A judge has rejected a bid by a B.C. strata to wind-up its strata plan with a view to selling the property, despite the fact that more than 78 per cent of the owners were in favour of the move.
In his ruling on the case, B.C. Supreme Court Justice Geoffrey Gomery noted there was sufficient confusion, uncertainty and unfairness surrounding the matter such that he could not approve of the court petition.
Court heard that, in the summer of 2021, the owners of the plan were discussing the possible liquidation of their strata corporation and the sale of the property to a developer. They were facing increasing capital expenditures to maintain and repair the buildings.
The so-called Tall Tree strata, built in 1982, has six two-storey residential buildings with a total of 28 units and is on Inlet Street in Coquitlam.
On Nov. 5, 2021, the strata council negotiated a purchase and sale agreement with Anthem Properties Group Ltd.
At a meeting on Jan. 20, the owners failed to approve the sale by the necessary 80 per cent majority but discussions with the developer continued. On June 17, 89 per cent of the owners approved a winding-up resolution.
But the developer took the position that the agreement had been terminated three days earlier, on June 14, under amendments to the agreement earlier negotiated and wanted its deposit returned.
On Aug. 18, the strata filed the petition seeking to have the wind-up approved, a process required under the agreement. Eight days later Anthem filed a lawsuit seeking the return of its deposit.
In the petition, the number of owners supporting the wind-up move had dropped to 22 of 28 owners, or 78 per cent.
The judge said there was “no question” that unfairness, confusion and uncertainty were present in the matter before him.
“Having regard to the best interests of all the owners, the issue is whether their probability and extent are significant enough to justify overriding the wishes of the 78.6 per cent of the owners who voted in favour of the winding up and still wish to proceed,” he said.
“Confusion and uncertainty are manifest because it is uncertain when the winding up will be effected, how it will be effected, what the results will be when it is effected, and even whether it will be effected.”
The judge said that unfairness was present because the winding-up proposal was put forward and approved on the basis of a cost estimate and interest schedule that are “entirely unrealistic” in light of the litigation involving Anthem.
“Legal, conveyancing and liquidator fees will undoubtedly exceed $126,000, possibly by several times,” said the judge. “If the owners succeed in the action against Anthem, they will recover significantly less than $1.085 million per owner, and their recovery will be delayed, perhaps for years.
“If the owners fail in their action against Anthem, their eventual recovery is entirely uncertain, but it is significant that they view this as the inferior outcome.”
The likely practical effect of approving the winding-up order would be to render all of the strata lots unsaleable, unless and until the order is some day set aside, said the judge.
“It is hard to see what would motivate someone to purchase a strata lot that could at any time cease to exist because the strata council had filed the order in the Land Title office,” he said.
“Upon the filing, none of the owners would be entitled to remain in possession of their residential units.”
The judge noted that the petitioner’s counsel advised that the strata council firmly intended not to file the order unless a sale was ready to take place, but found that did not change his analysis.
“This does not affect my conclusion that making the order would imperil the rights of ownership of a strata unit, because the strata council’s intentions and assurances do not legally bind this or a future strata council,” he said.
“While the present owners may be inclined to accept them, I think that is much less likely in the case of a potential purchaser.”
Lawyers for the strata and the developer could not be reached for comment.
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