Newsletter Article: Time to Walk Away?
From a legal standpoint, the BC Government has made it easier to wind up your strata corporation and sell your property. But that doesn’t make it any less work – or much less challenging. Here are some guidelines from the experts.
Prepared by the legal experts at Lawson Lundell LLP
By lowering the voting threshold from unanimous approval of all strata lot owners to 80%, an amendment to the Strata Property Act enacted last July 28 has made it easier for owners to dissolve or ‘wind up’ their strata corporation.
Carrying out a strata wind up can be beneficial for many reasons. As many older strata buildings across the province reach the end of their life cycles, these buildings and related common property may require costly capital repairs, which many owners would rather not pay.
Additionally, as developers search for new development opportunities, particularly in the Lower Mainland, aging strata buildings (and more specifically the land beneath them) are becoming appealing assets, because many of these older strata developments were built at lower density levels than are currently achievable.
That said, winding up a strata corporation is a technical, complicated process, and legal advice should be sought early on in the process to help ensure a successful wind up. Here are eight major points to consider if your strata corporation is exploring a wind up.
What you need to know
1. Each Strata Corporation is Unique Each strata corporation is unique in its physical condition, existing zoning, potential for rezoning, state of repairs and can be made up of a diverse group of owners. Your stakeholders need to recognize this, as well as understand where you are in the “wind up” process, and understand how they can help you achieve your goals.
2. Information Meetings It is key that all owners and especially strata council members understand the wind up process. It is important to hold informational meetings with strata council, owners, lawyers, and other parties involved to help explain the process and the role of the various advisors. Ensuring correct information is provided to owners, tenants and mortgagees is a central part of the wind up process.
3. Distribution of Sale Proceeds The process and formula for distribution of any sale proceeds is determined by the Strata Property Act and its predecessor legislation. Determining the applicable formula is a surprisingly complicated process that should be carried out early in the process.
4. Conditions in Listing Agreements and Purchase and Sale Agreements Any listing agreement with a brokerage must address the inability of a strata corporation to force owners to sell their units before the wind up process is complete. A standard listing agreement may not be appropriate. Similarly any purchase and sale agreement must reflect the wind up approval process including both the approval by the strata lot owners and the courts, as well as the due diligence process required by the developer.
5. Sale of the Property The timing and nature of the marketing of the property will vary from strata corporation to strata corporation depending on the circumstances. The location of the property may be such that there is only one logical buyer who is willing to pay a premium for the property (for example, the developer who controls adjoining sites) or it may attract a wide number of potential purchasers. Strata corporations should carefully choose their real estate brokers who have the ability and experience to market such a property. Appraisals from independent appraisal firms may be required at this stage or later in the court approval process.
6. Authorizing the Wind Up The technical process of winding up a strata corporation requires strict compliance with the Strata Property Act, under the current 80% approval threshold. This can be a long and stressful process. The strategic decision to seek such wind up authorization before marketing of the property or after a contract is accepted is critical.
7. Rezoning Any marketing of the property must take into account what a developer can build on the site, either under the existing zoning or any potential rezoning. Working with your real estate brokers and appraisers, further information can be provided to owners on the current and potential rezoning, and the timing and realistic potential of any rezoning and ensure the strata corporation captures its fair share of that potential. This information can be collected through the appraisers and real estate brokers.
8. Land Title and Conveyancing Process Working closely with Land Title Office staff, precedents have been developed for the wind up process as well as the required conveyancing processes. Be sure to look for lawyers that provide the software and precedent knowledge to help expedite the process and achieve cost savings.
DISCLAIMER: All information provided by FirstService Residential is advisory in nature. Any such information may not identify or contemplate all unsafe conditions; others may exist. FirstService Residential does not imply, guarantee or warrant the safety of any of the client’s properties or operations or that the client or any such properties or operations are in compliance with all federal, provincial, or local laws, codes, statutes, ordinances, standards or recommendations. All decisions in connection with the implementation, if any, of any of FirstService Residential’s advice or recommendations shall be the sole responsibility of, and made by, the client or other recipient of the information.
Prepared by the legal experts at Lawson Lundell LLP
By lowering the voting threshold from unanimous approval of all strata lot owners to 80%, an amendment to the Strata Property Act enacted last July 28 has made it easier for owners to dissolve or ‘wind up’ their strata corporation.
Carrying out a strata wind up can be beneficial for many reasons. As many older strata buildings across the province reach the end of their life cycles, these buildings and related common property may require costly capital repairs, which many owners would rather not pay.
Additionally, as developers search for new development opportunities, particularly in the Lower Mainland, aging strata buildings (and more specifically the land beneath them) are becoming appealing assets, because many of these older strata developments were built at lower density levels than are currently achievable.
That said, winding up a strata corporation is a technical, complicated process, and legal advice should be sought early on in the process to help ensure a successful wind up. Here are eight major points to consider if your strata corporation is exploring a wind up.
What you need to know
1. Each Strata Corporation is Unique Each strata corporation is unique in its physical condition, existing zoning, potential for rezoning, state of repairs and can be made up of a diverse group of owners. Your stakeholders need to recognize this, as well as understand where you are in the “wind up” process, and understand how they can help you achieve your goals.
2. Information Meetings It is key that all owners and especially strata council members understand the wind up process. It is important to hold informational meetings with strata council, owners, lawyers, and other parties involved to help explain the process and the role of the various advisors. Ensuring correct information is provided to owners, tenants and mortgagees is a central part of the wind up process.
3. Distribution of Sale Proceeds The process and formula for distribution of any sale proceeds is determined by the Strata Property Act and its predecessor legislation. Determining the applicable formula is a surprisingly complicated process that should be carried out early in the process.
4. Conditions in Listing Agreements and Purchase and Sale Agreements Any listing agreement with a brokerage must address the inability of a strata corporation to force owners to sell their units before the wind up process is complete. A standard listing agreement may not be appropriate. Similarly any purchase and sale agreement must reflect the wind up approval process including both the approval by the strata lot owners and the courts, as well as the due diligence process required by the developer.
5. Sale of the Property The timing and nature of the marketing of the property will vary from strata corporation to strata corporation depending on the circumstances. The location of the property may be such that there is only one logical buyer who is willing to pay a premium for the property (for example, the developer who controls adjoining sites) or it may attract a wide number of potential purchasers. Strata corporations should carefully choose their real estate brokers who have the ability and experience to market such a property. Appraisals from independent appraisal firms may be required at this stage or later in the court approval process.
6. Authorizing the Wind Up The technical process of winding up a strata corporation requires strict compliance with the Strata Property Act, under the current 80% approval threshold. This can be a long and stressful process. The strategic decision to seek such wind up authorization before marketing of the property or after a contract is accepted is critical.
7. Rezoning Any marketing of the property must take into account what a developer can build on the site, either under the existing zoning or any potential rezoning. Working with your real estate brokers and appraisers, further information can be provided to owners on the current and potential rezoning, and the timing and realistic potential of any rezoning and ensure the strata corporation captures its fair share of that potential. This information can be collected through the appraisers and real estate brokers.
8. Land Title and Conveyancing Process Working closely with Land Title Office staff, precedents have been developed for the wind up process as well as the required conveyancing processes. Be sure to look for lawyers that provide the software and precedent knowledge to help expedite the process and achieve cost savings.
DISCLAIMER: All information provided by FirstService Residential is advisory in nature. Any such information may not identify or contemplate all unsafe conditions; others may exist. FirstService Residential does not imply, guarantee or warrant the safety of any of the client’s properties or operations or that the client or any such properties or operations are in compliance with all federal, provincial, or local laws, codes, statutes, ordinances, standards or recommendations. All decisions in connection with the implementation, if any, of any of FirstService Residential’s advice or recommendations shall be the sole responsibility of, and made by, the client or other recipient of the information.