Dear Tony: In early 2022 our strata corporation experienced a flood that resulted in an insurance claim that damaged many units with a deductible cost of $100,000 on our policy.
At the time of the claim, our strata had depleted our contingency from a recent roofing replacement so the council issued a special levy to all owners for the deductible amount. Owners demanded a special general meeting to vote on this but we discovered the act permits it. Each owner paid around $1,800 depending on their unit entitlement.
While the repairs were underway, it was discovered an owner had made unapproved plumbing alterations which caused the flood and damages. As a result, the strata corporation advised the owner they were going to pursue a claim for the deductible as the owner was responsible for the claim.
We have recently been informed the strata corporation did receive from the owner and their insurer the deductible amount for $100,000 and the strata council deposited this money into the contingency fund without any discussion with the owners.
Do the rules of special levies apply differently to insurance levies or these circumstances? Since the levy was collected there have been six units sold. What happens to those units who paid the levy?
The conditions of section 108 of the strata property act still apply to a special levy whether it was approved by the owners at a general meeting or issued by the strata council for an insurance deductible. This is the exception to the act where a strata council does not require the approval of the owners at a general meeting.
The insurance deductible, regardless of cause is a common expense. If the amount collected exceeds the amount required, the strata corporation must refund the amount to the owners based on the same payment schedule if any owner is entitled to $100 or more. The purpose of the levy was the insurance deductible, the collection from the owner was to pay the insurance deductible that was levied; therefore, the levy has $100,000 in the account and that amount must be refunded to the owners.
When an owner sells their strata lot, they no longer have a claim or interest in the contingency funds or refunds to special levies. Refunds are paid to the owner who is identified as the party on title at the time the refund is made. If a seller has an interest in a potential refund from a special levy, that is a condition they may negotiate with the seller.
The cautionary tale here for strata corporations: don’t write your own 3/4 vote resolutions. What you say in the language matters, and what you don’t say matters. You now have a $100,000 dispute that was avoidable with an hour of your lawyer’s advice.
Tony Gioventu is executive director of the Condominium Home Owners Association