Strata Corporation Finances (22:VIII)
| This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on July 24, 2023. |
A. Introduction to Strata Corporation Finances
A strata corporation collects funds from the owners to fulfill many of its duties. Funds are collected and allocated to the strata corporation’s operating fund, contingency reserve fund, or a special levy fund. The funds are spent in accordance with the authority granted at an annual or special general meeting and within the confines of the SPA and its SPR.
B. Operating Fund
1. Purpose of Operating Fund
Each strata corporation must establish an operating fund (SPA, s 92) to be used for common expenses that occur either once a year or more often than once a year. Examples include landscaping, management fees, annual inspection fees, and office and administrative expenses.
a) Common Expenses
Under s 1(1) of the SPA, “common expenses” is defined as those expenses:
- Relating to the common property and common assets of the strata corporation; or
- Required to meet any other purpose or obligation of the strata corporation.
b) Strata Fees
To create the operating fund, each owner contributes fees that are determined by reference to the budget approved at the annual general meeting. These fees are generally a strata corporation’s primary source of income. The default formula to calculate strata fees is set out in s 99:
𝑈𝑛𝑖𝑡 𝐸𝑛𝑡𝑖𝑡𝑙𝑒𝑚𝑒𝑛𝑡 𝑜𝑓 𝑆𝑡𝑟𝑎𝑡𝑎 𝐿𝑜𝑡
𝐸𝑛𝑡𝑖𝑡𝑙𝑒𝑚𝑒𝑛𝑡 𝑜𝑓 𝑎𝑙𝑙 𝑆𝑡𝑟𝑎𝑡𝑎 𝐿𝑜𝑡𝑠 ×𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛𝑠
Per s 107(1), interest can be charged by bylaw on late payments so long as the rate of interest does not exceed what is set out by the SPR, which is currently 10% per annum, compounded annually.
F. Allocating Expenses
1. Two Main Issues with Allocating Expenses
a) Unit Entitlement or Not
Generally, all owners must contribute to the costs of repair and maintenance in accordance with unit entitlement, as decided by the courts in Strata Plan LMS 1537 v Alvarez, 2003 BCSC 1075.
b) Everyone, or Allocate to Individuals
There are, however, exceptions in which common expenses are allocated using a different formula than the formula in s 99 (s 100(1)). For example, certain common expenses that relate to and benefit only limited common property can be allocated to only those strata lot owners entitled to the use of that limited common property. If different “types” of strata laws are distinguished by the bylaws, common expenses that relate to and benefit a particular type of strata lot can be allocated to only the strata lots of that type.
2. Unit Entitlement
a) Relating to Owners
“Unit Entitlement” is the number used in calculations to determine the strata lot’s share of common property, common assets, common expenses, and common liabilities of the strata corporation (s 1(1)). The SPA and the SPR require the calculation of contributions to the operating fund, the contingency reserve fund, and a special levy to be based on unit entitlement. Otherwise, if a strata corporation has failed to calculate contributions to the operating fund in accordance with unit entitlement, the owner may be able to obtain an order from the CRT requiring the corporation to determine the correct strata fee calculations.
b) Relating to Limited Common Property
23-49 Provided there is no alternate formula adopted by way of a s 100 resolution, the SPR allows for the formula in s 99 to be amended for operating fund expenses that relate to and benefit only limited common property as follows:
𝑈𝑛𝑖𝑡 𝑒𝑛𝑡𝑖𝑡𝑙𝑒𝑚𝑒𝑛𝑡 𝑜𝑓 𝑠𝑡𝑟𝑎𝑡𝑎 𝑙𝑜𝑡
𝑇𝑜𝑡𝑎𝑙 𝑢𝑛𝑖𝑡 𝑒𝑛𝑡𝑖𝑡𝑙𝑒𝑚𝑒𝑛𝑡 𝑜𝑓 𝑎𝑙𝑙 𝑠𝑡𝑟𝑎𝑡𝑎 𝑙𝑜𝑡𝑠 𝑤ℎ𝑜𝑠𝑒 𝑜𝑤𝑛𝑒𝑟𝑠 𝑎𝑟𝑒 𝑒𝑛𝑡𝑖𝑡𝑙𝑒𝑑 𝑡𝑜 𝑡ℎ𝑒 𝑢𝑠𝑒 𝑜𝑓 𝑙𝑖𝑚𝑖𝑡𝑒𝑑 𝑐𝑜𝑚𝑚𝑜𝑛 𝑝𝑟𝑜𝑝𝑒𝑟𝑡𝑦 𝑡𝑜 𝑤ℎ𝑖𝑐ℎ 𝑡ℎ𝑒 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑟𝑒𝑙𝑎𝑡𝑒𝑠 X 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑡𝑜 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑓𝑢𝑛𝑑
That formula cannot be used for contributions to the contingency reserve fund and special levies. Instead, the contributions are allocated among all of the owners as follows:
𝑈𝑛𝑖𝑡 𝑒𝑛𝑡𝑖𝑡𝑙𝑒𝑚𝑒𝑛𝑡 𝑜𝑓 𝑠𝑡𝑟𝑎𝑡𝑎 𝑙𝑜𝑡
𝑇𝑜𝑡𝑎𝑙 𝑢𝑛𝑖𝑡 𝑒𝑛𝑡𝑖𝑡𝑙𝑒𝑚𝑒𝑛𝑡 𝑜𝑓 𝑎𝑙𝑙 𝑠𝑡𝑟𝑎𝑡𝑎 𝑙𝑜𝑡𝑠 X 𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑡𝑜 𝐶𝑅𝐹 𝑜𝑟 𝑠𝑝𝑒𝑐𝑖𝑎𝑙 𝑙𝑒𝑣𝑦
| © Copyright 2024, The Greater Vancouver Law Students' Legal Advice Society. |
