The provincial government introduced Bill 12 (Strata Property Amendment Act, 2009) on March 23, 2009, and it received second reading on March 31, 2009.
Bill 12 proposes several changes to the Strata Property Act (British Columbia) that are intended primarily to improve the dispute resolution processes available under the Strata Property Act, provide better protection to owners and purchasers, and increase strata corporation accountability. However, they are largely operational in nature and do not address the long list of technical legal issues that have plagued developers, strata corporations and lawyers since the Strata Property Act was enacted in 1998.
The progress of Bill 12 was delayed due to the closure of the legislature for the recent provincial election. In the ordinary course, we would expect it to reappear on the agenda when the legislature reconvenes. However, there is speculation in some quarters that, because of the many issues not addressed by the bill, it may in fact not proceed in its current form. Rather, its contents may be incorporated within a broader set of changes to the Strata Property Act. We will monitor the situation and keep our readers advised as more information becomes available.
The following is a summary of the principal provisions of Bill 12:
1. Dispute Resolution
The Strata Property Act currently requires that, except in limited circumstances, disputes involving strata property or strata corporations must be heard by the Supreme Court. Bill 12 is designed to foster the resolution of strata disputes in a more efficient, expedient and economical manner by expanding the jurisdiction of the Provincial Court (i.e., Small Claims Court) to permit it to hear strata disputes that currently may only be heard by the Supreme Court. Expanding the role of the Provincial Court will improve access to justice, but is very likely to increase substantially the number of lawsuits involving strata corporations, owners and tenants.
Bill 12 also repeals the current arbitration process set out in Sections 179 to 186 of the Strata Property Act and provides the government with the authority to make regulations providing for new arbitration and mediation processes, including the ability to make mediation mandatory in some circumstances. New regulations will presumably be released by the government when the bill becomes law.
2. Depreciation Reports
Bill 12 includes new provisions that require a strata corporation to obtain a depreciation report from a "qualified person" (to be defined in the new regulations). A depreciation report must estimate the repair and replacement cost of major items in the strata corporation and the expected life of those items. A strata corporation may waive the requirement for a depreciation report by a 3/4 vote of the owners. If a strata corporation obtains a depreciation report, it must be disclosed in any Form B — Information Certificate requested by owners or purchasers. These new provisions are intended to assist strata corporations in tracking the need for major expenditures and accumulating appropriate contingency reserve funds for repair and replacement work, and to provide more information to purchasers regarding strata assets. In doing so, they will also increase a strata corporation’s administrative burden and expense.
3. Audited Financial Statements
Given the significant size of many strata corporation budgets and the fact that strata council members are not required to have any accounting knowledge, Bill 12 seeks to improve budgetary transparency by requiring that strata corporation financial statements be audited. Like the depreciation report requirement, the audit requirement will increase a strata corporation’s administrative burden and expense (although the audit requirement may be waived by a 3/4 vote of the owners). However, the benefit is that owners and purchasers reviewing the financial statements will know whether the financial statements are materially correct and have been prepared in accordance with proper accounting practices.
4. Special Levies
Bill 12 proposes that strata corporations be required to account for funds raised by way of special levy separately from other strata corporation funds, and to invest those funds in investments permitted by the regulations or in insured accounts with savings institutions in British Columbia. These provisions are intended to help ensure that funds raised by special levy are not lost due to risky investments or poor financial management.
The bill also provides strata corporations with new tools for dealing with difficult owners in the context of approving and collecting special levies. Strata corporations will be authorized to establish a rate of interest (not to exceed the rate set out in the regulations) to be paid by a strata owner who is late in paying a special levy. The interest on a late payment of a special levy will not constitute a fine but, rather, will form part of the special levy (and must be used for the same purpose as the special levy). The result is that strata corporations will now be able to register a lien against a strata lot for interest owing due to late payment of a special levy. Currently, strata corporations are prohibited from registering liens on account of fines assessed against an owner.
If a resolution to approve a special levy for repairs to common assets or common property is only approved by a simple majority rather than by the required 3/4 vote, the strata corporation may apply to Supreme Court or Provincial Court, within 90 days after the vote, for an order approving the resolution. This change will make it easier for strata corporations to obtain approval to raise funds and repair strata property in order to minimize health and safety risks, and to preserve the value of owners’ investments.
5. Rental Restrictions
The current rental restriction provisions of the Strata Property Act have given rise to a variety of interpretive disputes, and Bill 12 addresses some of them. For example, the bill provides that, if a rental restriction bylaw is enacted by a developer prior to the first conveyance, the rental restriction will be effective immediately rather than the later of: (a) one year after a tenancy in effect at the time the bylaw is passed turns over, and (b) one year after the bylaw is passed. It also clarifies that, where a strata lot is included in a filed rental disclosure statement, a subsequent rental restriction bylaw will not apply to an owner who takes title from the developer, even if that owner had acquired his or her right to purchase by way of an assignment of a purchase contract with the developer, and will only apply to subsequent owners of the strata lot. Finally, Bill 12 adds a deemed approval provision in respect of a request for an exemption from a rental restriction bylaw where the owner requests a hearing but it is not held within four weeks after the request.
6. Bylaws and Other Procedural Matters
Bill 12 proposes several changes to certain procedural matters under the Strata Property Act. These changes include:
- allowing the president, or the vice-president in certain circumstances, to have a casting vote at annual or special general meetings if provided for in the bylaws;
- confirming that the bylaws may provide for voluntary dispute resolution processes that do not preclude the use of mediation, and that any statements and records made solely for the purpose of such processes may not be used in court, arbitration or mediation;
- requiring that a bylaw amendment be filed in the Land Title Office before the new amendment has effect, and providing that the amendment no longer needs to be filed within 60 days of the bylaw being approved;
- moving Section 15 of the Standard Bylaws to the Strata Property Act (this will ensure that the right of an owner or a tenant to request a hearing at a council meeting cannot be overridden by bylaw);
- prohibiting any bylaw amendment associated with a bare land strata plan, or a strata plan in which some or all the strata lots are residential, until after the second annual general meeting (rather than after the first annual general meeting) unless approved by a unanimous resolution;
- reducing the number of votes required to demand that the strata corporation consider a proposed resolution or other matters at an annual or special general meeting from 25 per cent to 20 per cent of the strata corporation’s votes;
- allowing notices to be given by e-mail to owners and to the strata corporation;
- clarifying the procedure in which resolutions requiring a 3/4 vote in respect of various provisions of the Strata Property Act may be passed before a strata corporation’s first annual general meeting; and
- confirming that strata corporations may pass age-restriction bylaws.
In order to assist in the transition to the new bylaw requirements, Bill 12 provides that, despite the prohibition on bylaw amendments prior to the second annual general meeting unless approved by a unanimous resolution, amendments may be made during that period by 3/4 vote if the resolution was passed before the bill became law, or the notice of the meeting and proposed amendments were given before the bill became law. In either case, the amendment must be filed in the Land Title Office within one year after the bill becomes law.
7. Conflicts of Interest
Bill 12 proposes several changes that extend the requirement for disclosure by council members who have a direct or indirect interest in a matter, where the interest could conflict with their duty as a council member or the matter is to be discussed by council. Council members who have such an interest will be required to: (a) fully and promptly disclose to the council the nature and extent of the interest; (b) abstain from voting on the contract, transaction or matter; and (c) leave the council meeting while the contract or matter is discussed, unless asked by council to be present to provide information. The council member must also leave the council meeting while the council votes on the contract or matter.
8. Information Certificates
In addition to requiring the most recent depreciation report obtained by a strata corporation to be disclosed in a Form B — Information Certificate (see above), Bill 12 also requires that the certificate disclose information regarding which parking stalls and storage lockers have been allocated to a particular strata lot.