When it comes to sharing expenses under the Strata Property Act, the general principal is that all owners are “in it together.” For example, if there is a major leak on one side of the building, all owners will need to contribute to the cost of repairs, even if they live on the dry side.
Sharing all common expenses regardless of who benefits can be a source of conflict in strata developments with both condominium towers and townhouses. These different styles of strata lots can have very different expenses. For example, condominiums often have higher maintenance expenses than townhouses because they may feature extra amenities like elevators or shared hot water systems. Townhouses can face higher per unit repair expenses because low-rise buildings have fewer strata lots.
To help deal with this difference, the Strata Property Act and the Strata Property Regulation allow owners to create and use special tools to help them allocate common expenses. Condominium- and townhouse- style strata lots can be treated as different “types” of strata lots. They can also be separated into different “sections.”
When strata corporations allocate common expenses based on types, they are permitted to allocate expenses in the annual operating budget that relate to, and benefit, a single type of strata lot to the owners of those strata lots.
When strata corporations create “sections,” they create separate governing bodies for each type of strata lot. Each section is a separate legal entity with its own executive council. Sections have special powers to manage and pay for those common expenses that relate solely to the strata lots in the section.
Sections can create and enforce their own bylaws, budgets and contingency reserve funds. They can enter into their own contracts, acquire or dispose of property and sue or arbitrate in the name of their section.
For many owners, the most important difference between sections and types is that sections can raise funds through special levies of section owners.
If a strata corporation does not use sections to allocate expenses between condominiums and townhouses, all owners must contribute to all special levies, regardless of whether the funds raised will benefit a single type or style of strata lot.
If you are buying a townhouse or a condominium in a strata development featuring both condominiums and townhouses, review the bylaws and the budget to see if the strata corporation uses “types” or “sections.” If the strata corporation does not use one of these tools to allocate expenses between condominiums and townhouses, there is a good chance that one style of strata lot may end up subsidizing the other.
If you have more questions or are considering using types or sections in your strata corporation, be sure to consult with a knowledgeable strata lawyer.
Originally published in the British Columbia New Condo Guide – January 24, 2014 at page 36.