Have questions regarding complex strata windups? We've got you covered.

Q

What was it exactly that recently changed in the law
applying to strata corporations?

A

In July, 2016, the level of owner approval required to dissolve a strata corporation
and sell its property was reduced from unanimous to 80% plus court approval.

Q

Why would owners wish to windup and sell?

A

The law was changed to offer a solution to strata owners who cannot afford to
make the repairs and replacements necessary to extend the life of their building.
But it is available to any strata corporation in which over 80% of owners vote in
favour and, if fewer than 100% of owners vote in favour, the court confirms the vote.

Q

What determines the value of the strata corporation's building(s)?

A

Typically, purchasers will be interested in re-developing. Municipal land use zoning
and location are the main factors influencing its value as a development site.

Q

How do we get an idea of what the value of our
strata corporation might be?

A

An estimate of that value can be obtained by hiring a professional appraiser or
consulting with a real estate brokerage firm with experience selling development
sites.

Q

How long does the process take?

A

There are many variables that will affect timing, but a typical timeline from the
point at which a strata council is satisfied that the owners wish to pursue the
possibility of a windup and sale would be about 18 months (give or take 6
months) until the sale closes and owners receive sale proceeds.

Q

Who determines how the sale proceeds are shared
amongst the owners?

A

The Strata Property Act determines this in accordance with strict rules. Unfortunately,
the specific provision of the Act is easy to misinterpret at first glance. In nearly all
cases, the allocation will be on the basis of either the Schedule of Unit Entitlement
(relative sizes of strata lots for strata corporations created before August, 1974) or
the Schedule of Interest on Destruction (the original developer's estimate of relative
values for strata corporations created between August, 1974 and 2000).

Q

I just completely renovated the kitchen and the bathroom in my
condo unit—am I entitled to more money on a windup as a result?

A

For strata corporations created under the Strata Titles Act or the Condominium
Act, the Schedule of Unit Entitlement or the Schedule of Interest Upon Destruction,
as applicable, will apply to determine the formula for sharing the sale
proceeds—neither of these formulas takes into account the value of upgrades to a
strata lot. In addition, as the developer is typically buying the complex for
redevelopment purposes, the developer will not pay more for the complex based on
the alterations made to individual strata lots.

Q

What resolutions are required to start the process to
windup and sell?

A

Ideally, the process is started by hiring a lawyer and a realtor. The majority of
council must approve the search for those professionals. While there is no
specific approval needed to enter into contracts with either the lawyer or a
realtor, the strata corporation will likely need a ¾ vote to fund legal fees, and we
often recommend a majority vote resolution to hire the professionals primarily
to gauge owner interest.

Q

What is an 80% vote?

A

The Strata Property Act defines an 80% vote as 80% of all votes of the strata
corporation—not just of those votes in attendance in-person or by-proxy at a general
meeting. As a result, abstentions from voting on the 80% resolution, as well as the
non-attendance of a vote at the general meeting, essentially count as "no" votes.

Q

During the windup and sale process, who is responsible to
repair the common property?

A

The duty to repair and maintain the common property under section 72 of the Strata
Property Act remains with the strata corporation. So, even if the reason the strata
corporation wants to sell is because they cannot afford to repair or replace components
of their building, they will need to do those repairs to maintain the building for
at least the duration of the process to the standard of reasonableness and/or the
standard required under the purchase and sale agreement.

Q

Throughout the process, what is council's role?

A

The council will act on behalf of the strata corporation, with the assistance and
advice of the professionals it hires. The council will also need to keep the owners
informed of all the steps and information it receives about the sale and windup.
Later, when the court application to confirm the vote is made, the council will be
involved in providing the evidence necessary.

Q

How long does it take to bring the court application to
confirm the vote?

A

This is the part of the process that is most difficult to predict. You must file the
application within 60 days of the meeting at which the sale and windup was
approved by an 80% vote. Service of the application will typically take about a
month to six weeks. Then, the hearing can be scheduled. When the hearing can be
held will be determined by whether any person responds to the application and
how much time it will take for everyone to speak in front of the judge. If there is no
one responding, it can be done within a week or two. If there is someone that does
want to respond and speak in front of the judge, it can take a few months for the
hearing to be held.

Q

What does the court consider when deciding whether or not to
confirm an 80% vote resolution?

A

The court will carry out a balancing of the interests of the persons affected by a
windup, including looking at the following:

  • The best interests of the owners
  • The probability and extent of any significant unfairness to an owner or charge-holder if the windup is confirmed or not confirmed by the court
  • The probability and extent of significant confusion and uncertainty in the affairs of the strata corporation if the windup is confirmed or not confirmed by the court

Q

What happens to any funds remaining in the strata corporation's
contingency reserve fund on a windup?

A

Once all of the strata corporation's remaining financial obligations are paid out, any
funds remaining in the strata corporation (be they operating funds, contingency
reserve funds or unspent special levy funds) at the time of windup will form part of
the proceeds of the sale and will be distributed to the owners based on the formula
for the sharing of sale proceeds.

Q

Can I stay in my unit after closing?

A

The strata corporation can negotiate, as part of the terms of any purchase and sale
of the complex, the ability for owners to remain in their strata lots for a period of time
after closing. Depending on the terms negotiated, that period may be rent-free, may
be subject to an agreed rental rate or a combination of the two (say the first 3
months are rent-free, and a further period of time with an agreed rental rate).

Q

What happens to my tenant after closing?

A

In most cases, the terms of the purchase and sale agreement will require that
tenancies must be terminated by closing and that the owner cannot continue to rent
the unit after closing, even if the owner chooses to live somewhere else during the
period of time that owners are permitted to remain in their strata lots after closing.

Q

My strata corporation is in the process of marketing the complex
for a potential windup—does that prevent me from selling my
strata lot outside of a windup?

A

No—the fact that a strata corporation is in the process of considering a windup, or
even has voted in favour of a windup, does not mean that you cannot sell your
strata lot on your own.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.