passing a winding-up resolution and complying with related requirements.5 After several developers asked about purchasing the complex, strata council hired a brokerage to market the property. After a sophisticated marketing campaign, the strata council accepted a developer's offer, subject to the strata corporation passing the necessary winding-up resolution and obtaining the requisite Court orders. Later, at a hearing to confirm the winding-up resolution, the dissenting owners argued that only a liquidator had the legal capacity to list and sell their strata complex.
The courts disagreed, confirming on appeal that strata council could engage a brokerage and later contract to sell the project to a developer, subject to the owners passing a winding-up resolution and meeting all other pre-requisites.Mike Mangan
|1.||This Legally Speaking column is based upon material in the strata termination chapter in Mr. Mangan's forthcoming fourth edition of The Condominium Manual to be published by Strata Publishing Corp. in 2019, all of which is used with Mr. Mangan's permission.|
|2.||Strata Property Act, s. 1(1) (definition of “80% vote.”).|
|3.||Strata Plan VR2122 v. Wake, 2018 BCCA 280 at para. 64; Buchanan v. S.P. VR 1411, 2008 BCSC 977.|
|4||Buckerfield v. Strata Plan VR 92, 2018 BCSC 839, interim injunction denied pending appeal 2018 BCCA 243.|
|5||Strata Plan VR2122 v. Wake, 2017 BCSC 2386 rev’d in part on other grounds 2018 BCCA 280.|
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