Hundreds of thousands of British Columbians now live in strata-titled housing. But, since it’s still a relatively new form, it’s not clear to all how those owners are jointly going to decide what to do as their buildings age.
I wrote about this issue in Vancouver magazine recently. Now, in one of the cases I referred to in that story, the judge has made a decision: Those who want to sell, even if they constitute about 50 per cent of the owners, can’t force the other half to sell if it’s going to create hardship. And, as the non-sellers at Cypress Gardens, argued persuasively to him, it would cause a hardship.
Here’s my story on the decision in today’s Globe. And here’s the actual decision, which I couldn’t quite pack all in with my 700 words.
26 responses so far ↓
1 Andrew Browne // Apr 10, 2012 at 10:03 am
Haven’t read the decision yet but this is going to have far-reaching impacts. I wonder what criteria are imagined for a strata shutdown causing hardship (financial primarily or are we also courting emotional distress as a permitted factor?). And if no hardship is found, is 51% support enough? 75%? 95%?
2 Glissando Remmy // Apr 10, 2012 at 11:28 am
Thought of The Day
“ROTFLMAO!”
This news fall in the Mayor’s Housing Affordability “Task Force” reading material.
As #Vancouver faces an uphill battle between the HaveOwns & HaveOwnNots, the knifing between HaveFlip-Floppers & HaveStays have begun!
Anyone want to comment now, on my #109 #123 postings “Condos are for shmucks?” here:
http://francesbula.com/uncategorized/how-to-create-lower-cost-housing-in-very-expensive-vancouver-a-kick-start/
Gee, this was not to be expected… in a speculative city like Vancouver and all.
And things are not going to stop here. All it’s needed now is a… precedent, in favor of the HaveFlip-Floppers and … CONDO-viction is new game in town! This was just like the scene from the movie Jurassic Park, where the T-Rex was trying out the 10,000 Volts Electrified Fence, here and there. His Learning Curve.
Housing have become unfortunately, a commodity, open to speculative, unsolicited offers, similar only to that of hostile corporate takeovers.
Give it time people, the next offer will be better, more aggressive, and remember, no one can be bought… ahem, unless it’s for the right price!
Funny. How gullible people are, trying to milk the last drop from an almost sterile market, all while not seeing the easy cons of games like Facebook or Instagram?
Tick, tock, tick, tock… one born every minute.
We live in Vancouver and this keeps us busy.
3 Andrew Browne // Apr 10, 2012 at 12:55 pm
Skimmed the court decision and it’s really not at all useful for drawing any parallels to other housing projects. The petitioners couldn’t even provide evidence that they had a simple majority in favour (51%) nevermind a more reasonable standard of 75% or similar. That, coupled with the “cheater strata” common law condominium determinable fee simple ownership makes this very, very specific.
4 rf // Apr 10, 2012 at 2:29 pm
I live in a building like this and I can’t say I disagree with the decision.
A 75% vote really is the key to forcing a sale, just like a levy.
What I hope this judgement leads to is progress on significantly higher mandatory contingency funds to be on hand for Strata Corps.
I read the submissions by many of the dissenters about being willing to pay levies for building improvements if they were properly planned and laid out in detail in advance. It’s a fair point….but it was also some serious deja vu for me. The reality is, a building like this (not a leaker, but just plain old) needs about $40-$60,000 per unit to get it back in shape and trading at market rates.
Sadly, these types of owners are not willing to pay this kind of money until it’s an emergency. Until the pipes start bursting they won’t replace the pipes ($15k/unit).
Until the roof starts leaking, they won’t repair the roof ($10k+/unit).
Until the underground parking/foundation drops some concrete on to a car, they won’t dig up and resurface the underground foundation membrane ($10-15k unit).
Until the siding and balconies rot and someone sticks a foot through, they won’t rebuild the balconies and siding ($10k-15k unit).
You can rarely get the 75% in 50+ unit complexes until it’s an emergency. And then it costs more and everyone cries poverty from the last levy when you try to get on with a levy that is preventative maintenence.
The problem in buildings like this, in short, ‘half of the residents don’t have any money’.
Some units will be beautifully renovated and others will be occupied by hoarders, posing a fire/death risk to everyone.
If strata codes forced buildings to keep a contingency reserve based on the value of the building (a level that appreciated based on the age of the building), everyone could budget for it.
I sincerely agree that it’s a hardship for elderly and strugging people to forced out of a home that they own. I get that.
But what gets lost in the argument is owners who wish to maintain the value of the property are left to “beg” those owners to not let the building rot. It’s safe to say that at least 20% of owners in most buildings would do nothing if left to their own devices, just like 20% of houses on most blocks look like they are about to fall apart (elderly millionaires on paper who would rather live in a dilapitated bungalow than remortgage 10% of their house to fix it up. When the roof leaks they have the nerve to cry poverty when they have to come up with $30k. Or even worse, cry poverty when they raise property taxes $54.)
Many of these dissenting owners spoke of ‘almost having their mortgage paid off” and not being able to get another.
Well you can get a reverse mortgage. Yes, it cost money, but why should other owners have to watch their asset detiorate just so another owner can pass the depleted value of their unmaintaned unit mortgage free/tax free to whoever inherits it after they die or head to the care home?
The irony is that the mindset of many of these owners is that the cost of proper maintenance is a “cost”. They view the home as an asset, but they view putting money into as a cost. Buildings like Cypress gardens, if owners put $60k in, they would be worth $100k more and not be viewed in the market as lepper colonies.
5 Michael Geller // Apr 10, 2012 at 4:41 pm
Excellent comments by RF above.
One additional point I would like to make is that I believe Strata Property Managers need to be held to greater account for the deteriorating condition of some projects.
I look forward to the day when a Strata Council successfully sues its Property Manager for not ensuring that adequate replacement reserve funds were set aside in the budgets, and necessary maintenance was carried out in a timely manner.
As I suggested before on my blog http://gellersworldtravel.blogspot.ca/2011/08/buying-condo-should-you-get-inspection.html every condominium development should get a comprehensive inspection report every few years that is made available to each member, and to prospective purchasers.
This could be an effective way of increasing the likelihood that important repairs and maintenance is carried out.
I also would like to see the province make changes to the Act. I understand some improvements have either been approved, or are on their way.
At the end of the day, only legislation will get people to do the right thing such as saving for a rainy day…so that the roof doesn’t leak!
6 Kirk // Apr 10, 2012 at 6:25 pm
People are stretching themselves so thin nowadays to get into the condo market. In a few years if their buildings need a special assessment to redo the roof or something, mortgages could also be up for renewal at higher interest rates. It could be a perfect storm of problems.
7 IdleWild // Apr 10, 2012 at 9:05 pm
@rf
do you live in MY building?????
8 Lewis N. Villegas // Apr 10, 2012 at 9:08 pm
We are hearing that the changes are coming, and that legislation will require buildings to have a depreciation schedule in place, and pay on an on-going basis to the Contingency Reserve Fund (CRF).
At the moment the minimum contribution to the CRF is 10% of operating budget, about $25,000 for our building. While, that’s not enough, it’s not out by much provided everything else is up to date.
We have been collecting an annual special assessment of $40,000 for 10 years, and this year completed major repairs in two areas of the building. We are not a “leaker” but we are the 1970s equivalent of a STIR (it was called a MURB then), and the quality of construction was seriously compromised.
One problem was design. Balcony stucco was continuous with exterior wall stucco, and there was just no way to stop the balconies cracking through deflection and settling and becoming a point of entry for water into the envelope. We can look to the architects and engineers that signed off on the building and shake our heads.
The other problem was even worse.
Along the base of the building, the city’s building inspector really let one go. The bottom wood plate of the wall ends up being 4″ below grade. Code says 8″ above grade for wood.
The 12″ difference cost us about $150,000 to replace this year including some repair to suite interiors. By acting very aggressively, we managed to avoid mould forming in suites.
My own experiences in the building, on Council since 1989, inform part of my urgency to get us to fee-simple, high-density products.
It is a no-win to live in Vancouver and have the only option for sustainable urbanism (i.e. higher density) land you in a strata property. OK as an option. Not OK as the only option.
We need to strike out in a new direction.
9 Lewis N. Villegas // Apr 10, 2012 at 9:09 pm
CORRECTION: we contribute 20% to the CRF. Our operation budget is below 150,000 including management fees.
10 Frances Bula // Apr 10, 2012 at 11:21 pm
@Andrew. Just one fact to point out that isn’t in the court ruling. Those petitioning to sell did have more people on board than appears on the surface. They went to court, however, relying on what turned out to be a weak point of law, claiming that even if only one person wanted to sell, that person had the right to ask for a sale. When they realized that wasn’t flying with the judge, they then went and rounded up more affidavits but the judge wouldn’t accept them. They did get more than 50 per cent of the owners willing to sell to Polygon.
Interestingly, some people look at this case and, like you, say it’s not really applicable to current condos because it’s got a different legal foundation and structure. Others, like RF, look at it and say the same basic issues are involved: a division between those who want to maintain and those who want to sell, with concerns about spending money on both sides. It’s very specific legally but not very specific when it comes to human dynamics and problems in a collective-ownership situation.
11 IanS // Apr 11, 2012 at 6:06 am
From my brief review of the Cypress Gardens decision, I don’t think the result is very surprising and I don’t think it would have been any different if the Petitioners had been able to establish that more than 50% of the owners wanted to sell. Under the Partition and Sale of Property Act, 50+% makes it easier, but the Court retains a discretion to refuse to order the sale. Given the nature of the property, and the nature of the evidence advanced by the opposing Respondents, I think a successful result for the Petitioners was pretty unlikely.
In my view, the Partition and Sale of Property Act is not really set up to deal with property arrangements such as the “common law” condo at Cypress Gardens. The Court commented on that point (the standing issue), but didn’t go into it, given the lack of legal representation for the Respondents. From the reasons, I suspect the Respondents might have had success on that issue if it had been argued.
Finally, I don’t think the decision will have any broad application. The Strata Property Act sets up a different, very specific, ownership arrangement and I think it unlikely that we will see many applications like those in this case.
Frances – “It’s very specific legally but not very specific when it comes to human dynamics and problems in a collective-ownership situation.”
That’s true, but the applicable legal principles are very different under the Strata Property Act. There are a number of reported decisions involving strata ownerships resolving disputes which set out and apply those principles.
In my view, the Cypress Gardens decision, while interesting, is unlikely to have much application outside it’s very specific fact situation.
12 IanS // Apr 11, 2012 at 8:34 am
Just to correct myself, that’s the “Partition of Property Act”, not (as I wrote) the Partition and Sale of Property act.
13 sthrendyle // Apr 11, 2012 at 11:30 am
Then, there’s the fact that developers are building/pricing brand NEW projects at almost the same price as neighbourhood resales (there was even a project in New West – forget the name of it – that was advertised as ‘cheaper than resale!). And – even if the new places are smaller – who doesn’t want the 2-5-10 New Home Warranty and the new rainscreening and building envelope technology? I rather think – and I’d be interested in Mr Geller’s opinion – that older condos are going to be like 486 computers. Which then of course begs the question – how does an owner build up equity if the price of the unit doesn’t rise?
14 rf // Apr 11, 2012 at 1:00 pm
@sthrendyle
It’s not the value of the building that is rising anywhere. It’s the value of the land underneath.
You also build up equity by paying off your mortgage (ie. not spending the money on other things).
To even ask “how does an owner build up equity if the price of the unit doesn’t rise?” is really an odd question.
If the price of the unit does not rise, you build up equity by paying off the money your borrowed to buy it.
It’s only in the current la-la land that you get to build up equity without actually paying down the debt taken to acquire the asset.
@Idlewyld
If you have neighbours who steal buggies from Oakridge Safeway and leave then scattered around the property……you might live my building
15 MB // Apr 11, 2012 at 2:14 pm
Thanks, rf, for your comments. Rings true with me in all respects.
Just a note on paying down a mortgage. We played with amortization tables (Excel; some banks have them on their websites), as well as looking in detail at our own.
We discovered that every extra dollar placed on the principle in the first half of the 25-year amortizatrion period equals two at the end. We then had a light-bulb moment and decided to hammer the thing down with everything we had and paid it off 14 years early. We saved over 120K in interest.
Clearly, the banks love those who think they are “smart” when negotiating the lowest monthly payment over the longest time. They make billions more on people like these.
The painful part was seeing friends and family travelling the world and buying cottages. But most of them will be suffering making mortgage payments from their pensions well into their 70s.
Being debt-averse is very, very healthy. As is building an RRF in whatever home you own.
The best advice I can offer Gen Xers, Yers and Zeders is team up with your best pals and build your own triplexes or quads in non RS1 zones. Just be sure you have a really good contract, thick sound proofing, and a solid contractor.
This advice stands until such time as freehold row housing comes into play … if ever.
16 Bill Lee // Apr 11, 2012 at 4:31 pm
A few hours ago
http://www.thestar.com/business/article/1159857–toronto-condo-surge-disguises-looming-slowdown
A few days ago
thestar.com/news/article/1148728–hume-are-toronto-condo-towers-slums-in-the-making
17 Terry m // Apr 11, 2012 at 8:14 pm
I think Glissando Remmy @ 2 just concocted vancouver’s newest real estate term …
CONDO-viction!
18 IdleWild // Apr 11, 2012 at 8:56 pm
@rf
No, not the same building afterall but the sameness of the myopic, obstinate co-owners is frightening.
19 sthrendyle // Apr 12, 2012 at 10:33 am
@ rf – yes, of course… D’oh. My point was more about resales vs new condos. Despite the ‘hot market’, I know people who’ve taken their condos off the market (maybe they were being unrealistic).
Excellent observations re: MB and the mortgage tables. Once you purchase a property, any number of banks and credit card companies come out of the weeds to entice you with great deals, from teaser rates to of course the ‘crack’ of credit – HELOCs.
Funny, I don’t think people in other parts of Canada – other than Toronto – have this obsession with real estate. They’re likely too busy taking nice vacations and doing more useful things with their time than obsessing over down payments and negotiating quarter points on mortgage renewals.
20 Sean Bickerton // Apr 12, 2012 at 1:11 pm
It’s worth noting that Stratas require a 2/3 vote for anything of substance – a council can’t even amend a bylaw without 2/3 majority. A sale would never be allowed with less support and shouldn’t be.
Contingency Reserve Funds must by law equal at least 25% of any strata’s annual operating budget for the coming year or the strata must make a mandatory contribution to the CRF of 10% of the coming year’s budget.
And despite the entropic nature of the reality we all exist within, buildings included, most strata corporations have a significant asset that outlasts the building either in the value of the land or air rights they’re built on.
21 rf // Apr 12, 2012 at 1:33 pm
Sean’s email points out the key flaw in Contingency Reserve Fund Requirements.
If the Reserve must equal 25% of the operating budget, a Strata that skimps on operating expenses and does not budget for proper maintenance in it’s annual operations is actually able to retain less for contingency!
22 Bill McCreery // Apr 12, 2012 at 9:41 pm
An informative discussion. Solutions, finding ways top bring people together through discussion, negotiation, and education are preferable to legal or regulatory all or nothing dictates, although the regulations definitely need to be tightened to ensure funding is there when it’s needed and to require stratas to be proactive with respect to maintenance. I’d like to resubmit an earlier post when Frances first brought this up a few weeks back as it is perhaps more relevant here:
Bill McCreery // Mar 6, 2012 at 6:22 pm
“Morry, normally a 20-30 year olds building is not a tear down. In fact even wood frame structures can last hundreds of years. The oldest farm house in Victoria near U Vic dates to about 1834. It sounds like one faction of the Cypress Gdns. folks share your idea of throwaway buildings. Maybe they should do a deal something like this with Polygon:
1) all of those who want to sell to Polygon do and in sufficient numbers;
2) The holdout owners are moved into newly updated existing units if they are willing to pay for the upgrade, or into a block or 2 of units at one end that are left as is;
3) this is done so that Polygon can carve out a portion of the site for redevelopment;
4) then, Polygon does their redevelopment and sells them and the upgraded townhouses, which should sell at a good price.
I bet there’s a dollar there and it can be a win-win-win. (I’m applying for the project manager position with Polygon to do this project. It’d be an innovative, challenging project. I’m looking for that kind of thing at the moment.)”
23 rf // Apr 13, 2012 at 7:04 am
Bill,
If you believe you can get that many people in a strata property like Cypress Gardens to agree to something that creative (something that involves the hoarders having to purge something or getting an 85 year old to alter the view from their “sitting chair”), you might as well try and build a oil and gas pipeline through the project as well!
24 Bill Lee // Apr 13, 2012 at 1:00 pm
“Here’s my story on the decision in today’s Globe. And here’s the actual decision, which I couldn’t quite pack all in with my 700 words.”
But the decision is only 18000 words, surely some could be thrown out.
There were 82 mentions of Cypress Gardens, 80 “agreements”, 31 “rights” 30 “co-owners” etc.
Interesting that CG “comprising 177 apartments and townhouses owned by 135 different owners. ”
Some owners have multiple apartments?
25 Sean Bickerton // Apr 13, 2012 at 1:50 pm
@ rf #23:
Hi, I shd hv added that new legislation requiring annual depreciation reports requires all stratas to file and follow a life of building maintenance and replacement plan that costs out replacement of envelope, roof, core infrastructure etc. and requires stratas to set aside enough in their CRF to pay for those costs as they approach.
26 Bill McCreery // Apr 15, 2012 at 7:59 pm
rf, your observations are too true. However, firstly, I’m an optimist, the ‘glass is half full’. Second, if people are given “creative” and realistic options that will in fact get them out way ahead of where they now are, whether it’s financial gain, or a unit in the next building refurbished as it was when they moved in when new. Even if they get a different unit as is, they’ll still be ahead in that they’ll still have their comfort level with a bonus of living in a happy community with neighbours who get along. And, it sure beats paying legal fees to people whose modus operandi typically is adversarial. Also, paying someone $6 or $7,000 a month for 6 months is a speck of what it costs in legal fees and the time taken by the ponderous and uncertain legal process.
Where they are now is not exactly nirvana is it? Resentful neighbours, a dis-functional strata council, and a situation which will almost certainly continue to deteriorate.
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