Dear Tony: We hope you can write one more column about liquidation. Our strata was created in 1974 and our owners are considering selling the property. It is a four-floor walkup in upper Lonsdale, in North Vancouver, with no elevator and an old boiler with a failing heating system. This community has been a wonderful home for many of us and a great community, but we have all aged. Our property values as individual units are low, but an investor has made a very generous offer to the owners as a collective.
For those of us who are retiring, it is a good opportunity to simplify our lives. For the families, it’s a good opportunity to move up. Before we move forward and vote, we need to clear up the problem of how the money is distributed to the owners.
We have been given different information from a number of professionals and our owners are very confused.
Carol D.
When a strata corporation accepts an offer to purchase and the strata agrees to vote to liquidate, there are generally three formulas that may apply, and a fourth formula that may be agreed upon by unanimous vote.
If your strata corporation was created under the Strata Titles Act, which is the case in 1974, the formula for “destruction,” as it was called then, is based on unit entitlement. Unit entitlement is the formula commonly used to calculate common expenses, such as strata fees, special levies and lawsuit settlements.
For many strata corporations created under the Strata Titles Act, the Schedule of Unit Entitlement was based on the approximate size of each strata lot. This formula may be comparable to your B.C. Assessment values.
There is one flaw in this schedule, however. It may also have been based on a simple formula, such as one for a one-bedroom, two for a two-bedroom and three for a three-bedroom. This could indicate that the payouts for the respective units are 100 per cent, 200 per cent and 300 per cent of the payout value. The net amount will reflect any charges, such as mortgages, on the property.
If a strata was filed under the Condominium Act in the 1980s and ’90s, the formula commonly used is the Schedule of Interest on Destruction, which was a formula created by the developer that estimated what the likely sale value of each unit would be at the time, or a comparable formula.
For strata corporations created under the Strata Property Act, B.C. Assessment values are used to determine each unit’s share of the proceeds.
The fourth option would require a unanimous vote of the strata. The owners could adopt a separate formula, if everyone agrees, to create a new method of distributing the funds. This may be necessary to pass a successful vote to liquidate where the Schedule of Unit Entitlement doesn’t make any sense, or there are obvious errors or significantly unfair distribution formulas in the schedules that were filed.
Before owners vote on the liquidation, it’s essential that they understand how much each strata lot will receive from the sale. There may be unusual or separate formulas filed in the different time periods, so it’s important for the strata to get legal advice before proceeding.
Tony Gioventu is executive director of the Condominium Home Owners Association
