Vote signals first condo wind-up approval under new law
Owners of a Vancouver condominium complex have became the first in B.C.’s history to successfully vote to dissolve their strata corporation and sell their building to a developer without obtaining unanimous support.
On December 12, more than 20 owners voted in excess of the necessary 80% threshold to accept an offer to buy their building, according to Condominium Home Owners Association of BC president Tony Gioventu and Clark Wilson partner Darren Donnelly, who were both at the meeting.
The strata corporation now has 60 days to apply to have a B.C. Supreme Court judge approve the transaction.
Representatives from the strata corporation declined to speak with Business in Vancouver to reveal exactly where their site is or to provide the exact vote count.
Gioventu and Donnelly, however, confirmed that the transaction is the first successful vote to sell a stratified building since a new B.C. law took effect in late July and made the process easier.
Bill 40 lowers the required threshold to 80% from 100% for strata corporation members to vote to dissolve their entity and sell their buildings.
“Even 80% is a hard number to achieve,” Gioventu told BIV.
He estimated that many strata corporations across Metro Vancouver are investigating selling their complexes to developers.
One of those is the 37-unit Colonnade complex at the corner of Robson and Nicola streets, which is being marketed by Cushman & Wakefield.
What could be the largest project in downtown Vancouver where owners are contemplating dissolving strata corporations and selling to a developer is at the three Anchor Point buildings.
That 38-year-old complex includes three separate strata corporations. One is for the 165 units at 1330 Burrard Street, another is for 141 units at 950 Drake Street and a third is for 171 units at 1333 Hornby Street.
The Anchor Point stratas have yet to hire a lawyer or select a realtor to market their property.
Gioventu’s advice is that when they, or other strata corporations, select a realtor, they choose a firm that represents their interests alone and not a firm that has brokers in other cities who may separately represent developers interested in bidding to buy the site.
Large commercial brokerages are fine as long as representatives make clear that the firm would not be working for any potential buyer, Gioventu explained.
“Under no conditions would I advise a dual agency for representation,” he said.
Donnelly’s law firm represents more than a dozen Metro Vancouver strata corporations that are in various stages of trying to sell their buildings.
“[Clients’ buildings] tend to be underdeveloped relative to the density that would be allowed, and they are near transit so the development value is higher than the current value,” he said.
“At the other end of the spectrum you have stratas that aren’t necessarily in high-value locations or underdeveloped, but they are facing devastating repair bills.”
How to navigate the new strata corporation process
Condominium Home Owners Association of BC president Tony Gioventu said that strata corporations intending to embark on the complex process of selling their buildings should first hold a meeting where all owners can ask questions and get answers from a lawyer and a disinterested party who does not stand to profit from the sale.
“Our office provides this service for free, although we have a long waiting list,” he said. “We gave about 60 presentations this year.”
The speediest that owners should expect the process to take between initial meetings and completion is about 18 months, said Clark Wilson partner Darren Donnelly.
That timeline is when there is little opposition.
Donnelly added that a small number of owners who are strongly opposed to the process can stall things.
Failure to get legal advice and an accurate assessment of a property’s worth early in the process might also stall the process because strata corporation mistakes could force it to backtrack and redo parts of the process, Donnelly said.
Issues that strata corporations should consider when assessing a property’s value include whether the City of Vancouver will require 20% of any newly built units to be social housing and whether view cones or other city stipulations will limit a site’s future density.
Needing to rezone the site to unlock extra density is also something that can reduce a property’s value, Donnelly said.
He advised that strata corporations avoid trying to rezone their properties on their own because it is a complicated process that might require each owner to be served and to sign papers.
Developers who want to buy the property, however, may bid a lower price to factor in the risk that they are unable to rezone the land to their density expectations.
Another thing to clarify early in the process is how proceeds will be divided, Donnelly said.
“People may think that proceeds will be divided based on the relative assessed values of the strata lots.”
But he said the division of the proceeds is far more complicated.
Donnelly said all of the condominium buildings built between August 1974 and July 2000 have a schedule of “interest upon destruction” in their strata plans.
That schedule sets out the relative value of each strata unit based on a developer’s estimate of that unit’s value back when the building was built.
“Some estimates in the early days were incredibly rough,” he said. “There are examples where developers went through and gave a value of one to one-bedroom units, two to two-bedroom units and three for three-bedroom units.”
That formula might give some homeowners a share of proceeds that is higher than the market value for their units, but they will vote against a strata dissolution because they are upset that someone else in the building is getting even more.
“That thinking is human nature,” Donnelly said.
Finally, he warned that court approval of a vote to dissolve a strata corporation is not a rubber stamp.
Courts may reject a vote to wind up a strata corporation if it inflicts a “significant unfairness” on one or more of the owners, he said.
To ensure that there is a degree of fairness to everyone, contracts may contain a term that allows all owners to live rent-free in the building for a year after the sale closes or something similar.
“The terms and conditions of the deal are just as important as the price,” Gioventu said.