Bundling Resolutions

Our recent Annual General Meeting held electronically had 17 resolutions on the agenda for upgrades and repairs to our buildings. Our meeting dragged on for almost 5 hours and in the end every resolution passed. There were 4 special levies and 13 majority vote resolutions to approve items recommended in our depreciation report. The notice package and resolutions were written by our strata manager and other than the president the remainder of council did not have a chance to approve or review the content or agenda. By time we reached the election of council after 4 hours, more than half of the voters had left the meeting, and we barely managed to elect a new council. Several owners asked why we did not bundle the resolutions to make this quicker and the manager advised they had to be separate. Is there an easier method of addressing these types of resolutions to reduce the impact on our owners? Darla D.

Dear Darla: There is no requirement to separate resolutions for expenses either by majority vote or 3/4 vote for a special levy. If a strata corporation is expecting challenges with approving a resolution it may be helpful to separate those specific resolutions to avoid the failure of the remainder. The resolutions and business on th e agenda are approved at a council meeting by majority vote of council unless the council by majority vote had delegated that authority to a specific council member such as the president. Either way those decisions are recorded in the minutes of the meetings. Also of importance is the writing of the resolutions. Under the Legal Professions Act in BC, the writing of resolutions or bylaws for a corporation or association and charging a fee, is a practice of law. While strata corporations often pressure their managers to write the resolutions to avoid the costs, when there is conflict from a defective resolution, everyone pays. Majority vote resolutions that approve repairs, maintenance, and renewals as part of the depreciation report recommendations may easily be itemized into a single resolution; however, the specific allocated funds and scope of work for each item should still be detailed within the resolution to ensure the council has the authority to proceed with the work and spend the funds. Special levies are often addressed separately as they result in unanticipated higher costs, detailed projects that require a higher level of detail and accountability, and the possible result of collections from owners who fail to pay their special levies. Your special levies for the recommended upgrades were low and with all four in one resolution, the total for the largest unit would have been only $705. On checking your management service agreement, there is a $10 per unit per levy fee being charged, which in your strata corporation totals a $4,800 cost that could have been reduced to $1,200 with a single resolution. At a recent strata meeting I attended, a strata corporation with over 300 units passed a single resolution for their planned depreciation resolutions by majority vote for a total of $1.8 million dollars. The resolution was detailed to match the depreciation report and it took 10 minutes to approve the resolution. Their meeting was completed in 45 minutes, including annual budget and council elections.
None of us want higher strata fees, but it is much more economical to contribute higher amounts in the reserve funds each year than wait for special levies. Special levies are simply deferred strata fees because our communities are not implementing and reviewing our depreciation reports effectively, but they are often the last resort of a deferred maintenance program. From experience and case studies we know deferred maintenance and repairs result in unpredictable costs of 30-50% higher causing break downs, higher insurance costs as the frequency of claims increase, emergency repairs which are significantly costlier and often do not resolve the root causes, and disruption to the use and enjoyment of common property and strata lots.
A scheduled council meeting to discuss and approve your agenda and resolutions prior to notice being issued is a valuable exercise to avoid many of these pitfalls. Strata councils are not a singular person. They are a collective of elected voting owners who determine the scope of business and administration for your community and the enforcement of the bylaws and rules of the strata corporation.
Tony Gioventu, Executive Director CHOA

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Who Decides if an Owner Should Pay the Deductible?

Three years ago, my washing machine hose ruptured causing a flood in my unit and the two units below me. It was managed well by the strata insurance provider without any delays and as expected I was responsible for the deductible, which at the time was $5,000. Six months ago, one of our council members had renovation done to her suite and her contractor punctured a water line resulting in damages to 5 units, and an insurance deductible of $25,000; however, the strata council have paid the deductible out of the contingency fund and the newly elected strata council has discovered there was no effort to make the owner responsible as a result of her contractor causing the loss. This has raised a question we cannot find an answer. The Strata Property Act says the strata corporation may recover the deductible if the owner is responsible for the claim. So, we are a bit unclear on what “responsible” means, but more critically, how do strata councils apply this obligation to pay the deductible fairly against all owners, whether they are on council or not? Carla D.

Dear Carla: When there is a claim on the insurance policy of the strata corporation, the deductible portion is a common expense of the corporation. All owners pay either through the funds of the strata corporation from the contingency fund, operating fund or a special levy that may be issued by council as it does not require a 3/4 vote of the owners in this one circumstance. The requirement ensures the strata corporation repairs are conducted and the deductible is paid to the insurers. If an owner is responsible for the claim, the strata council then decides to send a notice of claim to the owner. In most situations the owner’s homer insurance provider will cover the cost of the deductible. The value of the deductible pressured by the recent dramatic increases in deductible rates, will often determine whether homeowners have sufficient insurance coverage or have purchased insurance, but that is purely for their protection, and has no affect whether they are responsible. If the owner refuses to pay the claim personally or through their insurance provider, the strata council then decides on a collection proceeding. An application to the Civil Resolution Tribunal is sufficient to obtain a decision ordering the payment of the deductible. The decision may then be registered against the strata lot until the owner pays or the strata corporation seeks an enforcement order for payment. This part of the process is generally handled by your lawyer acting for the strata corporation. The best method of evaluating responsibility, is in understanding your responsibilities as a strata lot owner for the maintenance and repairs of your strata lot, any of your appliances and fixtures in the strata lot, those services that are part of your strata lot and not common property, the actions of your occupants, tenants, guests and in this case, contractors hired by the owner. For example, except for your personal property and improvements to your strata lot, if a common property pipe or common property building system fails, the claim is a common expense of the corporation and an owner is not responsible for the deductible. The decision of a strata council to proceed with collection is in most cases a bylaw enforcement issue. Your strata corporation has a registered bylaw that clearly states if an owner is responsible for the claim the strata corporation must recover the amount of the deductible from the owner. Insurance bylaws are common, and I would recommend strata corporations consider bylaws to address damages and insurance deductibles. The clarity and authority defined in the bylaws sets a common standard for strata councils and provides authority and support when a strata corporation is making an application to the CRT or the courts to recover costs. Your strata council has not reviewed your bylaws and have not applied the bylaws fairly. A council member who has an incident that results in an insurance claim where they may be responsible for the deductible, must not participate in the bylaw enforcement process. They would have a direct interest in the outcome of the decision and be in conflict of interest.
Tony Gioventu, Executive Director CHOA

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Tenants Altering a Strata Lot

I own a townhouse unit in Surrey that I have been renting out for the past 15 years with a reliable tenant. I conducted routine inspections, and all seemed well until the tenant gave me notice 2 months ago. I did a final inspection to the unit and discovered the tenant had installed walls in the basement creating several rooms that do not meet code. Strangely enough the strata council had given the tenant permission to make the alterations. The removal of the walls and finishing is not a significant expense, but it raises an issue with our strata council and property manager. Is a tenant eligible to make improvements to a strata lot without the consent of the owner? The property manager told us this is common, but it seems unfair that a tenant can alter a strata lot without the consent of the owner? Danny R.

Dear Danny: Altering a strata lot or common property is a condition that is regulated under the Standard Bylaws of the Strata Property Act and any bylaw amendments properly adopted by your strata corporation. The Standard Bylaws and almost every other set of bylaw amendments I have seen, including yours, requires the written application by an owner of a strata lot for permission for alterations and the written approval of the strata corporation. There is no provision in the bylaws for a tenant to make an application as the owner has the interest in the strata lot and the strata council did not comply with the requirements of the bylaws to approve the request from the owner. I often see these types of errors occur simply because strata council members do not each have a set of the strata corporation bylaws and the bylaws are not reviewed at a council meeting prior to any decisions being made. Like any owner or tenants, strata councils have the same duty to comply with the provisions of the bylaws.
A variable that is often not acknowledged by strata councils and managers is the impact of the bylaws on non-residential/commercial strata lots. Owners who lease their units may have entered lease hold contracts that permit alterations or lease hold improvements by the tenants. This may have also granted the tenant the right to apply to the strata corporation for permission to alter the strata lot; however, the owner of the strata lot will always be liable for the actions and consequences of their tenants. The best practice whenever there is an application to alter a strata lot is first confirm the person you are dealing with is a registered owner. Family members are often assumed to be owners without verifying the title of the property. When you receive an application for an alteration that is from a tenant, whether residential or non-residential, confirm with the owner this application is endorsed or approved by the owner, and the owner has consented to the application. Copy all communications regarding an application for an alteration to the applicant and the owner of the strata lot. Require that any alteration agreements or conditions must be agreed to in writing by the owner, not the tenant. Follow your bylaws. If the bylaw requires an owner to make the application, insist on written confirmation by the owner and that they will be responsible for any cost relating to any part or condition of the alteration.
Tony Gioventu, Executive Director CHOA

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Is it an Operating or Reserve Allocation?

We live in the Okanagan and our strata corporation is located on a higher elevation. Naturally, we have snow frequently. Up until December of 2020, our strata corporation have contracted a snow removal service for our roads and walkways for owner safety and access. Our strata council, attempting to save money, decided to terminate the snow removal service and purchase a tractor with blower for $7,500 from our budget line item which is only identified as snow removal service contract. The owners did not have an opportunity to vote on this decision, and it is questionable by time we pay for additional operations costs this will ever save us any costs, and we will always be dependent on a council member or owner within our strata corporation to clear the snow. Is a strata council permitted to reallocate the funds approved by owner to other items or costs? Bill CT.

Dear Bill: The strata council is bound to the limitations of the approved budget. They do not have the authority to reallocate funds and would require a special general meeting and approval of the owners. The annual operating budget is for those events that occur at least once a year or more frequently. This includes utilities, insurance, maintenance costs, professional services, management services, scheduled inspection and maintenance of building components, security costs, and general operational costs. The definitions of the allocations are also critical in the annual budget, along with the frequency within the budget cycle. The contingency reserve fund is for those items that are expensed less than once a year and relate to depreciated items for major maintenance that occurs less than once a year or renewals and repairs that occur less than once per year. The exceptions to these expenses are emergencies and insurance deductibles which may be expended from either the operating fund or the contingency reserve fund. A principle of the Strata Property Act that is often misunderstood and confused is how the funds are expensed and approved when a corporation is conducting major purchases of assets. Whether it is a new snow blower, pool table for the rec room, newly installed exterior lighting systems, a new security locking system, additional security cameras, or lobby furniture, the Act requires a 3/4 vote for the purchase of any assets over $1,000, unless the bylaws have been amended. The purchase of the tractor is also an asset of the corporation and to be include in future depreciation reports. This is unlikely to occur if the amount is expended through the operating fund and not tracked as depreciated item on future reports. In a recent decision of the Civil Resolution Tribunal under strata plan EPS 2744, the strata corporation expended almost $4,000 from their operating budget on rekeying (sic) their common areas. While the security upgrade may have been necessary, the corporation had sufficient time to add this expense to a general meeting agenda and it was deemed not to be part of the operating budget as an annual expense. The strata corporation have been ordered to hold a General Meeting to approve this expense from the contingency fund by 3/4 vote.
While everyone can appreciate the attempt to provide increased service and reduced costs for the owners, the introduction of the tractor and snow blower now requires a storage area, has increased liability for the strata corporation, and will require a resident or employee to safely operate the equipment and be available throughout the winter season. In the case of assets purchases over $1,000, always convene a general meeting for the owners’ approval before you buy.
Tony Gioventu, Executive Director CHOA

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Year End Financial Report

How do we get the year end financial report from our strata corporation? Our fiscal year ends on October 31, and we normally have our general meeting in November to approve the budget for the next year. Our property manager told us with the extensions because of the emergency orders, the strata corporation has an additional 60 days to hold the annual meeting and to provide reports and information. One of the council members has indicated the strata council are significantly over budget for 2020, but no one will give us a copy of the financials and our meeting must be held by the end of February. Clarence W.

Dear Clarence: In May of 2020, the provincial cabinet approved a regulation under the Strata Property Act that extends the requirement for the period of general meetings to be held, by an additional 60 days, when a state of emergency for the province or a local region is declared. Even after our current state of emergency is cancelled, this Regulation will remain for any subsequent events as it automatically comes into effect when a state of emergency arises.

Regulation 17.23(1) In this section, “declaration of a state of emergency” and “declaration of a state of local emergency” have the same meaning as in section 1 (1) of the Emergency Program Act.(2) If a declaration of a state of emergency or a declaration of a state of local emergency is in effect where the land in a strata plan is located and at any time during the period of one month that ends on the last day on which a general meeting of the strata corporation must be held under any of the following provisions of the Act, the meeting may be held up to 2 months after the last day on which the meeting must be held under the provision:(a) section 16 (1) first annual general meeting to be held by owner developer;(b) section 40 (2) annual general meeting;(c) section 43 (3) special general meeting called by voters (by petition);(d) section 43 (3.1) special general meeting to consider winding-up resolution;(e) section 51 (6) [special general meeting to reconsider resolution passed by 3/4 vote];(f) section 159 (1) general meeting to decide not to repair or replace damaged property;(g) section 230 annual general meeting after deposit of subsequent phase.
The extension to hold meetings in prescribed time periods does not apply to the requirement to complete and provide documents such as financial reports or other provisions of the Act or Regulations. Within 8 weeks after the end of its fiscal year, the strata corporation must prepare a financial statement updated to the end of the fiscal year. This requirement was not altered by the emergency orders or regulations. The financial statement for the current and previous years is a document the strata corporation must maintain, and an owner is entitled to a copy of this document. It must be provided within 14 days of the request. The financial statement will also establish the balances for the annual tax return of each strata corporation. With so many orders and changes to notice periods, it is easy to understand how confusion was created around this document as it is connected to the financial reports and notices for annual general meetings. All recent changes to the legislation and emergency orders are posted to the CHOA web site under the Covid 19 banner. www.choa.bc.ca
Tony Gioventu, Executive Director CHOA

Note from Terra Nova…..I envision some property managers reading this and scrambling to finally be compliant.

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Competitive Bidding

Our strata corporation has just approved $125,000 from our contingency fund for roofing replacement. We received estimates from only 1 company and several owners are concerned we have not detailed the project correctly and did not get at least 3 bids before proceeding. As independent corporations, are we required to obtain multiple bids or for any specific values? It would be a good consumer practice but there are not always more than 1 or two companies available on the Sunshine Coast. If 3 bids minimum were imposed, we would never likely be able to comply? JDR

Dear JDR: When it comes to how a strata corporation spends their money, the purchasing and financial practices of strata corporations are determined through the bylaws of a strata corporation and the wording of the resolutions the owners approve at general meetings. The Strata Property Act does not require or set a minimum number of bids or special procurements conditions. For an expense on a major project or an operating contract, the owners at a general meeting may direct or restrict the council by majority and give specific instructions on the methods or limitations for purchasing. In a normal sequence the strata council will establish the proposed resolution for the project, including the details of the project and the how the funds will be approved, either by approving reserve funds or a special levy. A meeting is then held where owners debate the resolutions and either approve or defeat the proposed projects. Many resolutions often fail due to lack of information or unknown purchasing procedures that are challenged by owners. This results in mistrust between strata councils and owners, and delays in projects that inevitably cost more for everyone. While the Act does not require any minimum purchasing requirements, it is everyone’s best interest to set specifications for projects and develop a bidding process on the specifications.
Multiple quotes for projects are helpful to set budgeting plans and targets for scheduling, but they are not comparable as they are established from the perspective of each of the companies providing the quotes. Major construction and renewals have many variables that affect pricing and contracting relationship. Consultants, technical writers and project managers routinely set the specifications for the scope of work and assist with the processing of tendering projects so ensure the client is provided with comparable bids that meet the minimum conditions of product and materials, methods and details of construction, insurance requirements, site conditions, warranties, access to the property, environmental conditions, and any other contractual conditions a strata council negotiates. Depending on the value of construction or the risks associated with the project, a legal review of the bidding process and the contract conditions and terms is highly recommended. For a small investment, usually below $2,500 you can avoid a number of disputes that originate from a lack of a written agreement or failure to detail the conditions of the contract. Remember your objective as the client and owners. The best pricing for the best products, terms and conditions. The solution is competition and detailed written agreements. Even if you can only obtain a single quote, it is in your best interest to have the terms and conditions in a detailed written agreement. A contractor that is unwilling to enter into a written agreement is unlikely to act with integrity. Whether it is a $5,000 contract to replace gutters or $125,000 roofing project, a written agreement is essential to protect your interests. With or without consulting or legal services, confirm all details in writing before you proceed with your projects.
Tony Gioventu, Executive Director CHOA

A Note from the President of Terra Nova Landscaping ” a handshake or gentleman’s agreement, isn’t worth the paper it isn’t written on. Always use a detailed written agreement.”

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Energy Upgrades

Our strata council entered into a contract to change all of our lighting in common areas to LED’s to increase light levels and reduce the cost of electricity. They did not obtain the authorization of the owners at a general meeting for this expense and have declared there is no additional expense as the contractor has agreed to be paid through the savings until the contract balance is paid out over the projected 2 years. Council claim they can simply allocate this expense under the operating budgeted for Hydro and it did not require the approval of the owners. Is this correct? Our council has a bad history of expensing building upgrades or material purchases through the budget without informing the owners, while at the expense of reduced maintenance and servicing that our building highly needs at this time. How do we force this into a meeting before this contract proceeds? Many owners are questioning the logic of this decision to spend $79,000 on an upgrade which includes $4,500 in new outdoor light fixtures, at a time when our insurance costs are continuing to increase, and strata fees this year will go up by 35%. Ingrid F.

Dear Ingrid: The annual operating budget is for the purpose of those expenses that occur once a year or more frequently, while the contingency reserve fund is for expenses that occur less than once a year. When a strata corporation approves their annual budget, they are authorizing and instructing the strata council to proceed with these expenses based on the designations that have been created. Under your budget Hydro is listed as a utility and there is no indication in either the budget or minutes the owners agreed to or authorized the expenditure of any reductions to a contractor for any new components or lighting upgrades. While the annual budget may have a reduced cost, those calculated savings are still an amount that is paid by the strata corporation to the contractor which requires the authorization of the owners. In addition, the Strata Property Act requires a 3/4 vote approval for the acquisition of assets over $1,000, such as the new exterior light fixtures. A strata corporation may amend their bylaws to authorize a strata corporation to spend on higher amounts without the approval of owners, which in essence still requires the approval of owners at a general meeting. To address this issue, 20% of your owners may sign a petition demanding a special general meeting be called and propose a resolution to either approve the upgrade to enable this work to be done or to stop the work. The strata corporation must hold the meeting within 4 weeks of receipt of the demand, which is extend by 60 days under the emergency orders, and the resolution on the petition must be the first order of business.
Strata corporations can anticipate several energy upgrade requirements to become mandatory by their local governments and the province in the next 3-5 years. Major construction that requires building permits will trigger upgrades as well as changes to the building code for existing structures across the province. LED upgrades are certainly one of the best returns on upgrades, and the savings in many medium to larger buildings with extensive common areas and underground parking garages, easily reach full cost recovery of the upgrade within 18-24 months, as well as the long-term savings in the annual operating budget. A short-term approval of contingency funds to drastically reduce operating costs is well worth the investigation. The process is simple and usually requires little alteration on site, depending on the age of your fixtures, however, the project does require the approval of your owners at a general meeting. LED upgrades also increase light levels for public areas such as parking garages and lockers where security is a higher priority, reduce heating loading in hallways and reduce long term maintenance cost as lamp life is much longer. The development of a variety of lamp levels for light and colour also makes the transition of hallways and common rooms a welcome improvement. CHOA in partnership with BC Housing developed a helpful guide on Lighting Energy Upgrades to assist property owners in evaluating their feasibility of considering an LED conversion. Send me an email tony@choa.bc.ca for an easy download link.
Tony Gioventu, Executive Director CHOA

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Electronic Meetings

I have appreciated your column in The Province for a long time. Very informative and straightforward. As President of our building, last year we successfully used ZOOM for our AGM, with roughly 100 people attending by computer, tablet, and also by phone. We used the “Raise Hand” for voting, and the meeting went quite smoothly (but with a LOT of preparation). Last year the AGM was relatively simple in regards to issues and new board members (which was by acclimation). I am concerned that there may be more issues at this year’s AGM, and wondering if you will be doing a column on “AGM software” that is better prepared to handle “Advance Registration”, Voting, and AGM other tasks. I attended a couple of large company ZOOM AGMs and admired the way a dedicated software platform helped the meeting to run smoothly and report in real time. Curious if you have heard of any software vendors targeting the smaller, residential building market AGM? Stephen W.

Dear Stephen: There are several platforms and services available to the public such as Skype, Microsoft Teams, Google Meetings and Zoom. To date CHOA has test run several platforms that claim to have the solutions, but they are either too costly or do not provide any better services. The challenges for most platforms are the same. How do we integrate the use of the format with the requirements of registration, proxies and voting of the Strata Property Act and the Bylaws of each strata corporation? For this reason, many strata corporations and management companies have attempted to impose a “restricted proxy only” meeting format on their owners, but this does not comply with the provisions of the Act or the bylaws of each corporation and your meeting will be nullified if challenged in the Civil Resolution Tribunal. A proxy can only be restricted or limited by an owner which imposes an obligation on the proxy holder to follow those instructions or restrictions. If there is a general meeting convened, the notice requirements must still be issued in the same format, written notice to each strata lot, and may be by method of email if the owner has consented to receiving notices by email, and the agenda, methods of registration and certification of proxies, how voting cards are issued or recognized either physically or virtually, and how you will conduct each vote must be contemplated. I have chaired electronic zoom meetings in 2020 with over 300 strata owners and proxy participants with great success; however, as you indicate, it is a result of sound planning, but also a good partnership with the strata council and property manager to ensure everyone is playing a vital role. The method of registration is quick if the registration list is crossed referenced by strata lot/owner name/unit number, and as each person registers their strata lot or unit number replaces their name on the identity. This also enables the chairperson to allocate the correct number of votes per unit if there are non-residential units or individuals representing several proxies. Polling for resolutions is functional but it does not identify a person with multiple votes, fractional votes, or multiple proxies. The Pro Version of most platforms provides advanced features such as polling shown to the chairperson or scrutineers who is voting and their voting results. Depending on the size of your strata corporation and complexity of your bylaws this may be necessary. Using a participant recognized response with a thumbs up or down is also an easy method of dispensing with procedural items and is also identifies who is voting on each resolution, which enables the chairperson to calculate voting results. Generally, for majority votes these methods are easy to manage. The complications arise when an eligible voter requests a precise count, or you are approving a ¾ vote, 80% vote or unanimous vote (100% of all owners). For accuracy, and to be able to defend the voting method and results, a ballot that can be emailed at the time the vote is taken or an electronic audit where a copy of the results is maintained is your best solution. Don’t forget, when you send out your notice you must include the electronic address in the notice package. You cannot send it out the week before or post the notice and meeting to an electronic bulletin board. Each owner must receive direct notice of the meeting. Hopefully at some point this year we may see the end of emergency orders. Once this happens there will be a short window afterwards when electronic meetings are still permitted. When the period expires, it will be up to each strata corporation to adopt a bylaw that permits electronic meetings. As you plan meetings this year, a bylaw that permits electronic meetings and addresses the voting and registry procedures would be prudent if your strata corporation wants to continue with the option of electronic general meetings.
Tony Gioventu, Executive Director CHOA

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Adjusting Strata Fees for the Fiscal Year

Our strata corporation normally has its Annual Meeting 60 days after our fiscal year end at the end of February. This gives us time to review our financials in advance of the next year and provide an accurate report to the owners with our notice. Whenever we have an increase in fees, we have included an adjustment over the next 10 months to pay for the increases that would have occurred in January and February. This reduces the impact on owners and with the dramatic insurance cost increases this year it has been the best financial option for everyone. Our manager has instructed us that we must make the entire adjustment in March and cannot make this over the next 10 months, and we have a new owner who is refusing to pay the adjustment claiming they did not own the unit in January and February so why should they pay? How is a strata corporation expected to balance a budget if we cannot address the adjustments and where in the Act does it require us to collect the fees in the next month. G. R. M.

Dear GR: This matter has recently been before the Supreme Court of BC under strata plan LMS4385, who were challenged on retroactive fees. Strata corporation budgets are commonly approved after the fiscal year to provide owners with the most current financial statements, and the court deemed these are not retroactive fees. In the decision, The Honourable Justice G.C. Weatherill established: “a subsequent “adjustment” to the fees paid in the period between the end of a fiscal year and the passing of the budget for the next fiscal year, is not a retroactive charge. There is no requirement in the Strata Property Act that strata fees be paid in equal installments. Plainly, the schedule of strata fee payments can require equal monthly installments, or installments that include adjustments to make up a deficit between what was paid and what would have been paid had the budget for the current fiscal year been in place at the commencement of the current fiscal year. Fees for one month may be different than for other months.” A common practice and requirement for strata corporations under the notice of general meeting is to include the schedule of fees and how they are calculated for the year on the proposed budget. This is the opportunity to inform the owners how an adjustment would be calculated for the remainder of the year, either a single payment on the next month or scheduled over the remainder of the year. With the significant increases in insurance many strata corporations are seeing their fees increase 10-30% and proposing the fee increase be spread out over the remainder of the year. Sat Harwood, a Vancouver Lawyer pointed out the decision also included addressing the issue of purchasers. “While the Civil Resolution Tribunal had earlier deemed retroactive fees were not enforceable, the decision was overturned. An owner’s strata fee obligation does not arise until it is approved at the AGM. The Form F payment certificate and the Form B information certificates were accurate when issued, and any purchaser is entitled to request copies of the Annual Budget to determine the fiscal year period and if there may be an adjustment to fees if the current year’s budget had not yet been approved.” The cautionary message for both strata owners and purchasers is fees for the current fiscal year and how they are collected are never known until the annual budget is approved. The longer the corporation waits to convene their annual meeting the greater likely hood there will be significant adjustments if the budget increases significantly.
Tony Gioventu, Executive Director CHOA

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Best Pricing Insurance Terms

Will the recent changes to the insurance industry mean we will be paying less for insurance in coming years, or the dramatic increases will slow down? Our 78-unit townhouse complex in the interior renewed its policy in November with no claims for the last 5 years and our deductible went to $100,000 and our policy has gone from $55,000 a year to $129,000. Our broker told us in October with the hard market and the best pricing policies this was beyond their control. So how does best pricing apply to strata corporation policies? Janet W.

Dear Janet: Due to the high replacement cost values and the earthquake exposure that exist in BC most strata corporations are written on what is called a subscription property policy. A subscription policy can have anywhere from two to twenty different insurance companies involved. Each different insurance company takes a percentage of the property risk, a percentage of the property premium and in turn each of those insurers pays their same percentage of any insured loss that occurs. An example of a subscription property policy might be as follows: Insurance Company A insures 45%, Insurance Company B insures 25%, Insurance Company C insures 20%, Insurance Company D insurers 10%. So how does this get negotiated with a best terms clause? Traditionally when insurers quote to subscribe on a property policy for a percentage less than 100%, their quote has always been subject to a best terms clause. The best terms clause typically states that if their capacity is used that they must get at minimum the same rates and deductible as any of the other subscribing insurers. If insurance company D comes in at a rate 50% higher than the other insurers, that rate applies to all the insurers. Best terms clauses are mandated by insurance companies not insurance brokers. According to Steve Storrey at BFL Insurance, “the insurance broker first started trying to negotiate best terms clauses out of insurance contracts for strata corporations back in September 2019 when rates between subscribing insurers started to vary drastically. Several companies have been successful in getting the majority of insurers subscribing to their strata / condo and apartment protect programs to agree to remove the best term clauses from their quotes.” For the BFL program this took effect on June 1, 2020 and it applies to all quotes moving forward. As of January 1, 2021, the insurers authorized to provide insurance in BC, have reached an agreement with Financial Service to cease applying best pricing practices. While the alternative and impact of how pricing will be applied is not yet known, the agreement is a good start to a competitive process for consumers. The other side of insurance that still has many strata corporations and owners struggling to manage, is the dramatic increase in deductible rates for water and fire. At $100,000 to $250,000 per claim and higher, these amounts have the potential to bankrupt many owners if they are responsible for a claim. Brent Pavan from Hub International, a BC Insurance Broker, has provided an alternative for high deductibles and strata corporations may want to consider the option to reduce the liability. Their office has developed a water and sewer buy-down product that is applicable to the entire strata, not just the individual unit owner. It is possible to buy-down a deductible up to $125,000. The strata corporation absorbs the first $25,000 of any claim and the insurer will pay the rest. For example: $200,000 insured water damage claim with a $150,000 water deductible. The strata corporation will pay the first $25,000 and the insurer pays the remaining $125,000. There is a cost for this product but for many strata corporations, regardless of who you are insured with, this may be affordable method of managing the higher deductible risks.
Tony Gioventu, Executive Director CHOA

Covid-19 Notice: As a precautionary measure to prevent the spread of COVID-19 CHOA staff are working remotely and our offices are temporarily closed. We understand these are challenging times for strata corporations and we are here to help. Even though CHOA advisors are working remotely we are only a phone call or email away and able to assist you with hosting meetings and notice preparation.

Tuesday Lunch & Learn Live with CHOA: CHOA is hosting a series of webinars once a week, for the next few months. Join us each Tuesday as we bring together industry experts to discuss the many issues affecting BC’s strata community. For more information visit our website at: https://www.choa.bc.ca/seminars/

Hi MOM.

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