Strata Corporation

 

Every strata development involves a strata corporation.

Creation

A developer creates a strata corporation by depositing the strata plan in the Land Title Office. Section 2 of the Strata Property Act says,

As a corporate entity, the strata corporation is, in law, an artificial person. Subject to the Strata Property Act and the regulations, a strata corporation has the legal capacity of a natural person. A corporation can enter contracts to buy or sell property or services, and a corporation can sue or be sued. The name of the strata corporation is, “The Owners, Strata Plan No. …” To correspond with a strata corporation, one writes, for example, to, “The Owners, Strata Plan No. VR 150, Attention: Strata Manager.” According to the regulations, however, the failure to include the word, “No.” in a strata corporation’s name does not affect the validity of that name. 2

Both a strata corporation and a business corporation have members. In a strata corporation, a person becomes a member by virtue of becoming the owner of a strata lot in the strata plan. Generally speaking, in a strata corporation, there are no shares to acquire. By contrast, in a business corporation, a person becomes a member by acquiring one or more shares in the company. In this book, unless the context requires otherwise, the word member refers to a member of a strata corporation, while the term shareholder refers to the member of a business corporation.

Although a strata corporation and a business corporation are both corporations, the similarity effectively ends there. The following table summarizes some of the most important differences between a strata corporation and a business corporation incorporated in British Columbia.

Differences Between a Strata and a Business Corporation

Strata Corporation

Business Corporation

Liability

An individual member’s liability is not limited to the same extent as in a business corporation. If someone obtains a judgment against a strata corporation, the judgment becomes, in effect, a common expense. Each owner is ultimately liable to pay his or her share of the judgment according to the schedule of unit entitlement, being the same formula that governs an owner’s contribution to strata fees and the like.1 If, however, someone with a judgment against the strata corporation registers the judgment against title to an individual owner’s strata lot, then to remove that judgment from title, the owner must pay the whole amount due under the judgment to the judgment holder. That owner may then collect reimbursement from the remaining owners in the strata plan according to the contributions due from their respective strata lots.2

A shareholder is not personally liable, as a shareholder, when someone obtains a judgment against the business corporation. The judgment binds the business corporation, not its shareholders.

Incorporation

In a strata corporation, there is no certificate of incorporation. The strata corporation is created by depositing the strata plan.

The Registrar of Companies issues a certificate of incorporation.

Business Corporations Act3

The Business Corporations Act does not apply, except as specifically provided.4 For example, to cancel a strata plan and wind up a strata corporation, the Strata Property Act borrows the voluntary liquidation procedure from the Business Corporations Act.5

[NEW] In November 2015 the province passed amendments to the Strata Property Act which, at the date of this writing, are not yet in force. If the province brings these amendments into force, the Strata Property Act will contain its own procedures for cancelling a strata plan and winding up a strata corporation. The Strata Property Act will no longer borrow such procedures from the Business Corporations Act. 3 A regulation is required to bring these amendments into force. 4

The Business Corporations Act applies fully.

1 Strata Property Act, s. 166.

2 The Owners, Strata Plan VIS 4534 v. Seedtree Water Utility Co. Ltd. et al., 2006 BCSC 73. For more information, see also Chapter 27, Lawsuits.

3 Business Corporations Act, S.B.C. 2002, c. 57. (Updated to December 1, 2007.)

4 Strata Property Act, s. 291(1).

5 Strata Property Act, s. 276.

Duties

The Strata Property Act requires every strata corporation to carry out fundamental duties, all of which are discussed in more detail later in this book. In general terms, the strata corporation’s essential duties are to manage, repair and maintain the common property and common assets; to obtain and maintain appropriate insurance; to keep various records and to enforce the bylaws and rules.

Management

Section 3 of the Strata Property Act requires a strata corporation to manage the common property and common assets of the strata corporation for the benefit of the owners.

Repairs and Maintenance

A strata corporation must repair and maintain its common property and common assets. Depending on the bylaws, the corporation may also have a duty to repair and maintain limited common property (LCP) or features in a strata lot. 5

If the strata corporation receives an order from a regulatory authority to carry out work on common property or land that is a common asset, the corporation must carry out the work. If the strata corporation receives a work order respecting a particular strata lot, the corporation must promptly notify the owner. If the owner fails to do the work, the strata corporation may do it and charge the owner for its cost. 6

Insurance

A strata corporation must obtain and maintain property insurance on the common property, including any buildings shown on the strata plan, the common assets and any fixtures built or installed on a strata lot by the developer as part of the original construction of that strata lot. In addition, the strata corporation must maintain general liability insurance against property damage and bodily injury to others. 7 For more information about a strata corporation’s insurance requirements, see Chapter 16, Insurance.

Every year the strata corporation must review the adequacy of its coverage and report about it to the owners at the annual general meeting (“AGM”). 8

In Lalji-Samji v. Strata Plan VR 2135, 9 the Supreme Court of British Columbia considered one of the consequences of a strata corporation’s failure to insure its common property. The court held that a strata corporation could not claim against a strata owner whose carelessness apparently damaged the common property where the corporation had failed to insure the property under the former Condominium Act.

Case Study

A rug in the lobby of the complex was common property. The rug was ruined when bleach from a box belonging to one of the owners leaked on to the carpet. Apparently, the strata corporation lacked insurance for damage to the rug. 10

The strata corporation sued the owner, who argued that the Condominium Act and the general principles of insurance law prohibited the corporation from claiming against him.

Section 54 of the Condominium Act (now section 155 of the Strata Property Act) required the corporation to insure the common property against fire and other perils which are usually the subject of insurance in similar properties. Section 54(3) also provided, in part:

The court dismissed the strata corporation’s claim.

The court held that the strata corporation could not sue the owner. If the strata corporation had insured the rug as it was supposed to do, the corporation would have claimed against its insurance policy. If the strata corporation’s insurer paid the loss, the strata corporation’s insurer could not later recover it from the individual strata owner because the owner is one of the insured persons under the policy. Since the strata corporation failed to meet its statutory duty to insure the rug, the corporation could not sue the owner for the damage in these circumstances.

Keeping Records

The Strata Property Act requires every strata corporation to prepare and keep various records and to allow various persons access to those records. 11 For more information about keeping records, see Chapter 13, Record Keeping.

Canadian Charter of Rights and Freedoms

The Canadian Charter of Rights and Freedoms  12 does not govern the actions of a strata corporation created under the provincial Strata Property Act. Nor does the Canadian Bill of Rights  13 apply to the strata corporation’s actions. The Canadian Bill of Rights is limited to matters within the federal jurisdiction. 14

 

Notes:

  1. The Strata Property Act, s. 1(1) defines the term owner to mean a person who is the registered owner of the fee simple interest in a strata lot in a Land Title Office or, in the case of a leasehold strata plan, a person who is registered as the leasehold tenant of the strata lot. For more information about an owner, see Chapter 8, Members.
  2. Strata Property Act, ss. 2(2) and 38Strata Property Regulation, s. 17.2(2).
  3. Natural Gas Development Statutes Amendment Act, 2015, S.B.C. 2015, c. 40, ss. 37 through 54 (amends the Strata Property Act, Part 16 to create within the statute its own procedures to cancel a strata plan and, with or without a liquidator, to wind up a strata corporation.)
  4. Natural Gas Development Statutes Amendment Act, 2015, S.B.C. 2015, c. 40, s. 58.
  5. Strata Property Act, ss. 3 and 72. See, for example, the Schedule of Standard Bylaws, ss. 2 and 8. For information about repairs, see Chapter 25, Carrying Out Repairs and Chapter 26, Paying For Repairs.
  6. Strata Property Act, ss. 838485. For information about repairs, see Chapter 25, Carrying Out Repairs and Chapter 26, Paying For Repairs.
  7. Strata Property Act, ss. 149(1)150(1).
  8. Strata Property Act, s. 154.
  9. Lalji-Samji v. The Owners, Strata Plan VR 2135, 1992 CanLII 1177, [1992] B.C.J. No. 176 (QL)(S.C.).
  10. In Lalji-Samji, the reasons do not explain why the strata corporation lacked insurance coverage. In a later case, the court referred to a commentary on the Lalji-Samji decision in which the author reported that the strata corporation in Lalji-Samji failed to file a proof of loss to claim coverage within the one-year period required by the corporation’s insurance policy: see The Owners, Strata Corporation VR 2673 v. Comissiona et al., 2000 BCSC 1240 at para 8 per Levine, J.
  11. For information about a strata corporation’s records, including access, see Chapter 13, Record Keeping.
  12. Canadian Charter of Rights and Freedoms, being Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11.
  13. Canadian Bill of Rights, S.C. 1960, c. 44.
  14. Reid (Litigation Guardian of) v. The Owners, Strata Plan LMS 2503 (2007), 161 C.R.R. (2d) 278, 2007 BCSC 1396.