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The B.C. Court of Appeal Weighs in on Strata Wind-Ups

The B.C. Court of Appeal recently weighed in, for the first time, on the interpretation and application of the strata wind-up provisions in Part 16 of the Strata Property Act, (the “Act).  This is the first appellate decision to consider this aspect of the Act.  It is an important decision because the court confirmed the validity of the practice and procedures for strata wind-ups that have developed in the last two years, since the amendments to the Act reduced the voting requirement to 80%. 

Prior to July 2016, every owner in a strata had to agree to its wind-up.  As the Court of Appeal noted, this effectively gave "every owner a veto" over the prospect of a provident sale of the strata lands.  This requirement was so onerous that almost no strata corporations were ever wound up and there had been only been one court case (a three unit strata) that resulted in a wind-up. 

For a variety of policy and practical reasons, in July 2016, the Legislature reduced this voting requirement from unanimity to an 80% vote (or "super majority") of all strata owners (not just those attending the special general meeting).  Since then, several stratas in the lower mainland have been wound-up and sold to developers for prices in excess of their aggregate market value.  The difficulty for the courts and the legal profession is that the wind-up provisions of the Act are somewhat archaic and do not clearly set out how, as a practical matter, the process of a wind-up is to take place.  In making this amendment, the Legislature did not update the wind-up legislation other than changing the voting requirement.  Winding-up a strata for a sale remains a complicated process involving many parties and competing interests. 

However, the recent decision by the Court of Appeal provides comfort and guidance to strata owners that, provided they follow the right process, a wind-up can be successfully achieved.

The appellate decision involved a 33 unit strata in Vancouver’s West End known as The Hampstead.  Over 80% of the owners voted to wind-up and sell the land to a developer, in part to avoid anticipated repair costs.  The strata council had engaged commercial realtors and, after a marketing process, signed a sale contract with a purchaser that was conditional on a wind-up vote being successful.  After an 80% vote at a special general meeting, the B.C. Supreme Court granted an order confirming the wind-up, appointing a liquidator and approving the sale. 

However, four dissatisfied owners appealed this decision.  They advanced a number of arguments, including that the strata council did not have the authority to market and conditionally sell the strata lands and that the strict procedural requirements of the Act had not been followed, rendering the whole process null.

The Court of Appeal rejected these arguments and the strict interpretation of the Act advanced by the appellants.  The court found that a strata council does have the authority to enter into a sale contract subject to a wind-up vote by owners.  As the court noted, if a proposed sale contract is not before the court as part of a wind-up confirmation, this “would prevent the court from affording meaningful protection to the dissenting owners, creditors, and charge holders.”

The court also rejected a strict or technical interpretation of the Act.  The appellants had argued that additional information provided to owners as part of the wind-up resolution was confusing and not specifically authorized under the legislation.  They disagreed and found that “the inclusion of additional information” did not “amount to non-compliance” under the legislation.  The court concluded:

In short, while I agree . . .  that the mandatory requirements of the winding-up process must be complied with, . . .  they do not prevent the strata council or the liquidator from going beyond the minimum requirements, as for example, in obtaining court approval of a particular agreement, as long as those steps are not inconsistent with the provisions of the Act.

The Court of Appeal also commented on and helped define the role of the liquidator in the wind-up process.  A liquidator does not necessarily need to be a “professional”, nor are they required to have “special abilities”, though they are “assuming important responsibilities”.  A liquidator may engage the services of other professionals, if necessary.  The liquidator’s role is primarily:

To act as a conduit for the transfer of the lands and as a court-appointed and approved person responsible for making sure that creditors and charge holders are paid out and that each owner receives the share of the net sale proceeds he or she is entitled to under the interest schedule.

This Court of Appeal decision provides comfort to strata owners that a wind-up and sale can be achieved. It also provides guidance to the profession on the essential procedural and legal steps to be taken to get there.  Provided the process of a wind-up is done properly, the courts are not going to interfere on technical grounds with the wish of an 80% majority wanting to sell their strata.

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Our Real Estate Law Blog provides brief commentary on current legal trends and developments affecting your business. The topics addressed in Lawson Lundell’s Real Estate Law Blog are of interest to commercial real estate developers, real estate and strata agents, investors, landlords and tenants, as well as a variety of industry groups. 

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