Strata Managers

A strata corporation has the legal capacity to enter into contracts. 1 Although the strata council is responsible for carrying out the duties and responsibilities of the strata corporation, many strata developments hire strata managers to provide day-to-day management services for the corporation.

Although the strata council may negotiate a strata management contract with the strata manager, the costs associated with the contract must first be approved by eligible voters in the annual budget or by a 3/4 vote at a general meeting. 2

When a strata manager acts for a strata corporation, the manager represents the corporation, not individual owners or tenants. In McGowan v. Strata Plan NW 1018 the court described how the relationship between a strata property manager and a strata corporation ought to function: 3

Only the strata council has the authority to direct the strata manager, unless the management contract requires the manager to also take instructions from individual owners or tenants. 4

The relationship between the strata manager and the strata corporation is governed by the contract between the two parties. The activities to be performed by the strata manager, as well as the remuneration for such activities, should be clearly set out in the contract.

The Strata Property Act does not govern disputes between the strata corporation and the strata manager concerning the management contract. The parties must settle such disputes between themselves or through a court process.

A Strata Manager Must Be Licensed

Effective January 1, 2006, each strata manager who for remuneration provides strata management services to a strata corporation, or to a section within a strata corporation, must be licensed under the Real Estate Services Act, unless otherwise exempted. 5 Since the Real Estate Services Act requirements apply equally whether a manager supplies services to a strata corporation, or to a section within a strata corporation, in this segment every reference to a strata corporation includes a reference to a section, unless the context indicates otherwise.

The Real Estate Council of British Columbia (the “Real Estate Council”) enforces the Real Estate Services Act, including its regulations, and Council’s Bylaws and Rules. Readers may view the Real Estate Services Act, the Real Estate Services Regulation, Council’s Bylaws and Council’s Rules at Council’s website. 6

The Real Estate Council of British Columbia Licenses a Strata Manager

The licensing authority for strata managers is the Real Estate Council. The reader may learn more about the requirements for becoming licensed to provide strata management services at the respective websites of the Real Estate Council of British Columbia, or the University of British Columbia, Sauder School of Business, Real Estate Division. At the time of this writing, information about the Real Estate Division’s licensing course for strata property managers may be found at http://www.sauder.ubc.ca/Programs/Real_Estate_Division/Licensing_Courses/Strata_Management.

In addition to licensing, the Real Estate Council has wide disciplinary powers, including the power to suspend or cancel a strata manager’s license. The Real Estate Council publishes disciplinary orders at the Council’s website. 7

Levels of License

The Real Estate Services Act establishes four levels of license. The most senior level is called a brokerage license. In descending seniority, the remaining license levels are managing broker, associate broker and representative, this last being the most junior license issued.

Only a brokerage may provide strata management services to a strata corporation. Every brokerage must have a managing broker, who must ensure that the brokerage carries out its work competently. A brokerage may only provide strata management services if its managing broker is licensed to provide that category of real estate service. The managing broker, or as the case may be, an associate broker or representative licensed with the brokerage may only provide strata management services to a strata corporation through his or her brokerage. Similarly, a managing broker, associate broker or representative must receive his or her remuneration for those services only through his or her brokerage. 8

A brokerage license may be held in the name of an individual, a partnership or corporation. In most cases, a brokerage is held in the name of a corporation to take advantage of the limited liability features of incorporation.

A managing broker, associate broker or representative may provide real estate services individually, or through a personal real estate corporation. 9 Using a personal real estate corporation gives the licensee access to certain income tax advantages, but does not relieve the licensee of personal liability in the provision of real estate services. 10

Strata Property Management Services

Under the Real Estate Services Act, a person must not provide a real estate service for remuneration unless the person is licensed to provide that service, or otherwise exempted. The Act creates three categories of real estate service: trading services, rental property management services or strata management services. 11

Before a brokerage may provide strata management services, its managing broker, and any other of its licensees who provide those services, must be licensed to provide services in the category of strata management services. 12

A person who is licensed to provide strata management services may hold a license at any of the four levels described above. For simplicity, when describing related requirements in the rest of this chapter, a reference to a licensed strata manager is a reference to a brokerage, unless the context requires otherwise. Recall, for instance, that when a strata corporation contracts for management services with a licensee, it contracts with a brokerage qualified to provide strata management services.

Definition Of Strata Property Management Services

According to the Real Estate Services Act, a person provides strata management services if that person provides any of the following services to, or on behalf of, a strata corporation: 13

Remuneration

Under the Real Estate Services Act, the term remuneration is broadly defined. According to the Act, remuneration “includes any form of remuneration, including any commission, fee, gain or reward, whether the remuneration is received, or is to be received, directly or indirectly.” 14 In effect, this means that there is remuneration if a person who provides strata management services expects to receive a reward of any kind, direct or indirect, including goodwill.

In addition, where a license is required, a person may not sue to collect remuneration due for providing real estate services, such as strata management services, unless, at the time the services were provided, that person was licensed or otherwise exempted. 15

Exemptions

There are several exemptions where the Real Estate Services Act permits an unlicensed person to provide strata management services for remuneration, or alternatively, allows a licensed person to ignore compliance with the Act. The exemptions are set out below.

Recall that a licensee may provide strata property management services through his or her personal real estate corporation. To the extent that any of the following exemptions might apply to a real estate licensee, that exemption is not available if that licensee provides real estate services through a personal real estate corporation. 16

Exemption for a Strata Lot Owner 17

An individual is exempt from the requirement to be licensed in respect of strata management services if that individual:

Where the exempt individual receives any strata fees, contributions, levies or other amounts levied by, or due to, the strata corporation under the Strata Property Act, that individual must promptly deliver the money to the strata corporation. The wording of the relevant regulation suggests that this exemption is subject to compliance with this requirement. In other words, failure to comply with this requirement may terminate the exemption.

Exemption for a Strata Lot Owner Who is a Licensee

Where an individual who is licensed under the Real Estate Services Act as a managing broker, associate broker or a representative, is also a member of a strata corporation by reason of being the owner of a strata lot, then to the extent the licensee provides strata management services to that strata corporation, the Act and the Real Estate Council’s Rules do not apply, if all the following conditions are met: 18

  1. (a) the licensee provides strata management services under this exemption to no more than two strata corporations;
  2. (b) the licensee discloses in writing to the strata corporation, before providing the services, that:
  3. (i) even though the individual is licensed under the Real Estate Services Act, the individual is not acting as a licensee in this case,
  4. (ii) the licensee is not regulated under the Real Estate Services Act in relation to the strata management services, and
  5. (iii) the strata corporation is not entitled to the same protections under the Real Estate Services Act that are otherwise applicable to persons who deal with a licensed strata property manager.
  6. (c) the licensee provides a copy of the written disclosure just described to the managing broker of the licensee’s brokerage;
  7. (d) the licensee does not have sole signing authority for withdrawals of any funds of the strata corporation and does not otherwise have sole authority for expenditures of any funds of the strata corporation; and
  8. (e) the strata management services are not provided for or in expectation of remuneration.

Where the licensee receives any strata fees, contributions, levies or other amounts levied by, or due to, the strata corporation under the Strata Property Act, the licensee must promptly deliver the money to the strata corporation. A licensee who contravenes this requirement is liable to disciplinary proceedings under the Real Estate Services Act. 19 In addition, the wording of the relevant rule suggests that this exemption is subject to compliance with this requirement. In other words, failure to comply with this requirement may terminate the exemption.

Exemption for a Caretaker or Manager Employed by a Strata Corporation or Brokerage

Where a strata corporation employs an individual as its caretaker or manager, that employee is exempt from the requirement to be licensed in respect of collecting strata fees, contributions, levies or other amounts levied by, or due to, the strata corporation under the Strata Property Act. Likewise, if a brokerage supplies strata property management services to a strata corporation, and that same brokerage employs an individual to serve as the strata corporation’s caretaker or manager, that employee is to the same extent exempt from the requirement for a license. 20

Where an exempt caretaker or manager receives any strata fees, contributions, levies or other amounts levied by, or due to, the strata corporation, that caretaker or manager must promptly deliver the money to the strata corporation or brokerage, as applicable. The wording of the relevant regulation suggests that this exemption is also subject to compliance with this requirement. In other words, failure to comply with this requirement may terminate the exemption.

Exemption for Developers

An owner developer of a strata corporation (the “developer”), as defined in the Strata Property Act, 21 is exempt from the requirement to be licensed in respect of strata management services provided to or on behalf of the strata corporation, but only until control of the strata corporation’s money is required to be transferred to the newly elected council in accordance with the Act. 22 The owner developer must transfer control of the strata corporation’s money to the newly elected council within eight days after the first annual general meeting. 23

Record-Keeping Requirements

The Real Estate Council requires every licensed strata manager to comply with extensive record-keeping requirements, including certain requirements specific to strata management. The following are some, but certainly not all, of a licensed strata manager’s record-keeping obligations.

For instance, the Real Estate Council requires every licensed strata manager to keep separate books, accounts and other records with respect to each strata corporation to, or on behalf of whom, strata management services are provided. These records must be kept in British Columbia. 24

General Record Keeping and Reporting

A licensed strata manager must prepare and retain such financial records in connection with its business as are necessary to ensure the appropriate and timely accounting of all transactions relating to the strata management services provided by it. 25

For each account maintained by a licensed strata manager, it must retain all banking records relating to account transactions, including statements, and cancelled cheques and other source documents making or confirming deposits or withdrawals. The licensed strata manager must also prepare and retain the following records: 26

  1. (a) a record showing amounts received and disbursed, the reason for the receipt or disbursement, and any unexpended balance;
  2. (b) monthly reconciliations of banking statements, prepared in a timely fashion and, in any case, no later than five weeks 27 after the end of the month being reconciled.

A licensed strata manager must keep the following records for each strata corporation for which it provides strata management services: 28

  1. (a) any accounting statements prepared by, or on behalf of, the licensed strata manager that are provided to the strata corporation;
  2. (b) invoices for expenditures incurred on behalf of the strata corporation;
  3. (c) the monthly trust account statements which the licensed strata manager must obtain from the savings institution where the trust account is held, and which it must also provide to the strata corporation.
Trust Account

For each strata corporation on behalf of which the licensed strata manager holds or receives money, the Real Estate Council requires it to maintain at least one separate trust account in the name of the strata corporation. The licensed strata manager must establish its trust accounts at any of the following savings institutions in British Columbia: 29

  • a bank,
  • a credit union,
  • an extraprovincial trust corporation authorized to carry on deposit business under the Financial Institutions Act, 30 or
  • a corporation that is a subsidiary of a bank and is a loan company to which the federal Trust and Loan Companies Act applies. 31

If a brokerage holds contingency reserve fund (“CRF”) money or special levy money on behalf of a strata corporation, the brokerage must also maintain at least one separate trust account in the corporation’s name for that contingency reserve fund money, or special levy money, or both. 32

For each trust account concerning the strata corporation, the licensed strata manager must arrange for the savings institution to provide monthly statements for the account. Within 43 days from the end of the month for which a statement is issued, the brokerage must give the strata corporation a copy of that statement together with a copy of the manager’s monthly reconciliation for that statement. 33

In the case of a trust account to hold contingency reserve fund money, or special levy money on behalf of the strata corporation, the licensed strata manager must also arrange for the trust account to be set up so that the signatures of at least two of the following are required in order for money to be withdrawn from the account: 34

  1. (a) a managing broker from the licensed strata manager;
  2. (b) a member of the strata council of the strata corporation;
  3. (c) another licensee from the licensed strata manager;
  4. (d) a director or officer of the licensed strata manager;
  5. (e) a person employed or engaged by the licensed strata manager who is authorized to practice as
  6. (i) a lawyer under the Legal Profession Act, 35
  7. (ii) a certified general accountant under the Accountants (Certified General) Act, 36
  8. (iii) a chartered accountant under the Accountants (Chartered) Act, 37 or
  9. (iv) a certified management accountant under the Accountants (Management) Act. 38
Strata Manager’s Insurance

For information about the professional liability insurance and related coverage of a licensed strata manager, see Chapter 16, Insurance.

Cancelling a Strata Management Contract

If a strata corporation enters a contract for strata management services before the first annual general meeting (the “first AGM”), the agreement ends on the earlier of: 39

  • 29 days after the second AGM, unless the eligible voters decide by majority vote to continue the contract, or
  • on the termination date in the contract, or
  • when the contract is properly cancelled under the Strata Property Act.

The Strata Property Act permits a strata corporation to cancel a strata management agreement before its expiry upon two months’ notice to the licensed strata manager if the cancellation is first approved by a 3/4 vote at a special general meeting. Conversely, the licensed strata manager may also cancel the contract before its expiry by giving the strata corporation two months’ notice. 40

Return of Records

When a strata management contract ends, the licensed strata manager must, within 29 days, return to the strata corporation any of the strata corporation’s records that are required to be kept under the Strata Property Act and which remain in the manager’s possession or control. 41 If a licensed strata manager fails to comply with this requirement, it must pay the strata corporation an amount as provided in the regulations. At the time of this writing, the regulations require the licensed strata manager to pay $1,000 to the strata corporation for failure to return the records within the 29 day period. 42

In addition to the requirements of the Strata Property Act, a licensed strata manager must comply with the Rules of the Real Estate Council for the transfer of strata corporation records. Among other things, if requested by a former strata corporation client, it must provide the following records to that client or, if the former client engages another licensed strata manager to provide strata management services, to the new licensed strata manager: 43

The licensed strata manager must provide the requested records to the strata corporation, or to another licensed strata manager, as the case may be, by the later of the following two dates: 44

  1. (a) the date that is 15 days following the date of the request,
  2. (b) the date that is 29 days following the date of the termination.

Nothing in these requirements limits a licensed strata manager’s obligation to comply with the requirements of the Strata Property Act to return records to the strata corporation, as described above, or to retain certain records regarding the corporation as required by the Rules of the Real Estate Council. 45

Holding Proxies

A licensed strata manager who provides strata management services to a strata corporation may not hold the proxy of an eligible voter at a general meeting of that corporation unless the regulations permit the manager to do so, subject to any restrictions prescribed by the provincial government. At the time of this writing, the regulations do not permit a strata manager to hold a proxy where the manager’s brokerage provides strata management services to the strata corporation in question. 46

This means that a licensed strata manager who provides management services to a strata corporation must not serve as a proxy on behalf of an eligible voter at a general meeting of that corporation.


 

Notes:

  1. Strata Property Act, s. 38.
  2. Strata Property Act, s. 97.
  3. McGowan v. The Owners, Strata Plan NW 1018, 2002 BCSC 673 at para 70.
  4. Strata Property Act, ss. 4 and 26.
  5. Real Estate Services Act, S.B.C. 2004, c. 42.
  6. Real Estate Services Regulation, B.C. Reg 506/2004, as amended by B.C.
    Reg. 544/2004; Real Estate Council of British Columbia, General Bylaws; Rules (“Rules”); online, Real Estate Council of British Columbia, Real Estate Legislation page, <http://www.recbc.ca/consumer_info/RESA.htm>.
  7. Real Estate Council of British Columbia, “Discipline Policy Statement #1, Effective July 1, 2008: Publication of Disciplinary Orders,” online, Real Estate Council of British Columbia, Complaints and Discipline page, <www.recbc.ca>.
  8. Real Estate Services Act, ss. 5; 6(1)(a), (b) and Real Estate Council Rules, R. 3-1.
  9. Real Estate Services Regulation, B.C. Reg. 506/2004, Part 10.
  10. Real Estate Services Regulation, s. 10.6(3).
  11. Real Estate Services Act, ss. 1 (definition of “real estate services”) and 3.
  12. Real Estate Services Act, ss. 5(5) and 6(1)(b) and Real Estate Council Rules, R. 2-1.
  13. The Real Estate Services Act, s. 1 (definition of “strata management services”). Section 1 also defines the phrase “strata corporation” to mean a strata corporation within the meaning of the Strata Property Act and includes a section within the meaning of that Act.
  14. Real Estate Services Act, s. 1 (definition of “remuneration”).
  15. Real Estate Services Act, s. 4.
  16. Real Estate Co