When Selling Stratified properties it is of the utmost importance you know the full picture of what your clients are buying. Reviewing the full details of the strata corporation, how it is run, issues they are experiencing and future potential expenditures to be aware of it crucial too assisting the consumer make an informed decision.
Strata title property is a form of ownership in which a property owner owns their individual unit, plus a share of the common areas of the site, or common property. Residential, commercial, industrial, and other types of buildings may be subdivided by way of a strata plan.
Reviewing strata documents is an important part of evaluating the financial and organizational health of a strata corporation. Here are some steps you can take when reviewing strata documents:
1.
Obtain the necessary documents: Strata documents typically include the strata corporation’s bylaws, rules, and regulations; minutes of meetings, financial statements, and budget. Make sure you have access to the most recent versions of these documents.
2.
Review the bylaws and rules: Look for any inconsistencies or ambiguities in the bylaws and rules, and make sure that they are in compliance with local strata laws and regulations.
Review the minutes of meetings: Look for any important decisions that we’re made or any issues that were discussed. Check if there were quorum for meeting and if all important matters were discussed.
Review the financial statements: Look for any trends or issues in the strata corporation’s revenues, expenses, and reserves. Make sure that the financial statements are presented in accordance with Generally Accepted Accounting Principles (GAAP) and are audited if required by local laws.
Review the budget: Look for any discrepancies or variances between budgeted and actual results. Look for areas where expenses may be reduced.
Look for any unresolved issues or disputes.
Look for any insurance issues and proper coverage.
It is important to remember that, even if you’re not an accountant or an expert in strata laws and regulations, you should still be able to identify any red flags or potential issues by reviewing the documents thoroughly. If you have any concerns or questions, it’s a good idea to discuss them with a professional or an expert in the field.
When you are writing an offer for a property you must review the proper strata documents to insure you are protecting your clients.
It is always recommended to have a subject clause imbedded in your offer to make sure you are requesting and receiving the proper information.
The following clause should be included in almost all strata contracts written for Buyers.
NOTE: Non conforming Strata’s (duplex, triplex or development with less then 5 units may not have all applicable documents to review)
The Seller or their agent will provide the following documents numbered 1-12 below, to the Buyer or their agent at the Seller’s cost within 1 day of the acceptance of this offer:
1 A Form B information Certificate dated within 30 days of acceptance of this offer, signed by an authorized party which includes the following attachments: a) The rules of the Strata Corporation; b) the current budget of the Strata Corporation; c) the owner developers’ Rental Disclosure Statement under section 139 of the Act, if any.
2. A copy of the Strata Plan showing the subject Strata Lot and all areas designated to the Strata lot, such as parking and storage and all common property, any amendments to the Strata Plan, and any resolutions dealing with the changes to the common property.
3. The Current Bylaws of the Strata Corporation and any section to which the Strata Lot belongs.
4. The most recent Financial Statements for the Strata Corporation and any section to which the Strata Lot belongs.
5. The minutes of the last two ANNUAL GENERAL MEETINGS
6. The minutes of the STRATA COUNCIL MEETINGS for the last two years
7. The minutes from all EXTRAORDINARY OR SPECIAL GENERAL MEETINGS for the last two years
8. A copy of the Surface TITLE SEARCH for this Strata Lot;
9. All copies of any ENGINEERING REPORTS, DEPRECIATION REPORTS, or other CONSULTANTS REPORTS concerning this Strata Corporation;
10. A copy of the PROPERTY DISCLOSURE STATEMENT for the Strata title Properties, dated within 30 days of acceptance of this offer. Once signed by the buyer the PDS will form part of this contract;
11. All documents pertaining to any WARRANTY that is applicable to this Strata Lot and Strata Corporation.
12. INSURANCE details for the Strata Corporation.
Subject to the buyer approving the documents numbered 1-12 by This subject is for the sole benefit of the Buyer.
In the case that you are writing a NO SUBJECT offer this does not relieve you from reviewing and providing this information to your client.
If you believe you may be in multiple offers and choose to write a NO SUBJECT offer it is very important that you do the due diligence for the review of strata documents prior to writing the offer.
NOTE: It is imperative that you not only give the documents to your client but they review the contents of the documents PRIOR to submitting the offer. This will insure the consumer has the information needed to make an informed decision and that you will be competitive with your offer as well.
The Seller or their agent has provided the following documents to the Buyer or their agent. The Buyer has reviewed these documents and is satisfied with the contents.
1. A FORM B Information Certificate dated within 30 days of acceptance of this offer, signed by an authorized party which includes the following attachments:
a) The rules of the Strata Corporation;
b) the current budget of the Strata Corporation;
c) the owner developer’s Rental Disclosure Statement under section 139 of the Act, if any.
2. A copy of the STRATA PLAN showing the subject Strata Lot and all areas designated to the Strata lot, such as parking and storage and all common property, any amendments to the Strata Plan, and any resolutions dealing with the changes to the common property;
3. The CURRENT BYLAWS of the Strata Corporation and any section to which the Strata Lot belongs.
4. The most recent annual FINANCIAL STATEMENTS for the Strata Corporation and any section to which the Strata Lot belongs
5. The minutes of the last two ANNUAL GENERAL MEETINGS
6. The minutes of the STRATA COUNCIL MEETINGS for the last two years
7. The minutes from all EXTRAORDINARY OR SPECIAL GENERAL MEETINGS for the last two years
8. A copy of the Surface TITLE SEARCH for this Strata Lot
9. All copies of any ENGINEERING REPORTS, DEPRECIATION REPORTS or other CONSULTANTS REPORTS concerning this Strata Corporation
10. A copy of the PROPERTY DISCLOSURE STATEMENT for the Strata title Properties, dated within 30 days of acceptance of this offer. Once signed by the buyer the PDS will form part of this contract
11 A copy of the INSURANCE POLICY for the strata corporation.
12. All documents pertaining to any WARRANTY that is applicable to this Strata Lot and Strata Corporation.
The Buyers have reviewed the information provided numbered 1-12 and are satisfied with the contents of the reports.
Remember: NO SUBJECT DOES NOT MEAN NO DUE DILIGENCE.
It simply means you need to make the proper investigations and preparations in order to enter any deal with a full understanding of what the client is purchasing and managing the expectations of the clients future ownership responsibilities while owing the property.
The Key here is making sure that the client has a full understanding about the strata corporation as a whole prior to entering a firm deal on the property.
A Form B - Information Certificate is a strata form that should be reviewed by anyone considering buying a strata lot. The Form B sets out information relating to the strata corporation and its financial affairs including the amount of the strata fees payable, the amounts of any outstanding or approved special levies, whether any new bylaws have been recently approved, how many strata lots in the development may be rented, etc… If you will be getting a mortgage to complete your purchase, your bank will likely require a copy of Form B. This form is also used by conveyance lawyers to make sure the statement of adjustments at completion is accounting for any outstanding fees and allocation of the parking and storage. Very important this information is reviewed and completely accurate.
This is the monthly payment the strata unit is required to pay to maintain the common property and budgeted items in the Financial report.
These would be payments still owed or outstanding due to the strata corporation on behalf of this Strata Lot. If you use the standard SPECIAL LEVIES clause to make sure this amount will be paid with the proceeds of the sale to the Strata Corporation upon completion. If you see an amount in this spot this could indicate financial distress from the seller or it could be as simple as a late payment. Always ask the listing realtor what this is pertaining to if you believe it could affect your clients’ decision-making.
Sometimes an owner may do a renovation but a part of the approval process could be taking responsibility for the alterations. Meaning if they fail or issues arise due to the alterations the owner of the strata lot needs to maintain them. example: The owner installed a Washing machine. The building didn’t originally install washers in the building. So the strata can approve an installation but the owner would be responsible for any issues if the machine or plumbing fails.
Why is this important? - The new owner will need to take on this responsibility. Knowing who did the work, what was done and making sure you have the correct insurance to cover any costs related to issues resulting from the install. Also was the work done by a certified plumber? Is it covered by any warranties?
So do not ignore this section and ask the proper questions to get the full details. A copy of the agreements should be attached to the Form B. If missing request a copy from the Listing Agent.
If a levy has been voted on and payments have not yet been assessed then this could be indicated here. Again making sure the Buyer is aware and that the CPS outlines who owes this amount should be clear in the Contract.
This is a very important piece of your investigation. The Contingency Fund is the emergency money the Strata has in their account. For a mature building, this can be a very important metric as it can cover larger expenditures or emergencies in the future. You want a healthy Contingency Fund. How that is determined will be a matter of the age of the building, recent improvements, budgeting etc. A good rule of thumb is to have at least $2000/strata unit average for the amount in the fund.
If the funds are low then you should inquire. It could be because the building is still newer and under contract or perhaps the fund was used recently for an improvement project.
When you receive the strata documents you will also be requesting a budget. If the strata is currently running over budget then this could indicate the strata fees may need to go up or even more alarming that the strata is not being financially responsible.
We will request a copy of the Bylaws but what if they have had a vote to change a bylaw recently but have not yet registered? This is where they would tell you. The resolutions should be included in the Form B.
If the Strata has made any changes to the common property title search that have not been officially filed yet then they with indicate it here. This is not very common but could apply to certain phased developments or newer construction potentially. If Yes, is ticked you must research further.
A strata wind-up is when the strata votes to sell the entire building to one entity, usually a builder. If this is a YES then there is a very good chance your client’s intended use of the property will be impacted.
Much like item (G), this would indicate that the strata may be considering a bylaw change and the strata corporation will be voting on the resolution in the near future. If this is YES then we must get a copy of the Notice and make sure it doesn’t affect the client’s intended use for the property. It does not mean it has been approved but rather that a vote will be happening soon.
When reviewing the Form B what should I be aware of?
If the Strata is in a current litigation of court proceeding with another party this is a concern to your clients. Request a copy of the proceedings or look it up on the BC Court Registry. Any court proceeding that includes the Strata could potentially have an impact on the subject property.
If the strata stills woes funds to a contractor or service provider then it will be listed here. Depending on the amount and situation this could be important factor in your clients decision making. It gives an indication on how the strata is being run.
Although rental restriction have recently been lifted it may still be important for a consumer to know the mix of owners and tenants in a building. If a building has 100 units and 75 are rented then you know most residents don’t have personal stake in the budding and they may not take the same care in terms of wear and tear in the building. Could mean the elevators are always booked and not available or that residents may not be as security conscious. If only 10 units are rented we could ascertain that the building is mostly owner occupied and that could indicate better care and personal involvement in the building. Depending on the size and location of the strata this could be an important factor in your clients enjoyment of the property.
Parking and storage is an incredibly important part of this form. It is also a place we see many misunderstandings or mistakes. First step is to make sure the proper numbers are associated with the strata lot. Then you must double check that those numbers line up with the spaces you have been shown. If Parking or storage is included but not mentioned on the From B, then you must reach out to the property manager to make sure the information is correct. Parking and Storage allocation is one of the biggest issues in regards to disclosure, complaints and lawsuits.
If you are the listing agent of a property it is just as crucial to make sure you have reviewed the Form B and all of the strata documents so you have the information needed to assist any consumers. We want our information to be accurate and timely.
Ordering a Form B can take up to 7 days. So make sure this is ordered prior to listing the property.
DO NOT make an offer on a property subject free if you have not reviewed or been given the FORM B. It is one of the only documents that is specific to the strata lot when we are requesting strata information.
These rules govern the management of common property and the responsibilities of the strata council (the governing body of the strata corporation) and the strata owners. Bylaws are legally binding and enforceable, and they are usually established by the developer of a strata property at the time of the development. They are subject to state or provincial laws.
Some typical bylaws that a strata corporation might have include:
• Rules on the use and maintenance of common property
• Regulations on parking, noise, and other nuisances
• Procedures for the collection of strata fees and fines
• Rules for the holding of general meetings and elections of the strata council
• Rules for the alteration or improvement of strata lots
• Rules for the management of pets and other animals
• Rules for the management of rental units
• Rules for disposal of waste and trash
• Rules for the use of recreational facilities
Bylaws are typically amended by the strata council but must be approved by a vote of the owners at an Annual General Meeting or Special General Meeting, and also by the local authorities or provincial or municipal laws. Owners are expected to abide by the bylaws and failure to do so can result in fines or penalties.
Bylaws are a set of rules and regulations that govern the internal operations of a strata corporation.
so it’s important to be familiar with them and understand how they may affect the ownership and use of your strata lot.
Keep in mind that Bylaws are binding legal documents,
When reviewing strata minutes, you should be looking for several key things:
The minutes should indicate that a quorum of owners was present at the meeting. A quorum is the minimum number of owners required to be present at a meeting in order for it to be legally valid.
The minutes should summarize the decisions and actions taken by the strata council, such as the approval of a budget, the appointment of a new committee member, or the decision to undertake repairs or renovations to the common property.
The minutes should also provide information on any issues or concerns that were discussed during the meeting, such as complaints from owners about noise or parking, or concerns about the condition of the common property.
It’s important to review the minutes thoroughly and to be proactive in identifying and addressing any issues or problems that you find. If there are any questions or concerns about the minutes, it’s a good idea to discuss them with the strata council or with a professional or an expert in the field.
The minutes should list the owners who were present at the meeting, including those who participated by proxy. And should indicate how owners voted on any motions or decisions that were put to a vote.
Note:
You must always make sure you have proof that the documents were shared in a timely manner to the purchaser and that you have recommended for them to read thoroughly.
The minutes should indicate the financial status of the strata corporation such as any variances, pending liabilities or upcoming expenses.
The minutes should indicate any follow-up actions that are required to be taken and by whom.
The minutes should indicate that the meeting was conducted in accordance with the bylaws and regulations of the strata corporation, including time and notice requirement.
The minutes should be accurate, complete and upto-date. It is important that the minutes are promptly prepared, distributed, and approved at the next meeting.
The best practice is to start from the latest date and read forward to the present day. This will give you a better understanding of how the strata resolves issues, ongoing matters and verifying you have all the minutes required.
When reviewing minutes you will notice they always approve the previous minutes at the start of the meeting and at the end of the meeting they announce when the next meeting will be. You can match the dates from document to document in order to ensure you have all of the information requested.
An Annual General Meeting (AGM) is a meeting that is held annually by a strata corporation for the purpose of conducting the business of the corporation. The AGM is typically attended by the owners of the strata lots, as well as the strata council (the governing body of the strata corporation). The AGM provides an opportunity for the owners to review the financial and operational status of the strata corporation, and to discuss and vote on important issues and decisions.
At an AGM, the strata council presents a report on the previous year’s activities and the financial status of the corporation. The budget and operating plan for the coming year are also presented. The strata council members will be elected during the AGM, which are held every year. Owners are also given an opportunity to raise any issues or concerns they may have, and to ask questions of the strata council. The AGM is also
an opportunity for owners to vote on any proposed changes to the bylaws, rules, and regulations of the strata corporation, and to vote on any other motions put forward by the strata council or the owners themselves.
AGM notices are usually sent out by the strata council well in advance and will include the
time, location, and agenda for the meeting. AGMs are usually conducted in person, but in some cases, due to COVID-19 or similar reasons, they could be conducted via virtual platforms.
and participate in the decision-making process, as this is an opportunity for them to have a voice in the governance and management of their strata community.IT’S IMPORTANT FOR OWNERS TO ATTEND THE AGM
A Special General Meeting (SGM) is a meeting of a strata corporation that is called for a specific purpose, rather than the regular business that is conducted at an Annual General Meeting (AGM). SGMs are typically called when there is a specific issue or decision that needs to be made that cannot wait until the next AGM.
The purpose of the SGM, time, and location, as well as the agenda will be clearly stated in the notice, which is usually sent out by the strata council well in advance. As like AGM, SGM are also conducted in person or via virtual platforms.
• To vote on a special resolution, such as a change to the bylaws or rules of the strata corporation, or to approve a significant expenditure
• To discuss and vote on a major repair or renovation to the common property
• To elect a new member to the strata council
• To vote on a motion put forward by an owner or the strata council
At an SGM, the strata council will typically provide information and answer questions about the specific issue that is being discussed, and owners will have the opportunity to raise any concerns or ask questions. Owners will also have the opportunity to vote on any motions or decisions that are put forward.
It’s important for owners to attend SGMs and participate in the decision-making process, as this is an opportunity for them to have a voice in important issues that affect the strata community.
These meetings are open to all of the owners in a strata corporation (not just the strata council). At an AGM or SGM is when big changes or improvements are made as the entire strata corporation is present to vote on any resolutions.
This will offer you a quick glimpse at items you may need to investigate within the strata minutes.
Bylaws are very important to review. It is also important that you are aware of all of your clients’ needs to make sure you address any bylaws that may affect the use of the property for a potential buyer.
• You must confirm the square footage for the property on the Strata Plan.
• Professional measurements can often be more than the strata plan square footage. This must be disclosed to the client.
• To convert Sq meters to Sq feet x 10.7639
• I would review the SGMS and AGMS that have been provided first.
• Review from the latest date to the most present meeting.
- This allows you to review any big items of conversation or potential large items of repair, maintenance and future expenditures.
• Reading the AGM and SGM first will allow you to better understand some of the topics in the individual minutes better.
• Start from the latest date you have and read the minutes forward.
• We are looking for issues, recurring problems and most importantly not IF there are issues but rather how well does the strata deal with issues.
• You want to look for patterns or recurring issues within the strata.
• Pay particular notice to complaints and what they are for and why they are occurring.
• Does the subject property have any concerns about these complaints?
• What items are often talked about but never resolved?
• It could be as simple as seeing lots of complaints about barking dogs, your client has a dog that barks often. This is something you should bring forward.
• To make sure you have received all minutes refer to the start of each document.
• Each set of minutes will state approval of the previous meeting. Make sure that is a document you received. Then they will post at the end of each meeting when the next expected meeting is. I would keep a ledger to make sure you have a complete set of minutes.
• Pets • Rentals restrictions • Use of common property • Responsibilities for repairsReviewing the financials of a strata corporation is important for several reasons:
Financial Health: Reviewing the financials allows the owners to assess the financial health of the strata corporation, including its revenues, expenses, and reserves. This can help identify any financial issues or problems that need to be addressed, such as a budget deficit or insufficient reserve funds.
Budget and Operating Plan: Reviewing the financials allows the owners to understand the budget and operating plan for the coming year, and to make sure that they are realistic and comprehensive.
Reserves: Reviewing the financials allows owners to evaluate the adequacy of the strata corporation’s reserves, which are funds set aside for future repairs and replacements of the common property.
Transparency: Reviewing the financials allows the owners to see how their money is being spent and make sure that the strata council is transparent in their actions and expenses.
Planning: Reviewing the financials can help the owners plan for future expenses or improvements, and make sure that the strata corporation is financially stable and sustainable.
Compliance: Reviewing the financials allows the owners to make sure that the strata corporation is in compliance with local strata laws and regulations, including accounting and financial reporting standards..
Overall, reviewing the financials of a strata corporation is an important step in understanding the current financial state of the organization and making informed decisions to ensure the corporation’s long-term financial health, stability, and sustainability.
It is very important to not only review all building reports but also to make sure you have received all copies of any reports.
When you are reviewing the minutes for the building there will be evidence of any discussions on major projects. If they mention any report provided to the Strata Corporations minutes then you need to request a copy to get further information.
An engineering or Consultants reports are usually concerning a specific problem or issue ie) parking membrane /roof/ water ingress etc.
A depreciation report is required under the Strata Property Act. So almost every strata should have a Depreciation Report available. If they do not then we should discover why not.
The Depreciation Report should not be relied upon for exact details of the building. Rather it is a document to offer the strata a cost analysis for the next 30 years of the building’s life. It is excellent to review to get the particulars on any upcoming maintenance required or the age of the current mechanicals and building systems.
Many of the recommendations are estimates so review and take the information to ask the right questions to protect and inform your purchaser.
• Make sure you have the most recent copy of the Strata Insurance
• Pay particular attention to the deductibles.
• Water/flood deductibles have risen almost 10 fold in recent years.
• If a deductible is over $100,000 then you may need third-party protection
• If the deductibles are over $250,000 special caution and considerations need to be taken.
• Do not write a subject-free offer or remove subjects without your clients confirming that they can get insurance for a specific property.
Although we request the PDS and the Title search in the strata documentation these two items are specific the actual suite. Title will have a common property component but generally the items we are looking for on the common area title would be and litigations or liens against the strata corporation.
Many Strats will have easements or rights of ways that are INTER ALIA. This just means it allies to the entire strata.
When reviewing the PDS please remember that any information disclosed is to the best of the clients knowledge. It should be used as a reference but not a fact. Any concerns or contradicting information should be investigated.
REVIEWING THE STRATA INFORMATION WHEN SELLING AN ATTACHED STRATA PROPERTY IS A MAJOR PART OF A REALTORS RESPONSIBILITIES. HOWEVER, IT IS VERY IMPORTANT TO HAVE THE CLIENTS REVIEW THE INFORMATION THEMSELVES AS WELL.
As a best practice an advisor should review the strata corporations information and create a document or email to report on any findings. Flag any issues or concerns that could effect the enjoyment, cost or use of the property. The information should ALL be included for the client to review as well. Any concerns or questions should be addressed prior too committing to a firm deal.
If your client is a first time buyer, elderly or not familiar with purchasing strata tiled properties; explaining the purpose of reviewing this information and items we should be reviewing and paying attention to is very important.
If any information you discover is outside your scope of expertise it is very important to get advice from an expert in that area.
