Kelowna, KAS 2048: Strata lot owner failed to provide evidence to prove significant unfairness

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Southern Interior Construction Association v. Strata Plan KAS 2048,

 

2007 BCSC 792

Date: 20070605
Docket: S066553
Registry: Vancouver

Between:

Southern Interior Construction Association, Inc. No. 8302A

Petitioner

And

The Owners, Strata Plan KAS 2048

Respondent


Before: The Honourable Mr. Justice Rogers

Reasons for Judgment

Counsel for the Petitioner:

T.A.M. Peters

Counsel for the Respondent:

D.M. Rush

Date and Place of Hearing:

May 28, 2007

 

Kelowna, B.C.

Introduction

[1]                The petitioner owns two of nine strata lots in a commercial development located in Kelowna, B.C.  The petitioner asserts that the current allocation of common costs, based upon the petitioner’s strata entitlement units, is significantly unfair to it.  It says that the court should exercise its discretion to vary the allocation so as to relieve it of the unfairness.

[2]                These Reasons follow the hearing of the petition.

The Facts

[3]                The strata development in issue was created in June 1998.  It is located in Kelowna, B.C.  The development is exclusively commercial – there are no residences in the building.  The developer was University Business Park Ltd.  There were originally eight separate strata titles.  The relevant legislation in effect at the time required the developer to file a schedule of unit entitlement for each of the eight strata lots.  The schedule of units of entitlement determined, among other things, the proportion of common expenses that any given lot owner had to pay.  The 1998 schedule was thus:

Lot No.

 

Size in
Square Meters

 

Units of
Entitlement

1

 

152

 

152

2

 

153

 

153

3

 

153

 

153

4

 

178

 

178

5

 

181

 

181

6

 

153

 

153

7

 

153

 

153

8

 

152

 

152

[4]                The building is two stories tall, but the size in square meters for each unit was based only on the footprint of the ground floor.  There was no evidence before the court that, when the original schedule of units of entitlement was created, a second floor or mezzanine had been built in any of the units.

[5]                In October 1999, the petitioner offered to buy Lot 4 from the developer.  At that time, that is, in October 1999, a mezzanine had been constructed inside Lot 4.  The petitioner stipulated a condition in its offer.  The condition was that it be permitted to subdivide Lot 4 into two separate lots, one lot to comprise the ground floor and a portion of the mezzanine and totalling 242 square meters, and the other lot to comprise the remainder of the mezzanine which totalled 116 square meters.  The subdivision plan required unanimous consent from the other strata lot owners.  Those other owners gave their consent.  The petitioner completed its purchase of Lot 4 and it began the process of subdivision.

[6]                The subdivision was completed in October 2000.  The subdivision plan was submitted to the Land Title Office.  Under the plan, Lot 4 was replaced by Lot 9 which was the ground floor and a portion of the mezzanine totalling 242 m2, and Lot 10 which comprised the 116 m2 remainder of the mezzanine.  The subdivision plan was accompanied by a certificate from a surveyor.  The surveyor confirmed the area in square meters of the two new lots.  A new schedule of unit entitlements was also created.  Lot 4 was deleted from the new schedule and the newly created Lots 9 and 10 were added.  The new schedule of unit entitlement was thus:

Lot No.

 

Size in
Square Meters

 

Units of
Entitlement

1

 

152

 

152

2

 

153

 

153

3

 

153

 

153

(deleted) 4

 

-

 

-

5

 

181

 

181

6

 

153

 

153

7

 

153

 

153

8

 

152

 

152

9

 

242

 

242

10

 

116

 

116

[7]                The new schedule did not show any changes in the area of the lots not affected by the subdivision.  There is no evidence that the surveyor was asked to survey the other lots for the presence of mezzanines, nor was there evidence that in October 2000 there were, in fact, any other mezzanines constructed inside those lots.

[8]                The petitioner immediately sold Lot 10 to a third party.  In October 2002, the petitioner bought Lot 10 back from the third party.

[9]                In the fall of 2001, the petitioner put a motion to the strata corporation to alter the basis on which the area in square meters of the strata lots should be determined.  The status quo then was that the area of the lots was determined by the footprint of the lot’s ground floor (i.e.:  the original method of determining unit entitlement).  The petitioner’s motion would have changed the formula by increasing the lot area to 1.5 times the footprint of the ground floor.  This, presumably, would have had the effect of including in the lot’s area whatever floor space might have been added by the construction of a mezzanine level.  The members of the strata corporation considered the petitioner’s proposal.  In November 2001, the strata corporation members voted to reject the petitioner’s motion to revise the schedule of units of entitlement.

[10]            In 2006, the development’s roof required repair.  The repair was carried out at a cost of approximately $52,000.  That expense was allocated among the strata owners in accordance with their units of entitlement.  The petitioner’s share of the roof expense, based upon its allocation of a total of 358 units (242 units for Lot 9, plus 116 units for Lot 10) was slightly shy of 25 percent of the total.  If the petitioner’s units had been limited to the area of Lot 9’s ground floor footprint, its share of the expense would have been only 14 percent.

[11]            Although there was no reliable evidence led on the point, the parties agreed that as of the petition’s filing in October 2006, Lot 6 did not have a mezzanine but the other Lots did have mezzanines constructed inside them.  There was no evidence and no agreement with respect to the size of those other mezzanines or when they were built.

Relief Sought

[12]            The petitioner seeks a declaration that the current allocation of units of entitlement is significantly unfair to it.  The petitioner asserts that all but one of the other Lot owners have and use mezzanines, but that the petitioner is alone in having to pay common costs based upon its ownership and use of a mezzanine.  The petitioner says that the proper thing to do is to quash the new schedule of units of entitlement and to reinstitute the original schedule.  That would, according to the petitioner, be fairer in an overall sense than the present regime.

Applicable Legislation

[13]            The relief the petitioner seeks engages two sections of the Strata Property Act, S.B.C. 1998, c. 43.  They are s. 246 and s. 164.

[14]            Section 246 describes the method by which units of entitlement shall be determined when a strata plan is developed.  There are two schemes:  one for residential and one for non-residential (oftentimes called commercial) strata developments.  The portions of the section relevant to this proceeding read thus:

246(1)  The person applying to deposit a strata plan must establish the unit entitlement of a strata lot in accordance with subsection (3).

(3)        The unit entitlement of a strata lot, other than a strata lot in a bare land strata plan, must be calculated as follows:

(a)        if the strata lot is a residential strata lot, the unit entitlement is either

(i)         the habitable area, in square metres, of the strata lot, as determined by a British Columbia land surveyor, rounded to the nearest whole number,

(ii)        a whole number that is the same for all of the residential strata lots, or

(iii)       a number that is approved by the superintendent and that in the superintendent's opinion allocates a fair portion of the common expenses to the owner of the strata lot;

(b)        if the strata lot is a nonresidential strata lot, the unit entitlement is either

(i)         the total area, in square metres, of the strata lot, as determined by a British Columbia land surveyor, rounded to the nearest whole number,

(ii)        a whole number that is the same for all of the nonresidential strata lots, or

(iii)       a number that is approved by the superintendent and that in the superintendent's opinion allocates a fair portion of the common expenses to the owner of the strata lot.

(4)        For the purposes of subsection (3), "habitable area" has the meaning set out in the regulations.

(7)        Subject to the regulations, an owner or the strata corporation may apply to the Supreme Court for an order under subsection (8) if

(a)        the unit entitlement of a residential strata lot is calculated on the basis of habitable area in accordance with subsection (3) (a) (i) or on the basis of square footage in accordance with section 1 of the Condominium Act, R.S.B.C. 1996, c. 64, and

(b)        the actual habitable area or square footage is not accurately reflected in the unit entitlement of the strata lot as shown on the Schedule of Unit Entitlement.

(8)        On application under subsection (7) and after consideration of the matters set out in the regulations, the Supreme Court may

(a)        order that a Schedule of Unit Entitlement be amended, in accordance with the regulations, to accurately reflect the habitable area or square footage of a strata lot, and

(b)        make any other orders it considers necessary to give effect to an order under this subsection.

[15]            Section 164 of the Act clothes the court with the power to rectify decisions taken by a strata corporation that are significantly unfair to one or more strata owners.  Section 164 reads:

164(1)  On application of an owner or tenant, the Supreme Court may make any interim or final order it considers necessary to prevent or remedy a significantly unfair

(a)        action or threatened action by, or decision of, the strata corporation, including the council, in relation to the owner or tenant, or

(b)        exercise of voting rights by a person who holds 50% or more of the votes, including proxies, at an annual or special general meeting.

(2)        For the purposes of subsection (1), the court may

(a)        direct or prohibit an act of the strata corporation, the council, or the person who holds 50% or more of the votes,

(b)        vary a transaction or resolution, and

(c)        regulate the conduct of the strata corporation's future affairs.

Issues

Application of Section 246

[16]            The remedial provision in s. 246(7) has no application in this case.  That is because that remedial provision is limited to redressing problems in the allocation of entitlement units based on habitable areas in residential developments.

[17]            However, the fact that there is no remedial provision for commercial developments is, nevertheless, instructive.  The fact that the Legislature did not include a remedial provision for commercial strata plans indicates that the Legislature wished that commercial strata developers should adhere to one of the three allocation methods stipulated by s. 246(3)(b) (i.e.:  prorated based on area in square meters, equal allocation, or some other formula approved by the Superintendent).

[18]            In the context of commercial developments, then, s. 246 comprises a code for the calculation and determination of entitlement units in commercial strata developments.  There is no room for departure from the statute.

[19]            In the present case, the subdivision of Lot 4 engaged the allocation method prescribed by s. 246(3)(b)(i).  The petitioner did not take the position that equal allocation in accordance with s. 246(3)(b)(ii) should have been employed.  The petitioner did not bestir itself to seek the Superintendent’s approval of a custom designed formula as it might have done under s. 246(3)(b)(iii).

[20]            What in fact happened was that the subdivision surveyor determined the area in square meters of each of the two new lots that derived from Lot 4.  Those areas were incorporated into a new schedule of unit entitlement.  The subdivision process thus adhered to the statutory prescription for determination of area and the entitlement schedule.  Neither party to this proceeding can reasonably complain because the subdivision followed the statute.

[21]            Neither can the petitioner reasonably complain that the surveyor did not survey all the other lots in the development in the year 2000 to determine whether they, too, had mezzanines.  The petitioner offered no evidence that, in October 2000, when the subdivision was completed, any of its neighbours had built or were using second story space in their units.  Absent some evidence that there was reason to believe that the area in square meters of the other units had increased by virtue of additional mezzanine space, the petitioner cannot credibly complain that the survey ought to have included all the other strata lots.  There was, therefore, no reason then, and no ground now, for complaint that the area of the other units remained unchanged when the new schedule of unit entitlement was created.

Application of Section 164

[22]            There are three distinct steps to determining whether an order should be made pursuant to s. 164.  The first step is to identify the decision under attack; the second is to assess all the facts relevant to the fairness of that decision; and the third is to assess whether the decision was, in all the circumstances, significantly unfair to the applicant.

[23]            The petitioner relied on s. 164 but did not specifically identify the decision or decisions it wants remedied.  Be that as it may, the court should nonetheless assess the evidence before it in order to determine whether there are any decisions that might be reviewable pursuant to the statute.

[24]            As noted earlier, the original and the new schedules of unit entitlement were prepared in accordance with the area formula prescribed by s. 246(3)(b)(i).  They were not the product of a decision of the strata corporation or council.  The original allocation of unit entitlement and the allocation that followed the subdivision were not, therefore, decided by the strata corporation or council.  The original and the new schedules of entitlement units are not, therefore, reviewable under s. 164.

[25]            The petitioner did put forward a motion in 2001 for a reallocation of the units of entitlement.  By that motion, the petitioner sought to revise the definition of “strata lots’ area” in square meters.  The revision would have had the effect of grossing up each lot’s ground floor area by one-half.  The corporation did not adopt the petitioner’s proposal.  That was a decision by the corporation, and it is a decision that could be subject to review pursuant to s. 164.

[26]            The evidence the petitioner adduced in the hearing did not describe the facts and circumstances of the strata owners when they cast their votes.  More specifically, the petitioner did not lead any evidence to show that when they voted on the petitioner’s measure, one, some, or all of the lot owners actually had mezzanines or second floors in their lots.  Absent that information, the court cannot assess whether it was fair, ordinarily unfair, or significantly unfair for the owners to have decided to reject the petitioner’s proposal to revise the allotment formula.  The petitioner has, therefore, simply failed to establish that the circumstances surrounding the November 2001 vote could bottom a finding that the corporation’s decision was significantly unfair to the petitioner.

[27]            The only other decision by the strata corporation to which the petitioner referred was its decision to allocate the cost of repairing the building’s roof in accordance with the new schedule of unit entitlement.  That was clearly a decision taken by the corporation and it is, therefore, capable of being the topic of review under s. 164.

[28]            That decision was taken only a few months before the petition was filed.  The petitioner asserts that as of the advent of the petition all of the other strata lots, excepting only Lot 6, had mezzanine space.  Given that only two or three months passed between the decision and the petition, it is reasonable to infer that those mezzanines were in place when the corporation decided to alloca