Vote signals first condo wind-up approval under new law

Unanimous owner agreement no longer needed to dissolve a strata corporation in B.C.
Clark Wilson partner Darren Donnelly has more than a dozen clients that are strata corporations with members investigating selling their buildings | Rob Kruyt
 

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.

gkorstrom@biv.com  

@GlenKorstrom  

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Unanimous owner agreement no longer needed to dissolve a strata corporation in B.C.
Clark Wilson partner Darren Donnelly has more than a dozen clients that are strata corporations with members investigating selling their buildings | Rob Kruyt

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.

gkorstrom@biv.com  

@GlenKorstrom  

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Michelle Renaud had no intention of leaving her 570-square-foot apartment in Vancouver’s West End.

Then she—and everyone else in her building—was offered double the value of the property.

“Absolutely felt like I hit the jackpot. This is a once in a lifetime opportunity. I don’t think you’re going to find another property where someone is going to come along and give you double what it’s worth,” she said.

“I wasn’t planning on [moving], but how do you turn that down? When somebody’s going to offer you double, it’s a pretty significant offer.”

The building on 1060 Barclay Street, Barclay Manor, will be purchased by Bosa Properties, who plan on tearing down the seven-storey apartment and replacing it with a highrise.

Bosa made the offer shortly after a change to British Columbia’s Strata Property Act was passed by the government this fall. Whereas stratas used to require unanimous agreement of owners for a building to be sold, it now requires 80 per cent approval.

The West End is a liveable neighbourhood that is home to a unique mix of people and places.

It is a community that features a range of housing, land use, heritage buildings, transportation options, and amenities.

Because demand for new development is growing, we have prepared a community plan to ensure that future growth in the West End meets the needs of the community.

In 2013, community members supported a set of emerging and refined plan directions, including the West End Community Values, which helped shape the community plan. The plan focuses on neighbourhood character, housing, local business, heritage, transportation, and parking.

Explore the plan highlights

“It’s very good. It means the small minority can’t hold out,” said Tony Gioventu, executive director for the Condominium Home Owners’ Association of B.C.

“If you take an existing building, and it can be converted from 12 units to 100 units because of a high rise, it significantly increases in value. What might be selling for $285,000, a developer might come along and offer you $450,000 or $500,000. It could be a significant windfall.”

Gioventu says such moves could become common in the West End, where many apartments are over 30 years old and would require extensive upgrades in the decades ahead.

“A lot of these buildings weren’t really built with the intention of lasting more than 50 years. It’s kind of a time cycle issue. They need new elevators, new [roofing], new decks and balconies, so the question is what’s the best value for the property.”

But Gioventu believes the tactic will take hold throughout Metro Vancouver.

“Wherever you have transit or high density or pressure for high density is where we’re going to see people using it…We’re looking at higher density for the Lower Mainland because we’re running out of space.”

READ MORE: Landmark deals in the Vancouver real estate market due to land assembly sales

All sales have to be approved by a court, which has to agree all parties are getting a fair deal, and one resident of Barclay Manor—who did not want to appear on camera—said the prospect of losing their home was devastating.

As for Renaud? She’s looking forward to finding a new home.

“It’s been great living here, but I just think it’s an opportunity you can’t pass up.”

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Can One Small Group of Owners Block the Strata from Selling?

In British Columbia, an estimated quarter of the population lives in jointly owned housing. With the province’s older condominium developments approaching the 50 year old mark, there has been increasing contention surrounding the BC Strata Property Act’srequirement that 100% of owners agree to the sale. A recent decision by a Supreme Court Judge highlights how BC’s legislation may be revisted in the near future.

Shared property owners in North Vancouver can force sale, B.C. Supreme Court rules
Content By Frances Bula, The Globe and Mail. To read the article as it originally appeared in The Globe and Mail, click here.

A Supreme Court judge has ruled that a majority of owners in a strata-type project in North Vancouver can ask for a sale of the whole property, even if a minority says the sale will force them out of the only affordable homes in their neighbourhood.

That adds one more decision to an increasingly contentious issue in British Columbia – how to deal with jointly owned properties in a province where a quarter of the population lives in collectively owned housing, largely stratas.

The issue is so thorny and prevalent that the B.C. Law Institute is working on a research project to look at how to improve the law in B.C. for dissolving strata corporations.

Lawyers for both groups at Seymour Estates, near Capilano University, say the decision by Supreme Court Justice Lauri Ann Fenlon put conditions on the order that require the final sale price and buyer to be approved by the court.

But the door is still firmly opened for 87 owners in the 114-unit project, who have been courted by Darwin Construction Ltd. of North Vancouver the last three years, to sell the entire seven-acre parcel. Seymour Estates, built in 1970, is not a strata under current B.C. law, but has an ownership model similar to a strata.

The court ruling is an important decision because it makes it clear that one small group of owners cannot block everyone else from selling, said Peter Roberts, the lawyer who acted for the pro-sale group.

John Whyte, who represented the small group of owners resisting, said the ruling Friday by the judge drew an “audible gasp” from the standing-room-only crowd.

For his clients, he said, “it was really their only option into the market in this neighbourhood.”

He and his clients are hopeful about Justice Fenlon’s conditions, which are meant to ensure the owners get the best possible price. That price will be scrutinized in the second legal round, to determine the impact for existing owners, Mr. Whyte said.

“Then we will know if people will be dislocated. They can compare that number for what they could buy in the area.”

Many residents in the complex didn’t want to speak publicly about where they stand on the issue. But some said they felt many owners didn’t understand that the Darwin offer was not the best deal they could get.

Darwin confirmed it is offering owners about 30 per cent more than they could get on the market right now. But if Darwin is successful in getting the land rezoned, the property will be worth significantly more than that. The area is slated for increased density, according to the District of North Vancouver’s official community plan.

One resident, however, said she’ll be happy to sell and get out.

“These are really nice places but everything is going wrong with them,” said Susan Watson, who has lived at Seymour Estates for 18 years. “If we stay, we’re going to be hit with a huge special levy. There’s plumbing trucks here every day.”

The dilemma of selling jointly owned properties has been rising to the surface, as the province’s older condos and jointly owned properties approach the 50-year mark and as builders hunt for low-density tracts near transit that they can redevelop.

The current B.C. Strata Property Act says that a strata-owned property can only be sold as a whole if 100 per cent of the owners agree.

“It’s very difficult to get to that point,” said Kevin Zakreski, the staff lawyer with the B.C. Law Institute working on the project to find a better mechanism.

At the moment, if there is anything less than unanimity, the group of owners wanting to sell have to go to court to try to get a sale ordered – an expensive, time-consuming procedure.

Two years ago, a group from an older North Van project, Cypress Gardens, tried to get a sale ordered, but were turned down because the judge said they didn’t represent a majority and they’d create too much hardship for those who didn’t want to sell.

Mr. Zakreski said B.C.’s rules are more onerous than those of other provinces, which typically allow a sale to be completed by the strata council if around 80 per cent of owners agree.

The law-institute project is going to go out for public consultation later this year.

Useful Links:
BC Strata Property Act

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B.C. government amendment could soon make it easier to dissolve strata corporations

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The executive director of the Condominium Home Owners’ Association of B.C. tells the story of a bunch of people who bought into an apartment building in Metro Vancouver six months ago.

They paid $375,000 per condo unit, and now, according to Tony Gioventu, a developer has come along, wanting to purchase the entire building, tear it down, and construct a bigger one. The offer to each owner, Gioventu related, is $525,000. For the new buyers, it’s a quick $150,000 profit. It’s likely more for older owners.

The building is more than 35 years old, and has over 75 units. According to Gioventu, the owners are now talking about taking the money, and liquidating the strata corporation.

 

Gioventu said that there are other potential deals and actual negotiations going on across the Lower Mainland, in which owners are looking at getting between 50 percent and 100 percent more than their assessed values.

“It’s not like they’re cashing out dollar for dollar,” Gioventu told the Georgia Straight in a phone interview. “The strata owners are actually looking at substantially higher rates of return.”

The CHOABC executive told this story when asked about the context of legislation introduced on October 8 by the B.C. Liberal government to change the Strata Property Act.

An amendment proposed in Bill 40 seeks to make it easier to dissolve strata corporations through the lower threshold of an 80-percent vote by owners. At present, unanimous approval is required to terminate a strata corporation.

According to Gioventu, it is virtually impossible for many strata corporations to liquidate themselves, because of a “very small minority who could hold out” either by voting against or by just not showing up.

The proposed legislation also provides that strata corporations with at least five units must apply to the B.C. Supreme Court for an order confirming a resolution to terminate the corporation. The court has to consider whether the dissolution is in the “best interests of owners” and does not cause “significant unfairness to one or more owners”.

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