Strata Solutions: Eight Tips for Winding Up a Strata
It has become easier to dissolve your strata and sell your condo building to developers, but there are pitfalls involved. Here we have eight essential tips, prepared by the legal experts Lawson Lundell LLP on behalf of FirstService Residential
Carrying out a strata wind-up can be beneficial for many reasons. As many older strata buildings across the province reach the end of their life cycles, these buildings and related common property may require costly capital repairs, which many owners would rather not pay. Additionally, as developers search for new development opportunities, particularly in the Lower Mainland, aging strata buildings (and more specifically the land beneath them) are becoming appealing assets as many of these older strata developments were built at lower density levels than are currently achievable. This means that as a strata lot owner, you could get top dollar for your unit if your strata corporation is dissolved and the building is sold to a developer.
However, winding up a strata corporation is a technical, complicated process, and legal advice should be sought early on in the process to help ensure a successful wind up. Here are eight major points to consider if your strata corporation is exploring a wind up.
1. Each Strata Corporation is Unique
Each strata corporation is unique in its physical condition, existing zoning, potential for rezoning and state of repair, not to mention that it can be made up of a diverse group of owners. Your stakeholders need to recognize this, as well as understand where you are in the “wind up” conversation process and how they can help you achieve your goals.
2. Information Meetings
It is key that all owners and especially as well as strata council members understand the wind up process. It is important to hold informational meetings with strata council, owners, lawyers, and other parties involved to help explain the process and the role of the various advisors. Ensuring correct information is provided to owners, tenants and mortgagees is a central part of the wind up process.
3. Distribution of Sale Proceeds
The process and formula for distribution of any sale proceeds is determined by the Strata Property Act and its predecessor legislation. Determining the applicable formula is a surprisingly complicated process that should be carried out early in the process.
4. Conditions in Listing Agreements and Purchase and Sale Agreements
Any listing agreement with a brokerage must address the inability of a strata corporation to force owners to sell their units before the wind up process is complete. A standard listing agreement may not be appropriate. Similarly any purchase and sale agreement must reflect the wind up approval process including both the approval by the strata lot owners and the courts, as well as the due diligence process required by the developer.
5. Sale of the Property
The timing and nature of the marketing of the property will vary from strata corporation to strata corporation depending on the circumstances. The location of the property may be such that there is only one logical buyer who is willing to pay a premium for the property (for example, the developer who controls adjoining sites) or it may attract a wide number of potential purchasers. Strata corporations should carefully choose their real estate brokers who have the ability and experience to market such a property. Appraisals from independent appraisal firms may be required at this stage or later in the court approval process.
6. Authorizing the Wind Up
The technical process of winding up a strata corporation requires strict compliance with the Strata Property Act, under the current 80 per cent approval threshold. This can be a long and stressful process. The strategic decision to seek such wind up authorization before marketing of the property or after a contract is accepted is critical.
7. Rezoning
Any marketing of the property must take into account what a developer can build on the site, either under the existing zoning or any potential rezoning. Working with your real estate brokers and appraisers, further information can be provided to owners on the current and potential rezoning, and the timing and realistic potential of any rezoning and ensure the strata corporation captures its fair share of that potential. This information can be collected through the appraisers and real estate brokers.
8. Land Title and Conveyancing Process
Working closely with Land Title Office staff, precedents have been developed for the wind up process as well as the required conveyancing processes. Be sure to look for lawyers that provide the software and precedent knowledge to help expedite the process and achieve cost savings.
Information obtained from http://www.rew.ca/ and Lawson Lundell LLP