Understanding Sectioned Strata Corporations: Allocation of Expenses

Section 194(2)(a) of the Strata Property Act (the”Act)  provides a framework for sectioned strata corporations to establish their own operating fund and contingency reserve fund, enabling them to manage common expenses efficiently. Similarly, Section 194(2)(b) grants authority for sections to approve budgets for authorized expenses and to impose special levies when necessary. However, interpreting these sections accurately is crucial for fair expense allocation among section owners.

Interpreting Section 195: Allocation of Expenses within Sections

Section 195 of the Act states:

Expenses of section

195  Subject to section 100 and the regulations, expenses of the strata corporation that relate solely to the strata lots in a section are shared by the owners of strata lots in the section and each strata lot’s share of a contribution to the operating fund and contingency reserve fund is calculated as follows:

Section 195 delineates how expenses should be allocated among owners within a section. While the language suggests expenses solely related to a section can be shared among its owners, competing interpretations exist. Some argue that expenses must be itemized in the section budget or approved through a section special levy, while others believe the strata corporation can allocate expenses to sections directly.

Legal Precedents and Court Interpretations

Legal cases such as Hou v. Strata Plan EPS 1069, Re Strata Plan VR 2213, and Gulf Manufacturing Ltd. v. Strata Plan BCS 1348 highlight the complexities of interpreting Section 195. The courts have grappled with whether certain expenses can be allocated to sections by the strata corporation itself or if they must be approved by the section owners. Furthermore, filed bylaws in sectioned strata corporations add another layer of complexity, with some attempting to allocate expenses to sections directly.

In Hou v. Strata Plan EPS 1069, the Civil Resolution Tribunal (CRT) held that the strata corporation properly assessed office section expenses incurred with respect to HVAC systems benefiting only the office strata lots. However, the Act lacks a mechanism permitting the strata corporation to levy expenses to a section directly.

Similarly, in Re Strata Plan VR 2213, the court referred to Section 195 as a “cost-sharing” provision between sections without detailing its implementation in practice.

In Gulf Manufacturing Ltd. v. Strata Plan BCS 1348, the CRT emphasized that Section 195 applies only to expenses solely related to one section in a strata corporation. The CRT noted the Act and the Regulation’s silence on expenses related to some but not all sections, highlighting the need for clarity in expense allocation.

What If One Section Benefits an Expense More Than Other Sections ?

In Strata Plan BCS 3495 v. Strata Plan BCS 3495, 2021 BCCRT 1020, the Civil Resolution Tribunal (CRT) delved into the complexities of expense allocation within sectioned strata corporations. The CRT’s ruling mandated the strata corporation to reimburse the commercial section for a portion of electrical expenses, shedding light on key principles governing expense allocation.

The CRT’s interpretation of Section 195 underscored the importance of adhering to statutory requirements. At para. 49, the CRT emphasized that expenses cannot be split based on use or benefit but must be allocated based on unit entitlement unless a unanimous resolution under SPA section 100 dictates otherwise. In the alternative, an application under s.164 of the Act would be a solution if there is a significant unfairness within the meaning of s. 164 for allocating some expenses between strata sections.

Challenges and Considerations for Strata Corporations

Many strata corporations and strata managers have adopted a pragmatic approach, treating sections as cost centers within a unified structure. However, this approach contradicts the Act, emphasizing the need for clarity in expense allocation. Strata corporations seeking to allocate expenses without section divisions should explore alternative methods, such as “type” distinctions, albeit with their limitations.

Conclusion

Navigating expense allocation within sectioned strata corporations requires careful consideration of statutory provisions, legal precedents, and bylaws. While Section 195 outlines principles for expense sharing, ambiguities in interpretation pose challenges for both strata corporations and section owners. In conclusion, regardless of where you are located in British Columbia—be it Vancouver, Burnaby, Surrey, North Vancouver, Langley, Abbotsford, or Coquitlam—our strata law firm, led by the expert strata lawyer Burak Dukkancilar, is exceptionally equipped to handle your strata law needs. Burak Dukkancilar is renowned for his deep expertise in the strata law area, providing knowledgeable and effective solutions for every strata-related challenge. As a dedicated strata lawyer, he and our team are committed to delivering comprehensive legal support tailored to the unique dynamics of communities across BC. Trust in our specialized skills to navigate and resolve your strata matters with the highest standard of professionalism and care.