Condo Smarts: Top Court OKs Retroactive Strata Fees

There have been several Civil Resolution Tribunal Decisions on this issue that originally deemed the status of retroactive fees was unenforceable.

Dear Tony:

We purchased a condo in a Fraser Valley community in the first week of June.  We obtained the disclosure forms in advance, read the minutes and bylaws closely, and were aware in advance that the insurance was increasing by 250 per cent due to the location and type of construction of the building.

We just received notice of the Annual General Meeting (AGM) to be held electronically in August, and other than routine business, the annual budget is increasing by 27 per cent to address a deficit from the previous year and the significant increase in insurance.

What we find alarming is the strata fees for September, if approved, include the increase from May to August as the fiscal year for the strata corporation ends April 30.
We did not find the increase unreasonable because the fees appear artificially low, the 27 per cent increase for the first four months is due and payable all at once in September, adding $486 to a monthly fee of $607.

The back charge for the first four months is being called a retroactive fee. As buyers, why do we have to pay for a period of fees when we were not the owners? Is the retroactive fee enforceable?

— Lillian and Dave M.

Dear Lillian and Dave:

There have been several Civil Resolution Tribunal Decisions on this issue that originally deemed the status of retroactive fees was unenforceable. However, the B.C. Supreme Court has “disagreed” with the tribunal’s conclusions and upheld the practice in the matter of fiscal year strata fees involving a “commercial strata development.”
The dispute primarily focused on the interpretation of the Strata Property Act and whether a strata corporation that was charging the additional increase of fees for the period of the fiscal year that had already passed, was compliant with the legislation.

In the court’s view, there was nothing in the strata corporation’s approach to strata fees that placed it offside the act. A subsequent “adjustment” to the fees paid in the period between the end of a fiscal year and the passing of the budget for the next fiscal year, is not a retroactive charge.

The tribunal based its determination in large part on the notion that the strata fee information required to be disclosed in a Form B or Form F would be inaccurate if a prospective purchaser of a strata unit obtained those forms (a Form F remains “current” for a period of 60 days after it is issued) prior to the approval of a new budget. The buyer would be led to believe that the seller’s strata fee payment obligation was up to date when, in fact, it was not.

With the greatest of respect to the tribunal, the judge disagreed. An owner’s strata fee obligation does not arise until it is approved at the AGM. The Form F (and indeed the Form B) will have been accurate when issued. There is no requirement in the Act that strata fees be paid in equal installments.

Plainly, the schedule of strata fee payments can require equal monthly installments, or installments that include adjustments to make up a deficit between what was paid and what would have been paid had the budget for the current fiscal year been in place at the commencement of the current fiscal year.

Fees for one month may be different than for other months. Ultimately the budget approved for the fiscal year becomes the obligation of the strata corporation to collect that amount through a schedule of fees due monthly as adjusted; however, not every strata corporation collects fees monthly or on the same schedule. Always read the bylaws of a strata corporation, especially resort properties, if you are concerned about the payment of strata fees.

Many strata corporations hold their AGM after the fiscal year-end as they wait for the completed financial reports to determine budgetary needs for the following year.
The AGM must be held within two months of the fiscal year-end, unless there is an emergency order as we are currently under, which extends the period to four months.
If the AGM is held prior to the end of the fiscal year, financial projection statements must be prepared and circulated to the owners in advance of the AGM as well as a completed financial report within eight weeks of the end of the fiscal year. While it is advantageous to convene the AGM as early as possible to execute the next year’s budget, the total amount owing by each strata lot for that fiscal year is the same total whether you approve the budget before the fiscal year-end or after.

When the strata corporation issues notice of the meeting, the fee schedule required by the Act showing either an adjustment in the next month or over the balance of the year is included, which by default is ratified by the owners when they approve the annual budget by majority vote.

Tony Gioventu, Executive Director CHOA
Tony Gioventu is executive director of the Condominium Home Owners Association. Email tony@choa.bc.ca