West Vancouver, Hacienda Del Norte: Court dismisses appeal; suggests former homeowners who purchased defective leaky rotten house without pre-purchase inspector would win $710,000 damage claim if they sued post-purchase inspectors

COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Cardwell v. Perthen,

 

2007 BCCA 313

Date: 20070606


Docket: CA033932

Between:

Eric Cardwell and Diane Susan Cardwell

Appellants

(Plaintiffs)

And

Juergen E. Perthen and Helga G. Perthen

Respondents

(Defendants)

Before:

The Honourable Madam Justice Prowse

The Honourable Madam Justice Levine

The Honourable Madam Justice Kirkpatrick

 

J.A. Hand, and

W. Sun

Counsel for the Appellants

P. Sandhu

Counsel for the Respondents

Place and Date of Hearing:

Vancouver, British Columbia

March 29, 2007

Place and Date of Judgment:

Vancouver, British Columbia

June 6, 2007

 

Written Reasons by:

The Honourable Madam Justice Levine

Concurred in by:

The Honourable Madam Justice Prowse

The Honourable Madam Justice Kirkpatrick

Reasons for Judgment of the Honourable Madam Justice Levine:

Introduction

[1]                This appeal concerns the liability of a vendor of a residential property for defects and deficiencies discovered by the purchasers after completing the purchase without a professional inspection.  The appellants, the purchasers, claimed a loss of $710,000 suffered on the sale of the home.  The trial judge found the respondent, the vendor, liable for damages of $35,442 for dangerous latent defects which he had failed to disclose.  The appellants claim the trial judge erred in articulating and applying the legal test distinguishing patent and latent defects; failed to consider whether the mitigation efforts of the purchasers were reasonable; and failed to consider the appellants’ claim of negligent construction.  They ask this Court to reassess their damages.

[2]                The trial judge’s reasons for judgment are reported at (2006), 41 R.P.R. (4th) 118 and may be found at 2006 BCSC 333.

[3]                For the reasons that follow, I would dismiss the appeal.  The trial judge did not err in articulating and applying the legal test for distinguishing patent and latent defects.  Whether or not the mitigation efforts of the appellants were reasonable at the time they suffered their loss, the vendor cannot be held liable for their loss.  For the reasons given by the trial judge, it is not necessary to decide the appellants’ claim for negligent construction.  There is no basis for this Court to interfere with the trial judge’s assessment of the damages.

Background

[4]                In May 2000, the appellants agreed to purchase the residence located in West Vancouver, B.C. for $1,350,000.  The appellants viewed the home twice with their real estate agent.  Their second offer, for $300,000 below the asking price, without conditions and for all cash, was accepted by the respondent.  The contract of purchase and sale was not made subject to the appellants completing an inspection of the home, and the appellants did not retain a qualified inspector to inspect the home before closing.  

[5]                Shortly after the closing, the appellants became aware of structural deficiencies, mould growth, and leaks throughout the home.  Six months after the purchase, the appellants sold the home in an “as is” condition for a loss of $710,000. 

The Renovations

[6]                The respondent purchased the residence in 1986.  At that time, it was a 2,000 square foot, single-storey bungalow.  In the following years, the respondent, who had considerable experience in matters of general construction and property management, extensively renovated the property.  Among other modifications, he built a series of retaining walls; relocated the kitchen, added a bathroom and bar to the home; moved an interior wall; added a beam to the dining room; and enclosed an outdoor patio to enlarge the living room area.  The respondent carried out most of the renovations himself, or had them done at his direction. The respondent and his wife lived in the residence throughout the renovations.

[7]                The respondent originally commenced the work without obtaining the necessary permits.  The neighbours became concerned about the work, especially the construction of the retaining walls.  Following complaints from one or more of the neighbours, the District of West Vancouver sent an inspector to the property. Although the District expressed some initial concerns about the deficiencies in the building plan, it granted the required permits to continue with the renovations.  From that point on, periodic inspections were conducted by the District.  Numerous deficiencies were identified over time, and the respondent remedied those deficiencies or allayed the District’s concerns by hiring expert third parties to prepare inspection reports to confirm the integrity of the designs and renovations. 

[8]                In the end, the property was transformed from a modest bungalow into “Hacienda Del Norte”: a spacious, Santa Fe style residence with a partial upper level, extensive pitched and flat-roof areas, a two-storey ornamental bell tower, a covered portico supported by columns and a second garage.  

Discovery of Defects and Deficiencies

[9]                Before moving in, the appellants decided to undertake some minor cosmetic renovations to the home.  They intended to replace the carpet in the living room and home office with tile.  When they lifted the existing floor, they found that the sub-floor had been constructed over old carpeting, the wiring did not go through the floor joists but over it, and a vapour barrier was installed on top of the joists — all of which caused moisture to collect under the floor, resulting in rot and mould.  Flaws were also discovered in the master bedroom: below the sub-floors, the wood timbers were soggy and black fuzzy mould was present on some of the joists.  As the sub-floors were removed throughout the house, the appellants began to realize the extent of their problem.  Underneath the sub-floor in the family room, there was no concrete slab, only soil.  Black water was dripping out of the joists and there appeared to be mould. 

[10]            The appellants sought a report on deficiencies from Gordon Spratt & Associates, consulting engineers.  The two principal contacts at Gordon Spratt & Associates were Mr. Trundle and Mr. van Blankenstein.  The appellants received a report on October 10, 2000 (the “Spratt Report”), which listed numerous deficiencies to the floors, walls, roof structures, outbuildings and retaining walls.  The Spratt Report recommended that the appellants either demolish the house and build a new one, or sell it. 

[11]            The appellants retained cost estimators, Heylar & Associates, to review the Spratt Report and determine the cost to repair the deficiencies.  The estimate was in excess of $1,000,000. 

[12]            The appellants believed their only two options were to either rebuild the home at considerable expense, or sell it and cut their losses.  Based on the Spratt Report and the cost estimate, and motivated by the danger created by the toxic mould, the appellants chose to sell the home. 

Re-sale of  the Home

[13]            The property sold quickly to an associate of Mr. Bebek, a builder, for $700,000. The intention was that Mr. Bebek and his brother would cosmetically restore the house for resale.

[14]            Six months after they purchased the home, the appellants realized a loss of $710,000 (including fees and other charges on the sale).

[15]            At trial, Mr. Bebek testified that he spent approximately $270,000 to cosmetically upgrade the property (including $50,000 to remodel the kitchen and a bathroom).  This amount represented his out-of-pocket expenses, and did not include amounts for wages or management fees for him or his brother.  He estimated that these fees would be about an additional 10-15% of the $270,000. 

[16]            In August 2003, an associate of Mr. Bebek sold the property for $1,265,000 to the McLoughlins.  Prior to the purchase, the McLoughlins commissioned an inspection, which revealed that some flashing had to be added and that other minor work was needed.  None of this was significant.  Shortly after the purchase, the roof began to leak.  The McLoughlins spent approximately $100,000 upgrading the home.  They did not break down how much of this was expended solely on repairing the leaky roof.  The McLoughlins decided to sell the property for $1,350,000 after owning it for only nine months.

The Lawsuit

[17]            The appellants sued the respondent for negligence (including negligent misrepresentation and negligent construction), fraud, and breach of contract.  Before trial, they settled their claims against the respondent’s real estate agent, the realty company for whom she worked, the District of West Vancouver, the engineering company retained by the respondent, and one of its engineers. 

Trial Judge’s Reasons for Judgment

[18]            The trial judge reviewed the background and evidence in detail.  She discussed (at paras. 73-118) the “Details of the Principal Alleged Deficiencies”, with reference to the Spratt Report, the trial evidence of Mr. van Blankenstein, and other experts who gave evidence for each of the parties. 

[19]            The trial judge described the Spratt Report (at para. 73):

In overview, the Spratt Report is a strongly worded condemnation of the construction quality of practically the entire residence and every out-building and the retaining walls.  It describes work as being crude and unprofessional at times achieving an appalling workmanship standard.  With a broad brush it paints a picture of a grievously flawed residence, with massive leaking or potential for significant water ingress, mold, structural defects and settlement concerns.  In effect, it advocates demolition of much of the house.  Also in evidence were videos capturing Mr. van Blankenstein’s criticisms on site taken just before the Cardwells sold and one taken by Mr. Perthen during a weekend break of trial showing the current exterior condition.  I will discuss below, under separate headings, the main areas of concern.

[20]            In reviewing the main areas of concern with the property. as described in the Spratt Report, the trial judge found that neither Mr. van Blankenstein nor the other experts supported the opinions that had been expressed in the Spratt Report.  The trial judge noted that with reference to “Walls and Sub-Floor Deficiencies”, Mr. van Blankenstein “became surprisingly equivocal on the moisture issue” (at para. 75); on “Roof Deficiencies”, he “qualified this statement [about water penetrating the roof] very significantly on cross-examination where he agreed that rain water was in fact not penetrating when he wrote his report and that his report was merely speaking to the potential of that occurring” (at para. 85); on the “Foundations”, “Mr. van Blankenstein’s evidence was insufficient to show that the foundations were inadequate or failing or that there was systemic problems with the walls, roof or floors” (at para. 97).  In the result, the trial judge placed little weight on the Spratt Report (at paras. 116-118):

            In carefully weighing the evidence, I have concluded that the Spratt Report conjures a deeply misleading impression of the true state of the property.  I have already referred to a number of instances where Mr. van Blankenstein’s criticisms were exaggerated or without factual foundation altogether.  Those previously articulated examples do not amount to an exhaustive list.  There were many instances in Mr. van Blankenstein’s cross-examination where he attempted to resile from the recommendation in the Spratt Report that the house be torn down.  In the end, he admitted that a wholesale demolition might not be required.  Mr. van Blankenstein failed to distinguish between areas of the house that had simply gotten worn out (e.g. the flat roofs of the garage) from areas that are alleged to be constructed in a negligent manner.  Allegations of shoddy workmanship are not put in perspective.  While Mr. van Blankenstein agreed that the Spratt Report painted a very bleak picture of the situation for the Cardwells at the same time he agreed that the next step in the process would have been to conduct a more intrusive investigation.  His inspection did not involve any destructive testing except for a hole put through the lower brick wall of the family room and in the ceiling between the family and living rooms.

            It would appear that the standards applied by Mr. van Blankenstein in respect of a substantial number of identified shortcomings were whether the work had been carried out to a high standard for a residence of such cost and whether it represented best practices.  Indeed, at the close of the unedited version of the Spratt Report originally provided to the Cardwells, it states that Helyar & Associates’ costings, which were based on the deficiencies highlighted by Mr. van Blankenstein, were for “remediation, to return 835 Younette Drive into a habitable residence to the high standard which Mr. and Mrs. Cardwell believed they purchased.”

            In all the circumstances, I consider it unsafe to rely on much of the contents of the Spratt Report and give it little weight.

[21]            Having reviewed the evidence of the alleged defects and deficiencies, the trial judge turned to the applicable law. She noted (at paras. 119-120) the continuing application of the doctrine of caveat emptor in the context of the purchase and sale of real estate, and the exceptions to the rule which bring into play the distinction between patent and latent defects (paras. 121-129).  She also considered the law relating to implied warranty of fitness in used homes, negligent misrepresentation, and negligent construction.

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West Vancouver, Deer Ridge: Ms. Mason buys a new townhouse in Phase Four; court orders Ms. Mason to pay for repairs to older leaky condos in Phase One

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The Owners, Strata Plan VR2654 v. Mason, 2004 BCSC 685 (CanLII)

PDF Format
Date:2004-05-21
Docket:H030648
Parallel citations: (2004), 32 B.C.L.R. (4th) 282
URL:http://www.canlii.org/en/bc/bcsc/doc/2004/2004bcsc685/2004bcsc685.html
Reflex Record (noteup and cited decisions)

Decisions cited

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

The Owners, Strata Plan VR2654 v. Mason,

 

2004 BCSC 685

Date: 20040521


Docket: H030648

Registry: Vancouver

Between:

The Owners, Strata Plan VR 2654

Petitioner

And

Carolyn Mary Mason and

Hongkong Bank of Canada

Respondents

 


 

Docket: H031146

Registry: Vancouver

 

Between:

 

Carolyn Mary Mason

 

Petitioner

 

And

 

The Owners, Strata Plan VR 2654

 

Respondent

 

Before: The Honourable Mr. Justice Joyce

Reasons for Judgment

Counsel for The Owners, Strata Plan VR 2654

 

Adrienne Murray

Counsel for Carolyn Mason

Herbert Rosner

Date and Place of Trial/Hearing:

February 16-17, 2004

 

Vancouver, B.C.

 

INTRODUCTION

[1]         These proceedings involve a dispute between The Owners, Strata Plan VR2654, which I will refer to as “Deer Ridge”, and Ms. Mason, who is the owner of one of the townhouse units in Deer Ridge.  Specifically, the dispute concerns the manner in which Deer Ridge has allocated operating fund expenses and contingency reserve fund expenses between the two different types of units within the strata development.

[2]         Deer Ridge is comprised of two types of strata lots – townhouses and apartments – and was constructed in phases.  Ms. Mason owns a townhouse in Phase Four.  This dispute arises because of special levies imposed by Deer Ridge to raise money to repair water ingress problems with some of the strata lots.  In particular, a number of the special levies related to townhouses constructed in Phase One.  Under the system of cost allocation by type of strata lot, only the owners of townhouses are responsible for the special levies that relate to townhouses.  Ms. Mason is unhappy that she, as an owner of a strata lot in Phase Four, which has not experienced water ingress problems thus far, has to contribute to the cost of repairs to Phase One when the owners of the apartments do not. 

[3]         Ms. Mason contends Deer Ridge has no authority to allocate the expenses as it has done.  As a consequence, she has refused to pay assessments charged against her strata lot.  Deer Ridge has brought this proceeding, inter alia, to recover unpaid strata fees and special levies. 

[4]         Ms. Mason has brought a counter-petition seeking a declaration that Deer Ridge’s method of assessment is invalid.  She seeks to have Deer Ridge converted into four separate strata sections with separate budgets.  Alternatively, she seeks to have all assessments made on the basis of unit entitlement without any allocation of expenses based on different types of units.

FACTS

[5]         Deer Ridge, a strata corporation located in West Vancouver, was created in four phases during the period 1990 to 1997.  It contains a mix of apartments and townhouses.  Phase One, comprised of 11 apartments (Tower One) and eight townhouses, was completed in 1990.  Phase Two, comprised of 20 apartments (Tower Two), was completed in 1993.  Phase Three, comprised of 25 apartments (Tower Three) and four townhouses, was completed in 1995 and Phase Four, comprised of eight townhouses, was completed in 1997.

[6]         Ms. Mason owns a townhouse in Phase Four.

[7]         Starting in 1991, operating costs and capital expenditures at Deer Ridge were allocated between apartments and townhouses.  In November 1992, Deer Ridge amended its bylaws to provide, by Bylaw 2.2, that both operating and contingency reserve fund expenses would be allocated based on the type of strata lot.  Bylaw 2.2, which was filed in the Land Title Office on November 26, 1992, reads as follows:

Prior to the commencement of each fiscal year, or as soon thereafter as possible, the Strata Corporation shall approve by majority vote of its owners at its Annual General Meeting an operating budget for the next fiscal year, which shall include all anticipated common expenses of the Strata Corporation allocated to each type of strata lot where so attributable in accordance with statutory bylaw 128, and the allocation of money to the contingency fund on the same basis.

 

[8]         Deer Ridge allocated operating expenses and the contingency reserve fund to the two types of strata lots until 2000, at which time the Strata Council prepared a budget by which it purported to allocate costs to six different cost centres representing each of the three apartment towers and the three phases of townhouses.

[9]         The owners of the Phase One townhouses challenged the validity of Bylaws pursuant to which the Strata Council purported to create the six cost centres.  On September 5, 2001 Madam Justice Boyd declared the bylaws that the Strata Council relied on to create the six cost centres to be ultra vires the strata corporation (Lim v. Strata Plan VR2654, 2001 BCSC 1386 (CanLII), 2001 BCSC 1386).  She held that costs were to be allocated by type of strata lot in accordance with s.128(2) of the Condominium Act, R.S.B.C. 1996, c. 64 (Repealed).

[10]   Madam Justice Boyd also held that Deer Ridge must revise the budgets for the years ending 2000 and 2001 to allocate costs between two types of strata lots, rather than amongst six cost centres. 

[11]   Following the decision in Lim, Deer Ridge resumed allocating operating expenses and major repairs costs based on the two types of strata lots.

[12]   The townhouses in Phase One have required significant repair and remediation as a result of water ingress, the costs of which have been allocated to all townhouse owners, including Ms. Mason.  Between November 29, 2001 and October 14, 2003 Deer Ridge has imposed special levies totalling over 2.3 million dollars, of which Ms. Mason’s share was $56,516.28.  As of the date the petition was heard, Deer Ridge claimed the sum of $61,613.72 from Ms. Mason for unpaid strata fees, security charges, special levies and registry fees and disbursements.  Since that date further unpaid strata fees in the amount of $1,517.94 have accrued.  Deer Ridge claims a total of $63,131.66 as of May 10, 2004. 

[13]   On November 13, 2002, Deer Ridge filed a lien in the amount of $28,363.03 against Ms. Mason’s property under the provisions of the Strata Property Act, R.S.B.C. 1998, c. 43 (the “SPA”) relating to unpaid strata fees and special levies to that date.  Deer Ridge seeks a declaration of priority with respect to the sum of $63,131.66, which is the amount it says is secured by the lien, an order that if the amount of the lien is not paid within 60 days after the date of the order Ms. Mason’s townhouse be sold to satisfy the lien, personal judgment in the sum of $63,131.66, costs and liberty to apply for a summary accounting of any amounts that become due to Deer Ridge from Ms. Mason.

ISSUES

[14]   There are a number of matters that require determination but the key issues are these:

     1.   Does Bylaw 2.2 authorize Deer Ridge to allocate               operating fund expenses to the apartment-type strata          lots and the townhouse-type strata lots:

          (a)  for the period July 1, 2000 to January 1, 2002;

         (b)  for the period subsequent to January 1, 2002;            and

         (c)  regardless whether the funds are raised through               a budget or by special levy?

     2.   Does Bylaw 2.2 authorize Deer Ridge to allocate               contingency reserve fund expenses to the apartment-      type strata lots and the townhouse-type strata lots:

         (a)  for the period July 1, 2000 to January 1, 2002;

         (b)  for the period subsequent to January 1, 2002;            and

         (c)  regardless whether the funds are raised through               a budget or by special levy?

ANALYSIS

1.   Does Bylaw 2.2 authorize allocation by type of strata    lot?

[15]   Prior to July 1, 2000, there was no need to rely on Bylaw 2.2.  The statutory bylaws under Part 5 of the Condominium Act permitted Deer Ridge to allocate expenses based on type of strata lot (see Lim, supra).  Statutory Bylaw 128(2) provided as follows:

128(2)    If a strata plan consists of more than one      type of strata lot, the common expenses       must be apportioned in the following               manner:

         (a)  common expenses attributable to one             or more type of strata lot must be            allocated to that type of strata lot          and must be borne by the owners of             that type of strata lot in the                  proportion that the unit entitlement            of that strata lot bears to the                   aggregate unit entitlement of all                types of strata lots concerned;

              (b) common expenses not attributable to a                     particular type or types of strata lot                        must be allocated to all strata lots and                must be borne by the owners in proportion                  to the unit entitlement of their strata                  lots.

[16]   While Deer Ridge was entitled to rely on the statutory bylaws, at least until July 1, 2000, it had in fact passed its own Bylaw 2.2, which authorized allocation of expenses by type, and had registered the bylaw in the Land Title Office prior to July 1, 2000.

[17]   On July 1, 2000 the Condominium Act was repealed and replaced by the SPA.  The scheme under the SPA for permitting allocation of expenses by type of strata lot is different than it was under the Condominium Act.  Whereas under s.128(2) of the former Act, if a strata corporation consisted of more than one type, expenses were to be allocated according to type, as this court has observed in Strata Plan LMS 1537 v. Alvarez, 2003 BCSC 1085 (CanLII), 2003 BCSC 1085, the general rule under the SPA is that all owners are responsible for all expenses in accordance with their unit entitlement – “you are all in it together”.  That general rule emerges from s.99 of the SPA, which provides:

99 (1) Subject to section 100, owners must contribute to the strata corporation their strata lots' shares of the total contributions budgeted for the operating fund and contingency reserve fund by means of strata fees calculated in accordance with this section and the regulations.

(2) Subject to the regulations, the strata fees for a strata lot's share of the contribution to the operating fund and contingency reserve fund are calculated as follows:

 

Unit entitlement of strata lot

 


 X total contribution

total unit entitlement of

all strata lots

 

      

[18]   While s.99 deals with budgeted amounts for the operating fund and the contingency reserve fund, s.108 deals with special levies as follows:

108 (1) The strata corporation may raise money from the owners by means of a special levy.

(2) The strata corporation must calculate each strata lot's share of a special levy

(a) in accordance with section 99, 100 or 195, in which case the levy must be approved by a resolution passed by a 3/4 vote at an annual or special general meeting, or

(b) in another way that establishes a fair division of expenses for that particular levy, in which case the levy must be approved by a resolution passed by a unanimous vote at an annual or special general meeting.

[19]   The general rule is subject to an exception in that, under s.100 of the SPA, a strata corporation may, by resolution passed by a unanimous vote, agree to use a formula other than that set out in s.99 and the regulations to calculate a strata lot’s share of expenses.  Section 195 of the SPA is engaged where a strata corporation is comprised of different “sections” under Part 11 of the Act.

[20]   The general rule is also subject to the following formulas under s.6.4 of the Strata Property Regulation, B.C. Reg. 43/2000 (the “Regulation”):

6.4 (1) For the purposes of section 99 of the Act, but subject to a resolution under section 100 of the Act, if a contribution to the operating fund relates to and benefits only limited common property, the contribution is shared only by owners of the strata lots entitled to use the limited common property, and each strata lot's share of that contribution is to be calculated in accordance with the following formula and not in accordance with the formula set out in section 99 (2) of the Act:

 

unit entitlement of strata lot

 


  x contribution to operating fund

total unit entitlement of all strata lots whose owners are entitled to use the limited common property to which the

contribution relates

 

 

(2) For the purposes of section 99 of the Act, but subject to a resolution under section 100 of the Act, if a contribution to the operating fund relates to and benefits only one type of strata lot, and that type is identified as a type of strata lot in the bylaws of the strata corporation, the contribution is shared only by owners of strata lots of that type, and each strata lot's share of that contribution is to be calculated in accordance with the following formula and not in accordance with the formula set out in section 99 (2) of the Act:

 

Unit entitlement of strata lot

 


  x contribution to operating fund

total unit entitlement of all strata lots of the type to which the

contribution relates

 

 

(3) Subject to a resolution under section 100 or 108 (2) (b) of the Act, if a strata lot's share of a contribution to the operating fund is calculated in accordance with subsection (1) or (2), each strata lot's share of the total contribution to the contingency reserve fund or a special levy is to be calculated using the following formula:

 

unit entitlement of strata lot

  x  

total contribution to contingency
reserve fund or special levy


total unit entitlement of all strata lots

 

6.5 (1) For the purposes of section 99 of the Act, but subject to a resolution under section 100 or 108 (2)(b)of the Act, if a strata corporation has, by a bylaw passed under section 72 (3) of the Act, taken responsibility for the repair and maintenance of specified portions of some but not all of the strata lots, a contribution to the operating fund or a special levy in respect of the repair or maintenance of those portions is shared only by the owners of the strata lots to which the contribution or special levy relates, and each strata lot's share of the contribution or special levy is to be calculated in accordance with the following formula and not in accordance with the formula set out in section 99 (2) of the Act:

 

unit entitlement of strata lot

 

contribution to operating fund
or special levy 

 

9


  x  

total unit entitlement of all strata lots to which the contribution or special levy relates

 

 

(2) Subject to a resolution under section 100 of the Act, if a strata lot's share of a contribution to the operating fund or special levy is calculated in accordance with subsection (1), each strata lot's share of the total contribution to the contingency reserve fund is to be calculated using the following formula:

 

unit entitlement of strata lot

  x  

total contribution to
contingency reserve fund


total unit entitlement of

all strata lots

 

[21]   Thus, as Mr. Justice Bauman concluded in Alvarez, supra at ¶54, where a strata corporation consists of more than one type of strata lot, contributions to the operating fund may be allocated by type (6.4(2)) but contributions to the contingency reserve fund or a special levy will be allocated to all strata lots in accordance with their unit entitlements (6.4(3)).

[22]   Mr. Justice Bauman summarized the scheme under the SPA as it relates to the contingency reserve fund and special levies at ¶55 as follows:

I would summarize the statutory scheme in relation to the allocation of contributions to the contingency reserve fund or to a special levy, the two sources of funds to pay for typical leaky condo repairs, in this manner:

Absent an agreement under s. 100 of the SPA, those contributions are to be allocated to all strata lots in accordance with their unit entitlements and regardless of their type (s. 99) unless:

(i)  in the case of a special levy, an alternative "fair division" has been approved by a unanimous vote of the strata lot owners (s. 108(2)); or

(ii) "sections" have been created under Part 11 of the SPA Regulation.

 

[23]   While that is the general scheme under the current legislation, the SPA and Regulation contain transition provisions that are relevant to this issue:

Strata Property Act

293 (1) Except as otherwise provided by this Act and the regulations, this Act and the regulations apply to a strata plan deposited and a strata corporation created under the Condominium Act, R.S.B.C. 1996, c. 64 or any former Act.

(2) On the coming into force of this subsection, a regulation of a strata corporation is deemed to be a rule and the provisions of this Act that apply to rules apply to regulations made by a strata corporation.

(3) The coming into force of this Act does not affect the deposit of a strata plan if the application for deposit was made before the coming into force of this Act.

(4) The Lieutenant Governor in Council may make regulations for meeting or removing any difficulty arising out of the transition to this Act from the Condominium Act, R.S.B.C. 1996, c. 64, and for that purpose disapplying or varying any provision of this Act.

 

Strata Property Regulation

17.11 (1) Except as provided in section 17.9 of this regulation, the Standard Bylaws do not apply to a strata corporation created under the Condominium Act until January 1, 2002, and on that date apply only to the extent set out in this section.

(2) Subject to subsections (3) to (5), a strata corporation bylaw existing under the Condominium Act immediately before the coming into force of this section, including a bylaw under Part 5 of the Condominium Act or under a former Act which was deemed, by section 26 (2) of the Condominium Act or a similar section of a former Act, to be a bylaw of the strata corporation, continues to have effect despite any provision of the Act or this regulation.

(3) On January 1, 2002,

(a) the Standard Bylaws are deemed to be the bylaws for all strata corporations created under the Condominium Act, except to the extent that conflicting bylaws are filed in the land title office, and

(b) any bylaws under Part 5 of the Condominium Act or under a former Act which were deemed, by section 26 (2) of the Condominium Act or a similar section of a former Act, to be bylaws of the strata corporation cease to have effect.

(4) Subject to subsection (5), if a strata corporation bylaw filed in the land title office conflicts with a Standard Bylaw, the filed bylaw prevails.

(5) On January 1, 2002, a strata corporation bylaw filed in the land title office ceases to have effect to the extent that it conflicts with a provision in Parts 1 to 17 of the Act or this regulation.

(6) Subsection (5) does not apply to a bylaw that was filed in the land title office before July 1, 2000 to the extent that the bylaw provides for the apportionment of contributions to a contingency reserve fund as a common expense according to type of strata lot, if that type of strata lot is a type identified in the bylaws of the corporation or a section.

17.13 (1) Subject to the bylaws of the strata corporation, if a strata corporation's budget, in effect on the coming into force of this section, apportions any common expenses to one or more type of strata lot in accordance with section 128 (2) of the Condominium Act or a similar bylaw, the strata corporation may continue to use the type of strata lot identified in the budget as a "type of strata lot" for the purposes of sections 6.4 (2) and 11.2 (2) of this regulation.

(2) Subsection (1) is of no effect on or after January 1, 2002.

(3) Before January 1, 2002, a strata corporation may enact a bylaw that identifies the type of strata lot set out in the budget referred to in subsection (1) as a "type of strata lot" for the purposes of sections 6.4 (2) and 11.2 (2).

(4) Despite section 128 (1) of the Act, a bylaw under subsection (3) may be approved by a resolution passed by a majority vote at an annual or special general meeting.

 

[24]   Thus, it will be seen that under s.17.13(1) during the transition period from July 1, 2000 to January 1, 2002, a strata corporation could rely on the former Statutory Bylaw 128(2) to allocate expenses by type in certain circumstances if it had a budget in place prior to July 1, 2000 that allocated expenses on the basis of type.  Deer Ridge submits it had such a budget in place and that the transition provisions provided the authority to allocate by type. 

[25]   What Deer Ridge seems to ignore in making this submission is that s. 17.13(1) permits allocation by type “for the purposes of sections 6.4(2) [relating to an operating fund] and 11.2(2) [relating to “sections”] of this regulation”.  As Bauman J. said in Alvarez, supra at ¶69, this transition provision:

permits a pre-SPA strata corporation to continue to allocate certain common expenses to one or more types of strata lot in accordance with s. 128(2) of the CA.  But it is only for the purposes of ss. 6.4(2) and 11.2(2) of the SPA Regulation, which cover contributions to the operating fund, not to the contingency reserve fund or a special levy, the sources for funding extraordinary building envelope repairs.

 

[26]   Deer Ridge submits, however, that it need not rely on the transition provisions set out in s. 17.13 because it had enacted and filed its own Bylaw 2.2 prior to July 1, 2000 and that bylaw continued in effect pursuant to the transition provisions. 

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