UPDATE: This decision discussed in this article was effectively overturned on September 20, 2018. Please see https://inspirepm.com/625536-b-c-ltd-v-the-owners-strata-plan-lms4385/ for the update.
The Owners, Strata Plan NW 2729 v. Haddow et al was a decision at the Civil Resolution Tribunal dealing with the retroactive portion of increased strata fees after a new budget was implemented.
In a decision earlier this year by Mr. Garth Cambrey, Vice Chair of the Civil Resolution Tribunal, a strata fee increase applied “retroactively” was determined to be unpermitted. Mr. Cambrey identifies several issues with the Strata Property Act related to budget implementation. Most strata corporations easily deal with these issues on an ad hoc basis. Unfortunately for this strata corporation, those issues were addressed by a bylaw which may have improperly phrased how the strata fee adjustments would be implemented.
At paragraph 39, Mr. Cambrey rightly identified that
there is no requirement that strata fees be paid in equal installments. In other words, strata fees for one month may be for a different amount than other months as long as they are calculated by unit entitlement.
For most strata corporations, this means that after the budget that calls for a strata fee increase is approved, the first month following that approval will include a one-time higher strata fee instalment before the new, equal installments start.
Section 104(2) of the Strata Property Act states:
If a fiscal year to which a budget relates ends before a new budget is approved, the owners must, until the new budget is approved, continue to pay to the strata corporation the same monthly strata fees that they were required to pay under the previous budget.
When a new budget is approved, including the amount that is necessary to be collected through strata fees, the strata corporation will do two things:
- determine each strata lot’s share of the total annual strata fees based on unit entitlement, and divide that number by 12 to figure out the monthly strata fee installments; and
- calculate the difference between the old strata fee installments and the new installments and add that difference to the next instalment to ensure that there isn’t a shortfall because of the lower strata fees paid during the previous months.
For instance, if the fiscal year ends on December 31st and the previous fees were $100 per month, the owner would keep paying $100 per month until a new budget is approved. If the owner’s share of the new budget, divided by 12, is $120 per month, the owner will need to pay an extra $20 with the next strata fee installment for every month that the previous fees were payable. So, if the budget was approved in February, the March 1st fees will be $160 (the new installment plus the adjustment to make up for the difference between the previous installments and the new). The fees will be $120 (the new installment) on April 1st and for all following months until a new budget is approved.
The strata corporation in this case adopted a bylaw which contradicted Section 104(2) of the Act. In effect the bylaws indicated that the strata fees during the period at the beginning of the fiscal year are not determined until the budget is approved at the AGM. The strata fees would be determined retroactively when the next budget is approved.
Unfortunately, this bylaw and the strata corporation’s policy to determine fees “retroactively” disentitled them from collecting the one time adjustment to make up for the lower fees that were paid during the first two months of the fiscal year.
This decision is not binding on judgements that may be made by the Court or by other decisions for the Civil Resolution Tribunal members. But, if future disputes are determined in a similar manner, strata corporations should be careful with how they word the “retroactive” increases to fees. Using this shorthand language may disentitle strata corporations from collecting the one-time increased strata fees that address the shortfall from the previous, lower fees.
Inspire Property Management has always recommended to our clients, if the bylaws do not address this issue, that the motion approving the budget also include clear approval of the date that the new fees will be implemented, including the one-time, higher installment to make-up for the lower strata fees charged since the beginning of the new fiscal year until that date.
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