Citation: Strata Corp. LMS 509 v. Andresen et al

Date:

20010207

2001 BCSC 201

Docket:

L001137

Registry: Vancouver

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN:

STRATA CORPORATION LMS 509

PLAINTIFF

AND:


BEV ANDRESEN, GORDON ANTIL, BOB BOWEN, ANN CARD,
PETER CARD, MARIE CARTER, DOREEN DARTNELL,
REG DARTNELL, JIM DOERR, JIM HANSEN, JUDY MORTENSEN
AND LAURENCE SHINDEL

DEFENDANTS

 

REASONS FOR JUDGMENT
OF THE
HONOURABLE MR. JUSTICE SKIPP

 

Counsel for Plaintiff

R.M. Shore

Counsel for Defendants

J. Mendes

Date and Place of Hearing/Trial:

November 14-15, 2000

Vancouver, BC

[1] The plaintiff Strata Corporation applies for a declaration that all owners of units at the Chelsea Green condominium complex are responsible for payment of expenses required to rectify damage to the common property of Chelsea Green in proportion to each owner's unit entitlement in the property.

[2] The plaintiff strata corporation is situate in Langley, British Columbia, and it consists of 224 residential units, and of those 224 units, 182 are attached low-rise buildings (townhouses). The remaining 42 are in a single contiguous, 3-storey block (apartments). There is a common building and pool which is available for use by all residents. There are two primary access gates to Chelsea Green which are locked and all residents have a common key which opens all entry points.

[3] The Chelsea Green complex has sustained water ingress damage, which in lay terms is the leaky condo syndrome.

[4] Predictably the fact that the estimated cost of rectification of the water ingress damage as of December 6, 1999, was $636,000.00 plus GST and because all of the rectification repairs would be to the apartment building, there is a division of opinion between the townhouse unit holders and the apartment unit holders.

[5] The townhouse unit holders submit that there are two types of strata lots within Chelsea Green, one type being the townhouse unit strata lots and the other type being the apartment unit strata lots. Their submission is that on a proper construction of the applicable legislation the costs of rectification should be directed to the apartment unit strata lots. The apartment unit strata lot owners do not agree and in their view all of the unit holders should contribute to the rectification costs on a unit entitlement basis.

[6] The defendants, whom I will refer to as the townhouse owners, seek an order dismissing the plaintiff's application and declaring that:

a. the plaintiff strata corporation is comprised of two types of strata lots, namely, strata lots 1 - 182 (the "Townhomes") and strata lots 183 - 224 located in an apartment building (the "Apartment Units" and "Apartment Building", respectively);

b. the cost of repairing the construction deficiencies in the Apartment Units and Apartment Building (the "Repair Levy") is a contribution which relates to and benefits the owners of the Apartment Units alone (the "Apartment Owners"), and must be allocated to the Apartment Owners in accordance with Strata Property Regulation s. 6.4(2);

c. in the alternative, the cost of repairing the balconies and decks of the Apartment Units is a contribution which is attributable to the limited common property of the Apartment Units and must be allocated to the Apartment Owners in accordance with s.128(3) of the Plaintiff's Bylaws.


WHAT LEGISLATION APPLIES THE CONDOMINIUM
ACT
, R.S.B.C. 1996, c.64 OR THE STRATA
PROPERTY ACT
, R.S.B.C. 1998, c.43

[7] The plaintiff's submission is that the appropriate legislation is the Condominium Act and it further submits that at all times relevant to the dispute Chelsea Green operated pursuant to the provisions of the Condominium Act. The plaintiff observes that all the pleadings filed herein prior to July 1, 2000, relied upon and referred to sections of the Condominium Act which was repealed on July 1, 2000, when the Strata Property Act came into force. Significant regulations were also proclaimed with the new Act.

[8] I refer to the transitional provisions set out in s.293 of the Strata Property Act which provide, inter alia:

293(1) Except as otherwise provided by this Act and the Regulations, this Act and the Regulations apply to a strata plan deposited and a strata corporation created under the Condominium Act, R.S.B.C. 1996, c.64 or any former Act.

It would appear on a plain reading of the now s.293(1) of the Strata Property Act and bearing in mind the changes made to these sections prior to the Strata Property Act coming into force that the legislature intended that the Strata Property Act would apply except as other-wise provided in the Act itself.

[9] The plaintiff in urging that the Condominium Act should be the governing Act to resolve the questions raised herein relies on Butterfield v. Strata Plan NW 3214, [2000] B.C.J. No. 1520 (Q.L.); 2000 BCSC 1110. Shortly put, I find Butterfield to be distinguishable. The Strata Property Regulations contemplate expense allocations of the nature raised herein and they provide mechanisms for strata corporations operating under the Condominium Act. Given that the legislature has provided direction in these matters I find that the Strata Property Act and the Strata Property Regulations govern this dispute, although events prior to July 1, 2000, will be relevant in determining how the repair levy is to be treated as an expenditure.

DIVISION TWO - CONTRIBUTION TO EXPENSES

[10] I refer to s.99(1) of the Strata Property Act:

Subject to s.100, owners must contribute to the strata corporation their strata lots' shares of the total contributions budgeted for the operating fund and contingency reserve fund by means of strata fees calculated in accordance with this section and the Regulations.

[11] "Operating fund" is defined in s.1 of the Strata Property Act as meaning:

a fund for common expenses that usually occur either once a year or more often than once a year, as set out in s.92(a).

"Contingency reserve fund" is defined as meaning:

a fund for common expenses that usually occur less often than once a year or that do not usually occur, as set out in s. 92(b).

[12] Section 99 stipulates that all owners must contribute to the operating and contingency reserve funds in accordance with their unit entitlement, a requirement made subject to exceptions for types of strata lots and limited common property by s.6.4 of the Strata Property Regulation. That section reads:

6.4(1) For the purposes of s.99 of the Act, but subject to a resolution under s.100 of the Act, if a contribution to the operating fund relates to and benefits only limited common property, the contribution is shared only by owners of the strata lots entitled to use the limited common property, and each strata lot's share of that contribution is to be calculated in accordance with the following formula and not in accordance with the formula set out in section 99(2) of the Act:

unit entitlement of strata lot
__________x contribution to operating fund
total unit entitlement of all strata
lots whose owners are
entitled to use the
limited common property
to which the contribution relates

the result of which is that the cost is shared amongst those owners entitled to use the limited common property.

[13] Section 6.4(2) sets out the following:

6.4(2) For the purposes of s.99 of the Act, but subject to a resolution under s.100 of the Act, 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 by-laws of the strata corporation, the contribution is shared only by owners of strata lots of that type, and each strata lot's share of that contribution is to be calculated in accordance with the following formula and not in accordance with the formula set out in s.99(2) of the Act:

unit entitlement of strata lot
__________x contribution to operating fund
total unit entitle-
ment of all strata lots
of the type to which the
contribution relates

and s.99(2) contains the provision where the cost is shared equally by all strata lots.

[14] From the sections that I have referred to and for the formula set out in Regulation 6.4(2) to have reference to the repair levy, in this case the following facts must exist:

1. That there is more than one type of strata lot at Chelsea Green and the types are identified as types in the bylaws.

2. That the contribution being made is to the operating fund.

3. That the contribution relates to and benefits only one type of strata lot.

[15] Is there more than one type of strata lot at Chelsea Green and if that is the case have the types been identified as types of strata lots in a bylaw?

[16] In determining whether there are different types of strata lots at Chelsea Green one must refer to the Strata Property Act and to the Strata Property Regulation for guidance. Section 191(1)(c) of the Strata Property Act provides that a strata corporation can have "sections".

[17] For the purpose of representing the different interests of "owners of different types of residential strata lots" s.191(2) provides that,

For the purposes of ss.1(c) strata lots are different types if they fall within the criteria set out in the Regulations.

[18] Section 193 outlines the procedure for the creation of, or cancellation of sections. It provides, inter alia:

193(1) To create or cancel sections, the strata corporation must hold an annual or special general meeting to consider the creation or cancellation.

(2) The notice of meeting must include

(a) a resolution to amend the bylaws to provide for either the creation and administration of each section or the cancellation of the sections, and

(b) any resolutions to designate limited common property, in accordance with s.74, for the exclusive use of all the strata lots in a section or to remove a designation in accordance with s.75.

(3) The resolution referred to in ss.2(a) must be passed:

(a) by a 3/4 vote by the eligible voters in the proposed or existing section, and

(b) by a 3/4 vote of all the eligible voters in the strata corporation.

[19] Part 11 of the Strata Property Regulation deals with "sections". Section 11.1 provides:

For the purposes of s.191(1)(c) of the Act, the following are the different types of residential strata lots:

(a) apartment style strata lots;

(b) townhouse style strata lots;

(c) detached houses

[20] Part 11 outlines formulas for sharing operating expenses for limited common property and types of strata lots in sections. Section 11.2(2) provides:

For the purposes of s.195 of the Act, but subject to a resolution under s.100 of the Act, if a contribution to the operating fund relates to and benefits only one type of strata lot in a section, and that type is identified as a type of strata lot in the bylaws of the section, the contribution is shared only by owners of strata lots of that type, and each strata lot's share of that contribution is to be calculated in accordance with the following formula and not in accordance with the formula as set out in s. 195 of the Act.

[21] Part XVII of the Strata Property Regulation also deals with types of strata lots. Section 17.13 provides:

(1) Subject to the bylaws of the strata corporation, if a strata corporation's budget, in effect on the coming into force of this section, apportions any common expenses to one or more type of strata lot in accordance with s.128(2) of the Condominium Act or a similar bylaw, the strata corporation may continue to use the type of strata lot identified in the budget as a type of strata lot for the purposes of sections 6.4(2) and 11.2(2) of this Regulation.

...

(3) Before January 1, 2002, a strata corporation may enact a bylaw that identifies the type of strata lot set out in the budget referred to in subsection (1) as a "type of strata lot" for the purposes of sections 6.4(2) and 11.2(2).

(4) Despite s.128(1) of the Act, a bylaw under ss.(3) may be approved by a resolution passed by a majority vote at an annual or special general meeting.

[22] Section 128 of the Condominium Act deals with common expenses and provides, inter alia,

(1) The strata lot owner's contribution to the common expenses of the strata corporation must be levied in accordance with this bylaw.

(2) If a strata plan consists of more than one type of strata lot, the common expenses must be apportioned in the following manner:

(a) common expenses attributable to one or more type of strata lot must be allocated to that type of strata lot and must be borne by the owners of that type of strata lot in the proportion that the unit entitlement of that strata lot bears to the aggregate unit entitlement of all types of strata lots concerned;

(b) common expenses not attributable to a particular type or types of strata lot must be allocated to all strata lots and must be borne by the owners in proportion to the unit entitlement of their strata lots.

(3) If a strata plan includes limited common property, expenses attributable to the limited common property which would not have been expended if the area had not been designated as limited common property must be borne by the owners of the strata lots entitled to use the limited common property in proportion to the unit entitlement of their strata lots.

[23] It would appear that the legislators intended in s. 193 of the Strata Property Act to provide a mechanism for strata owners to form sections based on types of strata lots for the purpose of apportioning expenses. Chelsea Green has not invoked this mechanism. Even so, the legislature has provided a means in s.17.13 of the Strata Property Regulation for strata corporations to continue to apportion expenses to one or more type of strata lot in accordance with s.6.4(2) and 11.2(2) of the Strata Property Regulation, provided that the budget of the strata corporation in effect on July 1, 2000, apportioned common expenses to one or more type of strata lot in accordance with s.128(2) of the Condominium Act.

[24] The budget of Chelsea Green in place on July 1, 2000 does in fact apportion some expenses to the townhouse strata lots and some to the apartment strata lots. Section 17.13 of the Strata Property Regulation sets out that subject to the bylaws of the strata corporation, if the budget has apportioned any common expenses to one or more type of strata lot in accordance with s.128(2) of the Condominium Act or similar bylaw the strata corporation may continue to use the type of strata lot identified in the budget as a type of strata lot for the purposes of s.6.4(2) and 11.22 of this Regulation.

[25] It is further noted that that option is permissive and not mandatory. This phrasing, together with the mechanisms set out in s.193 of the Strata Property Act empowers the owners of strata corporations to make their own decisions with respect to the allocation of costs related to expenditures such as the repair levy.

[26] Should the townhouse owners be required to contribute to the repair levy? Since the Strata Council levied all of the Chelsea Green unit holders, even assuming that the requirements of s.17.13(1) of the Strata Property Regulation, with reference to s.128(2) of the Condominium Act have been met, it is clear that the strata corporation has chosen not to continue to use the types of strata lot identified in the budget for the purposes of s.6.4(2) and 11.2(2) of the Regulation at least with respect to the repair levy.

[27] In my view the Strata Council, in opting not to use the types of strata lot identified in the budget, has acted within the discretion afforded to it by the legislation.

[28] The Strata Council issued its repair levy in December 1999 and three months earlier on September 8, 1999, a Special Resolution was put forward at an Extraordinary General Meeting of Chelsea Green Strata Council. The resolution read:

BE IT RESOLVED as a Special Resolution of the owners, Strata Plan LMS 509, Chelsea Green, that under Chelsea Green's by-laws and the Condominium Act, S.128, that Strata Plan LMS 509 consists of more than one type of Strata Lot, that is Apartment and Townhouses, and accordingly all expenses attributable to either Apartment or Townhouses shall be levied and borne by the owners of that type of Strata Lot.

This Resolution failed to attract the requisite approval.

[29] Having concluded that the Strata Council were acting within their jurisdiction in concluding that there is only one type of strata lot, the owners' opportunity for redress is as set out in s.17.13 of the Strata Property Regulation. That is, by the enactment of a bylaw pursuant to the provisions of s.17.13(3), identifying the types of strata lot set out in the budget referred to in ss.(1) as "types of strata lot", for the purposes of sections 6.4(2) and 11.2(2).

[30] Alternatively, the owners could put forward a Resolution pursuant to the provisions of s.193 of the Strata Property Act which section deals with the creation or cancellation of sections by strata corporation.

[31] It is the plaintiff's submission that regardless of what procedure could have been followed by townhouse unit owners, either procedure would have to have been accomplished prior to the water ingress damage having occurred. To create separate types of strata lots to effect retroactively the allocation of the repair levy would be unfair. The repair levy herein was assessed in December 1999, although the problem had manifested itself much earlier.

[32] When the September 8, 1999, Resolution was moved, the costs of rectifying the water ingress damage had not been established and when it was, the Strata Council elected not to resort to the mechanism available to it via s.17.13(1) of the Strata Property Regulation and I find their decision to be consistent with the condominium concept as enunciated by Bauman J. in the Royal Bank of Canada v. Holden (1996), 7 R.P.R. (3d) 80 (B.C.S.C.), wherein he referred to the condominium concept of people living together in individually owned units within a common shell.

[33] If my conclusion that the Strata Council acted within its jurisdiction in electing not to invoke the provisions of s.17.13(1) of the Strata Property Regulation to establish two types of strata units is deemed to be incorrect, then in order for a bylaw enacted pursuant to s.17.13(3) of the Strata Property Regulation to achieve the effect of allowing the costs of the repair levy to be allocated in accordance with s.6.4(2) and 11.2(2) of the Regulation, it would be necessary to comply with the remaining requirements set out in s.99 of the Strata Property Act and s.6.4(2) of the Strata Property Regulation.

[34] A number of definitions in the Strata Property Act are pertinent in determining whether the contribution being sought is one that is appropriately characterized as a contribution to the operating fund. Operating fund is defined in s. (1) of the Strata Property Act to mean "a fund for common expenses that usually occur either once a year or more often than once a year, as set out in s.92(a) [of the Strata Property Act]". Common expenses are defined in s.(1) of the Strata Property Act to mean expenses that are

(a) relating to the common property and common assets of the strata corporation, or

(b) required to meet any other purpose or obligation of the strata corporation.

[35] Section 92 of the Strata Property Act sets out that to meet its expenses the strata corporation must establish, and the owners must contribute, by means of strata fees, to

(a) an operating fund for common expenses that usually occur either once a year or more often than once a year, and

(b) a contingency reserve fund for common expenses that usually occur less often than once a year or that do not usually occur.

[36] It would appear to follow that in order for the repair levy to be properly characterized as a contribution to the operating fund, it necessarily must be

(1) a common expense that

(2) usually occurs once or more each year.

Conversely, if a levy can be properly characterized as a contribution to the contingency reserve fund then all of the owners, regardless of the type of strata they own, would pay on a unit entitlement basis. Such a finding would require that the contribution be

(1) a common expense that

(2) usually occurs less often than once a year or that does not usually occur.

[37] The provisions of s.128 of the Condominium Act, incorporated into the bylaws at Chelsea Green are helpful. The language employed in s.128 of the Condominium Act suggests that one indication that an item is a common expense is that it is budgeted. This observation is consistent with the remarks of Bauman J. in Royal Bank of Canada v. Holden, supra, wherein he noted that common expenses in the context of s. 128 of the Condominium Act would be only those expenses levied under s. 128(10) as part of the annual budget.

[38] I am of the view that this interpretation of the judgment is not correct. Bauman J. was clear in his finding that the repair levies arose because of the need to repair critical portions of the common property as is the case here. Prima facie this finding would fit within the definition of common expense in the Strata Property Act as outlined above,

Common expenses are also defined in s.(1) to mean expenses that are

(a) relating to the common property and common assets of the strata corporation.

[39] In Royal Bank of Canada v. Holden, supra, the issue was what constitutes common expenses for the purposes of statutory priority pursuant to the provisions of s.37(2) of the Condominium Act, R.S.B.C. 1979 c.61. Bauman J. observed that the repair levies were not contemplated by the annual budget as the expenses arose unexpectedly during the year, between the budgets. Secondly, referring to s.35(1)(b) and (d) the court noted that the levies were not intended to top up the contingency reserve fund.

[40] Section 35 of the Condominium Act at that time contemplated a "reserve fund being established for extra-ordinary future expenses". It permitted "the levying of contributions on the individual owners". It also permitted the strata corporation to make expenditures out of the contingency reserve fund when necessary to meet extraordinary expenses, as they materialized. Noting that the levies were not made out of the contingency reserve fund it was assumed in the circumstances that there was simply not sufficient monies for the needed repairs. Thus, rather than rising out of the annual budget, the levies arose by special resolution.

[41] The court concluded that the definition of common expenses in s.37(7) of the Condominum Act was inclusive and not exclusive, and that given the strata corporation's duty to repair and maintain common property the expenses related to the repair levies were authorized and enjoyed priority. A repair levy, such as the one here at issue, is related to common property and I find constitutes a valid common expense.

[42] The defendant submits that the cost of the rectification repairs is properly attributable to the operating fund. It was further submitted that the repair levy would be expected to form part of the administrative fund (now the operating fund) because expenses related to water ingress damage have occurred annually since at least 1995.

[43] The defence submits further that the repairs to the apartment building's exterior were not random but were instead the result of significant construction defects for which Chelsea Green was financially responsible. Without enumerating these defects, in June 1997 Strata Council was made aware the developer would no longer assume responsibility for any future building envelope repairs.

[44] In October 1997, the balconies and the stucco problems were apparent. In January 1998, Strata Council approved a contractor's quote to repair these defects. The work began shortly thereafter and by April 20, 1998, Strata Council had been advised that rot had been exposed in the apartment balcony soffits and finally the November 24, 1998, Spratt report set out that structural rot existed in the apartment building and that a complete rehabilitation of its exterior walls was required.

[45] The submission that the defendant makes arising out of the foregoing facts is that by May 1, 2000, the commencement of the plaintiff's last annual budget under the Condominium Act expenses to repair the apartment building's envelope had become a normal, foreseeable and indeed inevitable feature confronting the Strata Council. The defendant submits these expenses could no longer be considered as unusual or extraordinary draws on the contingency reserve.

[46] In Marco Polo Properties Ltd. v. Strata Plan LMS 1328 (1999), 71 B.C.L.R. (3d) 188, Davies J. upheld the decision of a strata corporation to include the cost of its building envelope repairs in its administrative fund. He said at paras. 19 to 22,

I am satisfied that in the circumstances of this case the inclusion of the remedial cost to repair the waterproof envelopes of the buildings in this development was properly included in the respondent's annual budget under 35(1)(a). That section requires that a strata corporation must:

Establish a fund for administrative expenses sufficient for the control, management and administration of the common property, for the payment of premiums on policies of insurance and for the discharge of other obligations of the corporation.

[47] The phrase "and for the discharge of other obligations of the corporation" as per Davies, J., as he then was in Marco Polo, included the strata corporation's duty to repair as mandated by s.14, 34(1)(d) and 116(b), (d) and (f).

[48] Further with respect to the strata corporation's duty to repair I refer again to Royal Bank of Canada v. Holden, supra, in which Bauman J. wrote at para. 17:

The strata corporation has certain essential duties under the Act to maintain common property, common facilities, and assets of the strata corporation. These are fundamental duties, and I perceive, their execution by the strata corporation is critical to the realization of the condominium concept - that is people living together in individually owned units within a common shell.

[49] In Marco Polo the court referred to the fact that a $2,467,000.00 levy to repair the defects related to water ingress damage could not be paid from the contingency reserve fund for both practical and legal reasons. Davies J. observed that in his view the use of funds from the contingency reserve fund for such purposes was not mandatory as s.35(1)(b) of the Condominium Act mandates that those funds be used to create a fund for unusual or extraordinary future expenses.

[50] Davies J. went on to observe that aside from the practical problem of the contingency reserve fund not having sufficient funds to pay for the repairs he found that the repairs then required were not future repairs but they were repairs required imminently and on an urgent basis, and that they had continued as such on an annual basis since the project was completed. Generally speaking I find that factual situation to be remarkably similar to the situation confronting Chelsea Green.

[51] In my view the observations of Davies J. in Marco Polo and his characterization of the repair levy have not been diminished with the advent of the Strata Property Act. Expenses concerning interim and emergency repairs to the apartment building envelope, investigative work, design work and remedial work will continue to be incurred each year that the building is not repaired.

[52] The townhouses will also require more modest envelope repairs as the time goes by. I find that the repair levy can therefore be correctly characterized as an operating fund expenditure. I have come to this conclusion notwithstanding the fact that similar repairs such as those undertaken to eight balconies of the apartment building in early 1998 were effected through the contingency fund.

[53] Should the conclusion, that there is only one type of strata lot in Chelsea Green prove to be incorrect, the issue to then be addressed is can the repair levy be characterized as a contribution that relates to and benefits only one type of strata lot. In my view the repair levy would relate to and benefit the townhouse strata lots, as well as the apartment unit strata lots.

[54] In that regard I refer to the evidence of Jeff Potoraka of Royal Appraisals, to the effect that there has been a diminution in the value of the townhouse units in Chelsea Green exceeding the average downturn in value of condominiums in Langley. As well, it would seem to be a defensible proposition that the repair levy will be of benefit to both the townhouse strata lots and to the apartment unit strata lots in terms of increased saleability.

[55] The defendants submit in the further alternative that the balconies and decks of the apartment units are limited common property and thus according to s.128(3) of the plaintiff's bylaws and 128(3) of the Condominium Act, expenses attributable to these areas should be borne by the owners of the strata lots entitled to use the limited common property in proportion to the unit entitlement of their strata lots.

[56] Limited common property is defined in s. (1) of the Strata Property Act as:

common property designated for the exclusive use of the owners of one or more strata lots.

[57] Although the balconies and decks in their daily use may be considered limited common property, as these areas relate to the structure of the apartment building, I find them to meet the definition of common property, as outlined above. As such, the repair of these areas falls under the obligations of Chelsea Green.

CONCLUSION

[58] In conclusion I find that the Strata Property Act and the Strata Property Regulation are the relevant legislation. Through the operation of s.99(1) of the Strata Property Act I find that the repair levy should be allocated to all strata lot owners on a unit entitlement basis with no exception arising under the Regulation. Accordingly, the application of the plaintiff is successful and the townhouse owners are required to share in the costs of the repair levy on a unit entitlement basis.

[59] Counsel has agreed that there is to be no order as to costs.

"H.L. Skipp, J."
The Honourable Mr. Justice H.L. Skipp

Vancouver, B.C.
February 7, 2001