After more than 50 years of communal living, the first buildings stratified in British Columbia under the 1966 Strata Titles Act may be nearing the end of their useful life. The recently imposed legislative requirement that strata corporations provide depreciation reports outlining future repairs and sources of financing will reveal more clearly the projected lifecycle of a building. It may be prudent for strata owners to consider ‘end of life’ options for the property as a whole where the projected cost of future repairs outweighs the financial resources of the strata corporation and any value that may be obtained through individual sale.
As a strata building nears the end of its useful life, it may become difficult for owners to sell their individual units because of the projected future maintenance costs associated with a deteriorating building. A collective sale of the whole property to a developer may be the most economically viable option. The Strata Property Act facilitates the termination of strata governance by allowing owners to hold the property as tenants-in-common upon cancellation of the strata plan and dissolution of the strata corporation. To wind up the strata corporation and pursue a collective sale, all owners must agree to the process. If support is not unanimous, those owners wishing to sell may apply for a court ordered winding-up, where they must demonstrate that it would be in the collective best interest to do so.
Such applications tend to polarize neighbours along lines of individual concern. On one side, there are owners who want to capitalize on their interest before the building deteriorates further, and on the other, attachment to neighbourhoods, school districts, and community ties lead many to wish to remain in their homes. In Buchanan, three owners of a small strata building were faced with projected future repair costs of over $1 million as a result of building deficiencies. Unable to agree on a course of action, an outside administrator was appointed by the court. After tens of thousands of dollars in administration fees and no significant repairs undertaken, one owner sought a winding-up order. Although willing to make the order, the court was influenced by the gravity of imposing dissolution against the wishes of an owner, and ultimately left it open to the parties to come to an alternative arrangement. Recently in McRae, the court held that the best interests of the group warranted an order authorizing collective sale in a common law condominium complex. In considering the collective best interest, the court held that individual hardships, such as having to change school districts or an inability to obtain similar housing in the same area, were not sufficient to prevent an order where a significant proportion of owners wanted to sell.
With the City of Vancouver projecting an increase of almost 100,000 dwelling units over the next 30 years without urban sprawl, the redevelopment of deteriorating structures is a trend that is inevitable. Even though such redevelopment is, in most instances, the most economically viable option, economic interests are not the only interests involved. Ownership incorporates values beyond investment potential and it will be difficult to garner unanimous support for a decision as fundamental as winding up a strata corporation and selling the entire building.
The BC Law Institute has recently released a survey seeking public input on whether the standard for termination of a strata corporation should be lessened to 80 percent; a change that would significantly alter the circumstances of those who find themselves in the opposing minority. Whether or not legislative change is on the horizon, the ‘end-of-life’ is near for many aging strata structures, and their inhabitants will soon have to collectively decide what is in their best interest – to stay and continue with costly repairs, or to wind up and start anew.