Paying for Repairs

 

The Strata Property Act and, especially, the regulations determine who is ultimately responsible to pay for repairs. For the reasons given at the start of Chapter 25, Carrying Out Repairs, every reference in this chapter to “repair” or “repairs” includes maintenance, unless the context requires otherwise.

For the purpose of paying for repairs, the Strata Property Act and the Standard Bylaws treat both common property and common assets the same. Accordingly, when speaking of repairs, in this chapter every reference to common property includes common assets, unless the context requires otherwise.

Use This Analysis for Expenses Other Than Repairs

Repairs are just one of many different kinds of expenses that a strata corporation may incur. The requirements for allocating expenses for repairs apply equally to every other kind of strata corporation expenditure.

We use the subject of repairs to illustrate how the Strata Property Act and the regulations allocate expenses. The reader, however, may use the analysis below to allocate any expenditure by a strata corporation among the owners, including expenses for repairs.

Although a strata corporation may amend its bylaws concerning repair work, the Strata Property Act and the regulations govern the allocation of costs for that work. Note that many of the provisions that specifically require a strata corporation to allocate repair costs among only some of the owners, rather than all of them, are found in the regulations.

A strata corporation that wishes to amend its bylaws governing repairs should keep in mind the ways in which the Strata Property Act and regulations allocate the cost of repair work. Where a strata corporation passes a bylaw to allocate repair work or the cost of repairs, if that bylaw conflicts with the Act or regulations, then the bylaw is of no force or effect to the extent it conflicts with the legislation. 1

Assuming that a strata corporation is responsible to perform certain repair work, the corporation must decide who ultimately pays for that work. In other words, the strata corporation must decide whether all, some, or even just one owner must pay the corporation for the cost of that work.

The General Rule for a Strata Corporation

Under the Strata Property Act, the general rule for a strata corporation is that every strata lot must contribute to the operating fund, the contingency reserve fund (“CRF”), or to a special levy, as the case may be, according to the schedule of unit entitlement. 2 In other words, all of the owners must contribute to common expenses according to unit entitlement. As one judge observed: 3

The Act describes the general rule with this formula for calculating a strata lot’s contribution: 4

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There are exceptions to the general rule. An exception requires a strata corporation to depart from the general rule. Where an exception exists, the strata corporation must allocate an expense among only some, or perhaps to just one owner, instead of all of the owners. It follows that the general rule applies unless an exception exists.

In most cases where an exception to the general rule occurs, the Strata Property Act or regulations create the exception. In certain circumstances, the Act also allows the courts to make an order that effectively amounts to a court-ordered exception to the general rule. 5

In summary, if the strata corporation must carry out the actual repair work, the general rule requires every strata lot to contribute to the cost of that work, according to unit entitlement. This chapter explains how the general rule governs unless one of the following exceptions applies:

  • a section 100 exception,
  • a fund based exception,
  • a special levy exception,
  • a court ordered exception, or
  • a section exists.

Exceptions to the General Rule

The Section 100 Exception

This exception may apply whether the expenditure for a repair comes from the operating fund, the CRF or a special levy.

Recall that the Strata Property Act, as a general rule, requires in respect of each strata lot that every owner contribute to the operating fund, the CRF or a special levy, according to the schedule of unit entitlement. 6

Section 100 of the Strata Property Act, however, permits the eligible voters to override the general rule by passing a unanimous resolution to change the formula for calculating each strata lot’s share of a contribution to the operating fund, the CRF or a special levy, as the case may be. A unanimous resolution requires the affirmative vote of every strata lot. For information about a unanimous vote, see Chapter 14, Voting.

A section 100 resolution is not enforceable until the resolution is filed with a Certificate of Strata Corporation (Form E) in the Land Title Office. 7 The prescribed form of Certificate of Strata Corporation (Form E) is found in the regulations.

Though it is a rare case where the owners unanimously agree to alter the general rule for contributing to the operating fund, the CRF or a special levy, as the case may be, the Strata Property Act permits the eligible voters, in effect, to agree unanimously to require some strata lots, or even just one strata lot, to contribute the whole cost of particular repair work carried out by the strata corporation. This exception is equally available for contributions to the operating fund, the CRF or a special levy.

The Supreme Court of British Columbia may use a section 100 resolution to remedy significant unfairness. In certain circumstances, if significant unfairness exists, section 164 of the Strata Property Act permits the court to make any order it considers necessary to prevent or cure the problem. For example, in Fraser v. Strata Plan VR 1411, the court ordered that all the owners were deemed to have passed a section 100 resolution under the Strata Property Act. 8 The court, in effect, ordered a section 100 resolution to remedy significant unfairness in the allocation of some repair expenses. In another case, the court made a similar order to remedy a significantly unfair allocation of water and sewage expenses in a strata corporation’s budget between its commercial and residential sections. 9

Exception In A Phased Strata Development

In a phased development, the Strata Property Regulation limits a strata corporation’s ability to pass a section 100 resolution in some cases. If certain conditions exist, the strata corporation may not pass a section 100 resolution. Specifically, so long as the developer in a phased development complies with the dates in the Phased Strata Plan Declaration, or in an amended Declaration, for the beginning of construction of each phase, the strata corporation may not pass a section 100 resolution until one of the following occurs: 10

  • the annual general meeting is held following the deposit of the final phase, or
  • in accordance with the Act, the developer elects not to proceed with the next phase, or
  • the Supreme Court of British Columbia declares that the developer is deemed to have elected not to proceed, or
  • the strata corporation obtains the developer’s written consent to passage of a section 100 resolution.

The Fund-Based Exceptions

There are also exceptions to the general rule whose availability depends on which fund is used to pay for an expenditure.

The Strata Property Act creates different exceptions, depending whether the strata corporation pays an expenditure out of the operating fund or the out of the CRF. These fund-based exceptions are described below.

To determine if a fund-based exception to the general rule applies, a strata corporation first must decide whether the expense in question falls within the definition of the operating fund or the CRF. The two funds are described earlier in Chapter 15, Finances.

Exceptions Where the Operating Fund is Used

The operating fund is for common expenses that occur at least once a year. 11 If a proposed expenditure typically occurs at least once or more per year, the operating fund must be used to pay the expense. The general rule requires in respect of each strata lot that every owner contribute to an expense, unless in this case, one of the operating fund exceptions applies. If an exception applies, the strata corporation must allocate the expense to only some, or even just one, of the owners, as the case may be.

Where the operating fund applies to an expense, the Strata Property Act and regulations create the following exceptions to the general rule.

Repairing Common Property

Normally, a strata corporation performs repairs to common property. If the repairs constitute an ongoing expense, the strata corporation pays for the repairs out of the operating fund. In the usual case, the general rule applies and in respect of every strata lot all the owners contribute to the operating fund according to unit entitlement to pay for that repair.

For the reasons explained earlier in Chapter 25, Carrying Out Repairs, as at the time of this writing a strata corporation may not use a bylaw to make an owner responsible to repair common property. 12 It appears, however, there are at least two instances where, by agreement, an owner may be solely responsible to pay for a common-property repair performed by the strata corporation.

First, where an owner asks permission under the Standard Bylaws to alter common property, the corporation may require, as a condition of its approval, that the owner take responsibility for any expenses relating to the alteration. 13Second, where in a short term exclusive use agreement a strata corporation gives an owner or tenant permission to exclusively use certain common property, the corporation may, as part of the agreement, require the owner or tenant to pay for repairs to the relevant common property.

Repairing Limited Common Property

According to section 6.4(1) of the regulations, if a contribution to the operating fund relates to and benefits only limited common property (“LCP”), the contribution is shared only by owners of strata lots entitled to use such LCP. Section 6.4(1) of the regulations says: 14

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For instance, under the Standard Bylaws a strata corporation must carry out all repair work on LCP balconies and railings attached to the exterior of the building. 15 This regulation requires the strata corporation to allocate its yearly expenses for LCP balcony repairs to strata lots with LCP balconies, all according to unit entitlement.

Repairing a Strata Lot

When the operating fund is used to pay for repairs to one or more strata lots, there are, generally speaking, two exceptions which require a strata corporation to allocate the expense to only some, or perhaps just one, strata lot, as the case may be. Before either exception applies, specific criteria must be met. The first exception involves identifying a type of strata lot, the second occurs where a strata corporation takes responsibility to repair specified portions of some, but not all, strata lots. 16

Exception: Repair Costs Allocated To A Type of Strata Lot

According to section 6.4(2) of the regulations, if a contribution to the operating fund relates to and benefits only one type of strata lot, and that type is identified as a type of strata lot in the bylaws, the contribution is shared only among strata lots of that type, all according to unit entitlement. Section 6.4(2) of the regulations says: 17

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The Standard Bylaws do not identify different types of strata lots. A strata corporation, however, may amend its bylaws to identify a type of strata lot for the purposes of allocating expenses. 18

What Is A “Type” of Strata Lot?

The Strata Property Act does not define the meaning of the term type.

In the early years of the Strata Property Act, previous editions of this book suggested that, in the absence of a definition of type in the Act, it seemed that each strata corporation could use its own criteria, by means of a bylaw, to define a type of strata lot. It is now clear, however, that the courts rely on case law decided under the former Condominium Act to determine if a different type of strata lot exists. 19

Consequently, the term, type is taken to denote the different character or form of a structure, 20 or a class of things having common characteristics. 21

The cases that have decided whether a different type of strata lot exists tend to be fact-driven. For instance, in one case, the court found that different types exist in a phased, heritage development with 88 strata lots. In that case, 12 apartment strata lots in a 1912 heritage building differed in character or form from the remaining 76 strata lots, contained in seven modern, three-storey townhouse style buildings. 22

Conversely, in a different case involving another heritage development, the court ruled that separate types of strata lot did not exist. 23 In that case, the development blended a 1904 heritage home, containing two strata lots, with a 1994 apartment building, which held six strata lots.

In another decision, the court found that different types of strata lot did not exist in a development consisting of two buildings which shared a common foundation. 24 The first building contained one strata lot and a garage which was part of another strata lot in the adjacent second building. The second building contained two strata lots.

The identification of the type in question does not have to actually occur in a specific bylaw. In The Owners, Strata Plan VR 2654 v. Mason, the bylaw in question referred to allocating expenses according to type, but it did not expressly say what the types were. 25 Upon reading all of the strata corporation’s bylaws, the court found other bylaws that apparently named the two types. In these circumstances, the court held that the bylaw in question met the requirement in section 6.4(2) of the regulations to identify in the bylaws the relevant types of strata lot. 26 This result is consistent with the wording of section 6.4(2), which requires, in part, that the, “. . . type is identified as a type of strata lot in the bylaws of the strata corporation.” (Emphasis added)

Townhouse and apartment building strata lots respectively do not constitute different types of strata lots by virtue only of being different kinds of buildings. The courts have apparently resisted reasoning that if different kinds of buildings exist in the same development, for example, townhouses and apartment buildings, their respective strata lots must automatically be different types. Despite opportunities to do so, 27 it seems the courts have refrained from this approach. Given the case law so far, where a development contains both townhouses and apartment buildings, it is not correct to say they are each a different type by virtue only of being townhouses and apartment buildings respectively.

Allocating a Common Expense for Repairs According to Type

Where a type of strata lot is identified as a type in the bylaws, the type-exception only applies if the contribution to the operating fund relates to and benefits only that type of strata lot exclusively.

In Ernest & Twins Ventures (PP) Ltd. v. Strata Plan LMS 3529, the complainant argued that where an item of expense benefits all types of strata lots equally, the expense must be allocated among them. 28 Where, however, an expenditure benefits one type of strata lot disproportionately, the complainant argued that the strata corporation must allocate the expense in a manner that reflects the extent of the benefit derived by each type of strata lot. This approach would mean, for example, that if roofing repairs benefit the Type A strata lots 80 per cent (80%), and the Type B strata lots 20 per cent (20%), then the expense should be prorated between Types A and B. On that basis, 80 per cent (80%) of the repair expense would be allocated to the Type A strata lots, which would then share the expense, also according to unit entitlement. The Type B strata lots would carry 20 per cent (20%) of the expense, also according to unit entitlement.

The British Columbia Court of Appeal specifically rejected this interpretation of the exception in section 6.4(2) of the regulations. 29 Instead, the Court of Appeal emphasized that this exception applies where the contribution to the operating fund relates to and benefits only that type of strata lot exclusively. Where this exception applies, the contribution to pay for that repair expense is to be shared by the owners of that one type of strata lot alone, according to unit entitlement.

Amending The Bylaws To Identify A Type of Strata Lot

A strata corporation may enact a bylaw that identifies different types of strata lots for the purpose of allocating expenses under section 6.4(2) of the regulations. Subject to a transition exception noted below, a strata corporation must follow the usual procedure to create a types bylaw. 30

Given the case law concerning what constitutes a different type of strata lot, as described above, a strata corporation that wishes to create a types bylaw should first obtain legal advice in the matter.

Residential Sections Involving Types

A section is a form of mini-government within a strata corporation. Where a strata corporation passes a bylaw to create a section to represent the different interests of “owners of different types of residential strata lots,” the strata corporation has a types bylaw. 31

Section 191(1)(c) of the Strata Property Act permits a strata corporation to pass a bylaw to create separate sections to represent the different interests of, “owners of different types of residential strata lots.” The regulations say that for this purpose, “the following are the different types of residential strata lots” (emphasis added) permitted: 32

  • apartment-style strata lots,
  • townhouse-style strata lots, or
  • detached houses.

If a strata corporation passes a bylaw to create a section for residential strata lots of one of these types, then by virtue of the wording in the regulation, the bylaw will necessarily identify different a type of strata lot. In that case, section 6.4(2) of the regulations will apply to permit the corporation to allocate expenses to that type of residential strata lot. 33 For information about sections, see Chapter 10, Sections. 34

In Oakley v. Strata Plan VIS 1098, the strata development consisted of 62 townhouse units and four buildings that together contained a total of 71 apartment strata lots. 35 The strata corporation passed a bylaw establishing two sections: Section 1 for the apartment-style strata lots, Section 2 for the townhouse-style strata lots.

The issue was whether the strata corporation could allocate repair expenses among apartment-style strata lots according to their respective buildings. If permitted, the result would be that each apartment building would bear its own repair expenses, and within each building, presumably the owners of the apartment-style strata lots would contribute to their building’s repair costs according to unit entitlement.

While the Strata Property Act recognizes the different types of residential strata lot which can comprise sections, the court held that the apartment-style residential strata lots in different buildings did not constitute different types of strata lots. The strata corporation could not treat the apartment-style residential strata lots in one building as a separate section distinct from the apartment-style residential strata lots in the other buildings. Put another way, a section for apartment-style strata lots cannot be broken into sub-sections such that each apartment building is a separate sub-section.

Advantages

For the purpose of allocating repair expenses, creating an apartment, townhouse or detached house-style section has certain advantages over the passage of a bylaw identifying a type of strata lot.

With a types bylaw, described above, the strata corporation is restricted to allocating expenditures from the operating fund. Since the operating fund is restricted to expenditures which occur at least once per year, if not more often, the operating fund is likely only used for regular repairs. Certainly, in most cases, the operating fund cannot be used for a major, once-in-a-lifetime repair, such as the replacement of a building envelope in a leaky condo building.

On the other hand, if the strata corporation creates a residential section, the corporation may, in effect, allocate to that section all expenses that relate solely to the strata lots in that section. This means that when a particular expenditure by the strata corporation relates solely to the strata lots in a section, only the owners of the strata lots in that section must contribute to it. This is so whether the strata corporation pays the expense from its operating fund, the CRF, or a special levy. 36

Transition From The Former Condominium Act

When it came into force on July 1, 2000, the Strata Property Act recognized that some strata corporations already allocated expenses according to different types of strata lots. Often, a strata corporation had for many years identified different types of strata lot in the corporation’s annual budget, for the purpose of allocating expenses. In other instances, under the former Condominium Act a strata corporation had already amended its bylaws to identify different types of strata lot for the purpose of allocating expenses.

The following explains how the Strata Property Act’s transition provisions addressed both of these situations.

Transition From A Types Distinction In A Budget Under the Condominium Act

The scheme for allocating expenses in the Strata Property Act and its regulations differs from that under the former Condominium Act.

Under the Condominium Act, the statutory bylaws required that where a strata plan consisted of more than one type of strata lot, the common expenses attributable to one or more type of strata lot must be allocated to and borne by the owners of that type of strata lot, in proportion to their unit entitlements. In addition, there was no requirement in the Condominium Act to first identify each type of strata lot in the strata corporation’s bylaws. Section 128(2) of the Condominium Act said:

The Condominium Act did not define the term type in section 128(2). Recall, however, that the courts held that the word type in section 128(2) referred to “character or form of structure” or to “a class of things having common characteristics.” 37

In the past, many strata corporations relied on section 128(2) of the Condominium Act to allocate different expenses in their budgets to different types of strata lots. In other words, in their annual budgets those strata corporations distinguished different types of strata lot and separately allocated expenses to each type of strata lot.

On July 1, 2000, the Strata Property Act came into force. While the Strata Property Act maintains the concept of allocating expenses according to a type of strata lot, the scheme in that Act is different. With one time-limited exception, the Strata Property Act requires that a bylaw identify each type of strata lot for this purpose. The exception occurred in the Strata Property Act’s transition provisions. The exception allowed a strata corporation to continue allocating expenses according to type of strata lot, even if there was no bylaw identifying a type of strata lot for this purpose. The transition provisions also made it easier to pass a types bylaw. The exception was available if a strata corporation met the following requirements . 38

If on July 1, 2000, when the Strata Property Act came into force, a strata corporation relied on section 128(2) of the former Condominium Act, quoted above, or a similar bylaw, to allocate expenses according to different types of strata lots in the budget prevailing on that date, then the regulations permitted the corporation to continue allocating expenses on that basis until December 31, 2001, subject to the corporati