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Pacific Shores Resort & Spa Ltd. (Re) v. Strata Plan VIS6830 was an insolvency proceeding in the Supreme Court of British Columbia.

Parkside was the owner of strata lots in which a resort and spa which was run in Strata Plan VIS6830 (the “Strata Corporation“).  The Strata Corporation consisted of both residential and commercial strata lots. The resort included  amenities, such as a pool.

The utility expenses were a common expense required to be paid by the strata corporations. For obvious reasons, the strata corporation wished to bill owners their share of the utility expenses according to usage rather than by unit entitlement (the resort strata lots included a pool, while the residential strata lots did not).

The strata corporation accrued an accounts receivable owing by Parkside in respect of its resort for its share of utilities. The Strata Corporation sought to receive priority rights to those utility billings similar to that protection given to the strata corporation for strata fees and special levies.

The Court highlighted that the Strata Property Act provides explicit instructions for how strata fees are to be apportioned to owners. However, in this case, the strata corporation charged utility fees to strata lot owners in proportion to their actual use rather than by their proportional share according to the unit entitlement formula stipulated in Section 99 of the Strata Property Act (the “Act“).

The Court ruled that the strata corporation was not entitled to the utility fees charged to the resort owner because the fees did not comply with the Strata Property Act.

In making its decision the Court mentioned the concepts of certainty and predictability which are so important to commercial law:

The priority regimes under the [Strata Property Act], the [Personal Property Security Act] and the [Land Title Act] rely on these concepts so as to provide clear rules upon which commercial players can operate, particularly within the context of potential or ongoing insolvency proceedings…It is beyond question that violence would be done to commercial law if established priority regimes could be regularly altered or circumvented on an ad hoc basis and based on individual notions of fairness

~ Fitzpatrick J.

This decision stresses the importance of strictly adhering to the requirements of the Strata Property Act when it comes to the apportionment of expenses to owners. If a strata corporation wishes to deviate from the standard formula set forth in Section 99 of the Act, they must make those changes in accordance with the provisions of the Act. For instance, this strata corporation could have approved a motion by “unanimous vote” under Section 100 of the Act to change the formula for sharing utility expenses according in proportion to actual use.

If you are a strata corporation who bills owners on consumption basis of utilities and you have not approved a resolution by unanimous vote under Section 100 of the Act, you should obtain legal advice immediately, or you may find that you will not be reimbursed for any of those expenses, as was the case for The Owners, Strata Plan VIS6830.

A copy of this judgment may be viewed on Canadian Legal Information Institute website, www.canlii.org.

Direct Link: http://www.canlii.org/en/bc/bcsc/doc/2013/2013bcsc480/2013bcsc480.html

 

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