Understanding the Dissolving of a Strata
Under some circumstances, terminating a strata corporation may be the best choice for strata lot owners. As some older strata corporations reach the end of their life cycle, the cost of repair may not make economic sense or owners may not have the financial ability to pay for the necessary repairs. Sometimes the land can be sold for redevelopment; for example, a low-rise building could be redeveloped into a building with many more units.
Bare land stratas (“strata subdivisions”) may want to terminate as well; this is known as cancelling the bare land strata plan. For example, a bare land strata corporation may want to convert to a fee simple (non-strata titled) subdivision or, in certain circumstances, become a single parcel with “tenants-in-common”.
From Unanimous to 80%
Effective July 28, 2016, strata owners are now able to terminate (wind up) their strata corporation with an 80% vote instead of the previous difficult-to-achieve unanimous voting requirement. Many other jurisdictions, including Alberta and Ontario, do not require a unanimous vote to terminate.
The 80% vote means the termination resolution must have 80% approval of all the registered owners. It is not a quorum vote. Unlike majority and 3/4 votes, it is not an 80% vote of those owners present, or holding proxies, at the meeting (learn more in types of voting). For strata corporations with fewer than 5 strata lots, the 80% voting threshold is effectively unanimous.
Given the significance of terminating a strata corporation, there is court oversight to protect any dissenting owners and registered charge holders (e.g. mortgage providers).
Overview of the Termination Process
Voluntary winding up from initial exploration to finalizing the sale (or liquidating) and owners moving out can take up to 18 months or even longer. This section provides a general overview of voluntary winding up but it does not list all the steps.
Sometimes strata lot owners may be concerned about protecting their interests. The termination process has a number of safeguards built in including: advance notification to every owner; an 80% vote of approval from all owners (not a quorum vote from those present, or holding proxies, at a meeting); and court oversight. However, individual owners may also wish to consult a strata lawyer for independent advice.
Starting the Termination Process
A termination process starts in one of two ways:
- A developer approaches a strata corporation with an offer to buy all the strata lots for redevelopment.
- A strata corporation is interested in winding up the strata and the owners want to sell for redevelopment, often due to excessive repair and maintenance costs.
We are fully committed to open and transparent communication with owners. Regular information meetings will be held with homeowners to discuss the process, all options and to collectively learn more about terminating the strata (winding up).
How will funds be disbursed to owners?
Owners will also want to understand how funds from selling would be disbursed. The current approach is that disbursement to owners for stratas is as follows:
Before August 1974 by unit entitlement
August 1974 to 2000 by interest upon destruction
After 2000, relative assessed values.
If the majority of owners are interested in termination, we can meet with you and either bring an initial offer or present a marketing to get you top dollar. The first step is usually a resolution is adopted to enable the strata council to move the process forward and hire legal counsel.
( Reference: https://www2.gov.bc.ca/gov/content/housing-tenancy/strata-housing/termination)