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Strata Property Act - Not a Cake Walk
for Owner Developers

By the Commercial Real Estate Group at Clark Wilson LLP
October 3, 2003

Itís been more than three years since the Strata Property Act came into force on July 1, 2000 and replaced the Condominium Act. Property managers and developers still often ask how this legislation affects them.

Quite a lot changed. Here are some examples.

An "owner developer" (thereís a new definition, for a start) now has a duty to act in the best interests of the owners (including future owners), and a duty to exercise the care and diligence of a reasonably prudent person in the circumstances. Penalties are payable by an owner developer if a strata corporationís expenses are underestimated in the Interim Budget. A strata corporation may lien one of the owner developerís strata lots for non-payment of a penalty. Any interim budget surplus is refunded to all the owners.

An owner developer must establish a contingency reserve fund that belongs to the strata corporation and cannot be used by the owner developer to pay strata corporation expenses.

An owner developer may pass resolutions, including resolutions to amend bylaws, at any time before the first conveyance to a purchaser. Once the first conveyance has occurred and before the first AGM is held, all resolutions requiring a 3/4 vote must be passed by a unanimous resolution at a general meeting. These provisions operate to prevent the strata corporation from entering into any contract or transaction with the owner developer (or with someone not at armís length with the owner developer), once the first sale has occurred, unless the contract or transaction is first approved by a unanimous resolution passed at a general meeting.

The first AGM must be held during the six week period that begins on either: (i) the date that 50% plus one of the strata lots have been conveyed to purchasers; or (ii) on the date that is nine months after the date of the first conveyance of a strata lot; whichever comes first. The notice for the first AGM must include the first Annual Budget and the first Financial Statement. Failure to hold the first AGM during this time will result in severe penalties for the owner developer. The owner developer will have to pay the strata corporation $1,000 for the first 30 days of delay and $1,000 for each additional delay of seven days.

The owner developer chairs the first AGM either personally or through an agent. A majority vote is required to approve the first Annual Budget. Any amendment to the proposed Annual Budget must also be passed by majority vote. The strata corporation begins paying the expenses on the first day of the month following the first conveyance to a purchaser.

At the first AGM, the owner developer must provide the strata corporation with a host of documents that were not previously required. For two years following the transfer of control by the owner developer, the owner developer must retain all financial records that relate to the strata corporationís finances. These records must be made available for inspection by the strata corporation at no charge and the strata corporation may, at its expense, copy or audit them.

Conclusion:

The Strata Property Act imposes numerous duties and responsibilities on owner developers that were not required under the Condominium Act. Penalties can be severe for non-performance. It is not necessary for an owner to hold the title "owner developer" in order for the responsibilities of owner developers to apply.

For a detailed review of the obligations of owner developers, please download the following paper:

 

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