Fundamentals of the Strata Corporation: An Introduction
A strata corporation is a form of organizing property which aims to accommodate individual ownership of private property within a collective, multi-unit structure.
Central to the strata property concept are two core elements:
- the division of property into units (the strata lots) and common elements (under shared ownership), and
- an administrative framework which enables the owners of the units to manage the property.
The strata corporation is responsible for managing and maintaining the common property and common assets of the strata corporation for the benefit of the owners.
This article focuses on the essential character of the strata corporation and its core powers and obligations.
Distinct from the Strata Community
The strata corporation is a distinct legal entity. It stands in contrast to the strata community. The strata community is the community shared by all the strata lot owners.
The Strata Corporation is a Creature of Statute
The strata corporation is created pursuant to the Strata Property Act. There is no basis for the strata property structure in the common law. Thus, the strata corporation is a creature of statute. All rights, powers, obligations and duties of the strata corporation exist solely because of legislation passed in British Columbia.
The Strata Property Act provides that a strata corporation is created automatically when a strata plan is deposited in the land title office. Once the strata corporation is created, the owners of all the lots in the strata plan become members in the strata corporation.
The Powers of the Strata Corporation
Generally, the powers and duties of the strata corporation, as outlined in the Strata Property Act, must be exercised and performed by a council.
Although it occurs infrequently, an exception to this rule arises when the strata corporation chooses to direct or restrict the council in its exercise of powers and performance of duties. The strata corporation must pass a resolution by majority vote at an annual or special general meeting to direct or restrict the council in the exercise of its powers and performance of its duties. Further, the strata corporation cannot direct or restrict the council if the direction or restriction:
- Is contrary to the Strata Property Act, the Strata Property Regulation or the strata corporation’s bylaws, or
- Interferes with the council’s discretion to determine if a person:
- Has contravened a bylaw or rule,
- Should be fined, and the amount of the fine,
- Should be denied access to a recreational facility
- Should be required to pay the reasonable costs of remedying a contravention of the bylaws or rules, or
- Should be exempted from a bylaw that prohibits or limits rentals
There are two types of powers which the strata corporation wields: statutory powers stated in the Strata Property Act and natural person powers.
Statutory Powers of the Strata Corporation
The Strata Property Act is the primary source of the strata corporation’s powers, rights, duties and obligations. The statutory powers provided to the strata corporation include the power to:
- Create bylaws which provide for the control, management, maintenance, use and enjoyment of the strata lots, common property and common assets of the strata corporation, the administration of the strata corporation and the creation or cancellation of sections
- Create rules governing the use, safety and condition of the common property and common assets
- Enforce the bylaws and rules of the strata corporation
- Repair and maintain the common property, common assets and, potentially, the property of strata lot owners
- Designate common property as limited common property of a specified strata lot owner or remove such a designation
- Perform work ordered by a public or local authority which has been authorized by law to require work on common property, land that is a common asset, or a strata lot (if the owner fails to do the required work)
- Create and retain records
- Hold meetings
- Establish an operating fund and contingency reserve fund
- Prepare a budget for each fiscal year
- Raise money from owners by means of a special levy
- Impose user fees on owners, tenants, occupants, or their visitors for the use of common property or common assets
- Register a lien against a strata lot if the owner fails to make payments to the strata corporation, and then apply to the Supreme Court for an order for the sale of a strata lot which has a Certificate of Lien registered against it
- Obtain and maintain:
- property insurance,
- liability insurance against liability for property damage and bodily injury,
- errors and omissions insurance for council members,
- insurance for other perils or liabilities of the strata corporation,
- property insurance for fixtures built or installed on a strata lot that were not built or installed by the owner developer
Natural Person Powers of the Strata Corporation
In addition to statutory powers, the Strata Property Act provides strata corporations with the ‘the powers and capacity of a natural person of full capacity’. These ‘natural person powers’ are subject to any limitations outlined in the Strata Property Act.
In general, the powers referred to as the “natural person powers” include:
- The ability to enter into legal agreements, like contracts
- The ability to buy and dispose of land and other assets
- The ability to hire and manage employees
- The ability to take or be the subject of legal actions
Restrictions on Natural Person Powers
In addition to the statutory powers identified above, the Strata Property Act explicitly identifies powers which may be exercised by a strata corporation in its capacity as a natural person of full capacity. In addition to identifying these powers, the Strata Property Act imposes limits on the exercise of some of these powers. These restricted natural person powers include the power to:
- Enter into agreements with owners or tenants for the short term exclusive use of common property or common assets
- Enter into contracts or join organizations
- Acquire land or personal property in the name of the strata corporation
- Sell, lease, mortgage or otherwise dispose of common assets
- Borrow money and secure repayment of borrowed money
- Enter into lawsuits or dispute resolution processes
Core Obligations of the Strata Corporation
The following core obligations are central to the operation and good governance of the strata corporation:
- Repair and maintenance
- Regulation of the use of common property and assets
- Record keeping
In this section, the scope and importance of each obligation list above will be reviewed.
Repair and Maintenance
The responsibility for the repair and maintenance of property is governed by the Strata Property Act and the strata corporation’s bylaws. Depending on the nature of the property (common property, limited common property, common assets or a part of a strata lot), and the strata corporation’s bylaws, responsibility for repair and maintenance lies with either the strata corporation or the strata lot owner.
Generally, the strata corporation is responsible for repair and maintenance of the common property and common assets. However, by bylaw, the strata corporation may make an owner responsible for the repair and maintenance of common property which has been designated for the exclusive use of the owners of one or more strata lots (“limited common property”). Further, the Act grants the strata corporation the power to make an owner responsible for the repair and maintenance of common property other than limited common property if it is identified in the Strata Property Regulations—although at this time, no such common property is identified in the regulations.
Where the repair and maintenance of a strata lot is concerned, the owner is generally responsible for repairs and maintenance. However, a strata corporation may, by bylaw, take responsibility for the repair and maintenance of specified portions of a strata lot. For example, section 8(d) of the Standard Bylaw provides that the strata corporation will repair and maintain portions of a strata lot including:
- the structure and exterior of a building,
- chimneys, stairs, balconies and other things attached to the exterior of a building,
- doors, windows and skylights that front on common property, and
- fences, railings and similar structures that enclose patios, balconies and yards.
The Strata Property Act also grants the strata corporation the power to step in and perform work required by a public or local authority. This power includes the ability for strata corporations to perform repair and maintenance on strata lots where a strata lot owner has failed to comply. This power functions as a saving provision and allows the strata corporation to meet the orders of public and local authorities on a timely basis where necessary.
Why is the Strata Corporation’s Obligation to Repair and Maintain Important?
The repair and maintenance powers granted to the strata corporation are essential for the upkeep and good repair of the common property and common assets shared by owners as well as the elements of the strata lots which the strata corporation has an interest in maintaining and keeping in good repair. The repair and maintenance powers of the strata corporation allow the strata corporation to make necessary repairs and perform maintenance without requiring the coordination of individual owners.
The flexibility of the repair and maintenance powers regarding the repair and maintenance of limited common property allows the burden of repair and maintenance to be allocated to the owner or owners which benefit from the use of the common property and assets. This relieves the strata corporation from the burden of repair and maintenance for common property that does not benefit all owners.
In summary, the repair and maintenance powers and duties of the strata corporation perform two key functions:
- they allow the strata corporation to allocate responsibility for repair and maintenance of common property and assets to the owners who have exclusive use, and
- they require the strata corporation to repair and maintain the common property and assets which are jointly held and used by all owners.
Under the Strata Property Act, the strata corporation is required to obtain and maintain forms of property and liability insurance. The Strata Property Act also grants the strata corporation the permission to secure insurance for other matters, including:
- errors and omissions of the strata council,
- fixtures on a strata lot which were not bult or installed by the owner developer, and
- any other peril or liability which the strata corporation is not required to insure against.
The obligation to insure property is broader than the strata corporation’s duty to repair and maintain and its legal ownership of property. While the strata corporation owns neither the common property nor the strata lots, it is required by the Act to obtain property insurance in respect of the common property and for some aspects of the strata lots. Specifically, the Act imposes the obligation on the strata corporation to obtain and maintain property insurance on the strata lots as they were originally constructed by the owner developer.
The Act also restricts the capacity of owners to obtain insurance. The Act only permits owners to obtain insurance in limited circumstances, including:
- for their strata lot,
- against perils which have not been insured by the strata corporation and for amounts that are in excess of the amounts insured by the strata corporation,
- improvements the owners have made to the fixtures on their strata lot, and
- liability for property damage and bodily injury (whether occurring on the owner’s strata lot or on the common property).
Why is the Strata Corporation’s Obligation to Insure Important?
The powers and duties of the strata corporation to obtain and maintain insurance has the benefit of avoiding a patchwork of insurance secured under a multitude of insurance plans held by the individual owners. If owners were permitted or required to obtain insurance on the common property of the strata corporation, they would only be able to obtain insurance to the extent of their insurable interest in the common property. In effect, every owner would need an insurance policy.
The Act allows owners to secure their own insurance in respect of their own property and liability while limiting the overlap of coverage between the strata corporation and the individual owner. For example, owners are also able to insure things not insured by the strata corporation, such as improvements to fixtures and fixtures not originally installed by the owner developer. This allows owners to still improve their private property as they see fit and insure it to their own satisfaction.
In summary, the Strata Property Act tries to balance ensuring that the collective property interests of all owners are protected while allowing individual owners the flexibility to insure their private property as they see fit. To achieve this, the scheme creates a minimum threshold for the insurance of common property and common assets and ensures that the common property interests of owners are protected under the strata corporation’s insurance coverage. The Act also provides owners with some flexibility and allows them to insure their private property independently.
Regulation of the Use of Common Property and Private Property
The Strata Property Act provides that bylaws may provide for the control, management, maintenance, use and enjoyment of the strata lots, common property and common assets of the strata corporation. Importantly, the bylaw power allows strata corporations to adopt bylaws regulating strata lots.
The strata corporation’s power to regulate strata lots and the private property of owners is not unlimited. Bylaws are only enforceable if they provide for the control, management maintenance, use and enjoyment of the strata lots, common property and common assets and are not in contravention of the Strata Property Act or any other law.
Why is the Strata Corporation’s Obligation to Regulate Common and Private Property Important?
At its core, the regulation of common and private property by the strata corporation is a democratic process aimed at creating a harmonious community. Since all bylaws must be adopted by resolution approved by a ¾ vote by the owners, the strata corporation is only able to govern the use of common and private property with the consent of the owners.
By regulating the use of private property, the strata corporation is able to impose community consensus on the permissible use and enjoyment of strata lots. As the court recognized in The Owners, Strata Plan LMS 4255 v Newell, 2012 BCSC 1542 at para 88:
one of the basic principles of condominium living…[is] that the proximity dictates that some forbearance and discretion is required of the occupants of such properties in order to avoid the infliction of misery upon fellow occupants. The Bylaws …exist to that end.
Ultimately, the bylaw powers in the Strata Property Act give strata corporations the ability to formalize community principles, create predictable restrictions on activities on the strata property and promote harmony among community members. This is achieved by creating rules and bylaws which facilitate fair community enjoyment of the strata property’s private and common properties for all.
The Strata Property Act requires the strata corporation to prepare and retain a significant number of records. Records which the strata corporation is required to prepare include:
- minutes of all general and council meetings,
- lists of council members, owners, mortgagees, and tenants, and
- books of account showing money received and spent.
Records which the strata corporation is required to retain include:
- all records which it creates,
- the bylaws and rules of the strata corporation,
- the strata plan and any amendments,
- correspondence sent or received by the strata corporation and council,
- resolutions that deal with changes to common property,
- bank statements,
- depreciation reports, and
- legal opinions provided to the strata corporation.
The Strata Property Act requires the strata corporation to make available nearly any retained records to an owner, tenant or authorized person upon request. This obligation extends to former owners and tenants when the requested records are from the period in which the former owner or tenant was an owner or tenant of the strata property.
The Strata Property Act also requires the strata corporation to give an owner, purchaser or person authorized by an owner or purchaser, an Information Certificate if requested. The Information Certificate must disclose a wide range of information related to the strata corporation and the strata lot for which the request is made. The information in the Information Certificate is binding on the strata corporation, if the person who received the Information Certificate relied on the information and acted reasonably in doing so.
Why is the Strata Corporation’s Record Keeping Obligation Important?
The record creation and maintenance powers of the strata corporation are necessary for the good governance and the transparent administration of the strata corporation. The creation, retention and release of records to authorized individuals promotes transparency and accountability of the strata corporation. For example, an owner concerned with the governance of the strata corporation may conduct a review of the strata corporation’s records without providing justification. Further, the breadth of the records required to be retained would likely provide any requesting person with the full range of information necessary to understand the basis for a decision made or action taken by the strata corporation.
Additionally, by requiring the strata corporation to maintain records on owners and tenants, the Act facilitates the community building goals of the strata property scheme by ensuring that members of the strata corporation are able to ascertain the identities of their neighbours and those with who they share interest in the common property.
Tension Point – Regulation of Private Property and the Reasonable Intrusion into the Exercise of Private Property Rights
It is undeniable that the Strata Property Act permits the strata corporation to intrude into the private ownership rights of strata lot owners through the imposition of bylaws. While owners may dislike such an intrusion into their private property rights, the capacity to regulate private property is an essential element of the strata property concept. Since every individual strata lot shares a boundary with either common property, limited common property, other strata lots or a combination thereof, the use of a strata lot has the potential to impact the use and enjoyment or repair and maintenance of other strata lots or common property. The nature of strata property living, in particular the proximity within which owners find themselves, necessitates some degree of restraint from each individual strata lot owner to avoid unreasonably impacting the property rights and use and enjoyment of other owners.
However, the intrusion into any given owner’s private property rights should be clearly defined and limited. Any intrusion should be predictable and identifiable. Written bylaws and rules, which are retained by the strata corporation and produced upon request, provide this predictability, certainty and transparency. Any intrusion into the private property rights of a strata lot owner should be based on promoting the reasonable use and enjoyment of common property, common assets and other strata lots.
The strata corporation is created through the operation of the Strata Property Act. Under the Strata Property Act, the strata corporation has both statutory powers and the power of a natural person. Although, those natural person powers may be restricted by legislation. Thus, when the strata corporation anticipates the use of its powers, the strata corporation should consider both the relevant restrictions imposed by the Strata Property Act and its core obligations under the Strata Property Act.