Strata Wind-Ups in BC: When Owners Sell the Whole Building

When a developer wants the land under an older strata building, the owners can vote to sell the whole property and end the strata. Here is how a wind-up works in BC, from the 80% vote and the court's approval to how the money is shared, and what it means for owners, landlords and buyers.

The short version

What a strata wind-up is

The Strata Property Act calls it cancelling the strata plan and winding up the strata corporation; the Province calls it termination. Once the plan is cancelled, the land is no longer divided into strata lots and can be sold as one property. BCREA notes that the common reasons are an aging building that needs costly repairs and rezoning for higher density. There are three routes:

• Without a liquidator. An 80% vote approves cancelling the plan and dissolving the strata, and the owners become tenants in common of the whole property, with any mortgage on a unit moving to that owner's share.
• With a liquidator. An 80% vote approves cancelling the plan and appoints a liquidator, who takes title, sells the property and shares the money.
• By court order. An owner, a mortgage lender or another person the court considers appropriate can apply, with no vote. The Province calls this rare.

The Province says a voluntary wind-up can take up to 18 months or even longer.

How a developer approaches a building

The Province notes that a developer may approach a strata to buy all the strata lots for redevelopment. The steps it and BCREA describe:

• Information meetings. Held early, so owners hear the options, how the money would be shared, and the costs and fees.
• A brokerage. Council may hire one to market the property; the Province suggests the strata's lawyer review the agreement and the commission first. BCREA notes that listing doesn't take an 80% vote; that comes later, on the wind-up itself.
• The resolution. Usually a detailed document drafted by the strata's lawyer. It typically authorizes the wind-up and the court applications, approves spending on the lawyer, the liquidator, fees and commissions, and may set move-out timelines or rent-free periods.
• Advice. The Province strongly advises the strata to get independent legal and professional advice; get your own before you vote.

The 80% vote

Before July 28, 2016, a wind-up needed every owner's agreement. Now it needs a resolution passed at an annual or special general meeting by at least 80% of the votes of all the eligible voters. The Province stresses that this is not a quorum vote, so not voting has the same effect as voting against: in a 50-lot building with one vote per lot, 40 votes in favour are needed.

• Notice. At least four weeks' written notice, rather than the usual two.
• Who votes. Every owner, even one who owes strata fees or special levies, whatever the bylaws say, unless a tenant has been assigned the vote. Mortgage lenders can't.
• Small stratas. With fewer than five lots, 80% is effectively unanimous.
• What owners approve. With a liquidator, the resolution must also name the liquidator and approve an estimate of the winding-up costs and the interest schedule that sets each share.

Court approval, and who can object

With five or more lots, the strata must apply to the BC Supreme Court within 60 days to confirm the resolution, serving the owners and the registered chargeholders, such as mortgage lenders. That lets owners who voted against it object. The court must consider the owners' best interests, how likely and how serious any significant unfairness would be to owners, chargeholders or other creditors, and any significant confusion and uncertainty. It may confirm the resolution, but it doesn't have to.

Within 30 days of being appointed, the liquidator asks the court to vest the property in the liquidator for sale and distribution, and once that order is filed at the Land Title Office, the strata plan is cancelled. The liquidator then needs a 3/4 vote of owners before selling, or the sale is void, and another 3/4 vote approves the final accounts before the strata is dissolved.

How the money is divided

The interest schedule lists every owner, every registered chargeholder with the estimated value of its interest, and any other creditors, and sets each owner's share by formula. The Province explains that the basis depends on when the strata plan was filed:

• Before August 1974. Unit entitlement.
• August 1974 to 2000. The schedule of interest on destruction from the former Condominium Act.
• After 2000. Each strata lot's assessed value as a share of the total for all the lots.

BCREA notes that mortgages and other secured debts come off each owner's share. An example with made-up figures: a lot assessed at $600,000, out of $24,000,000 for all the lots, has a 2.5% share. Of $36,000,000 to distribute, that is $900,000, or $550,000 after a $350,000 mortgage, before any prepayment penalty.

Tax and mortgage questions

The usual rules for selling a home generally apply, but talk to an accountant before the vote.

• Your home. CRA says that if the unit was your principal residence for every year you owned it, you generally don't pay tax on the gain, but you must report the sale on Schedule 3 and Form T2091(IND). I explain more in Capital Gains and Your Home.
• A rental or a second home. If it wasn't your principal residence every year, some or all of the gain may be taxable, and the sale of a rental property is reported as a capital gain.
• A recent purchase. If you owned it for under 365 consecutive days, the federal flipping rule generally treats the gain as business income, unless a life event exception applies. BC's home flipping tax covers sales within 730 days.
• Your mortgage. It is paid from your share, and the Financial Consumer Agency of Canada notes that paying a mortgage off early, including when you sell, can bring a prepayment penalty. Ask your lender about porting it to your next home, and see Moving Before Your Mortgage Term Ends.

If you rent out your unit

A wind-up doesn't end a tenancy on its own: under the Residential Tenancy Act, a tenancy ends only in the ways the Act lists, and a sale isn't one of them. To end a tenancy so the building can be demolished, the landlord must have all the permits and approvals required by law and intend in good faith to demolish. Then:

• Notice. It takes effect at least four months after the tenant receives it, on the day before rent is due, and not before a fixed term ends.
• Disputes. The tenant has 30 days to dispute it.
• Compensation. One month's rent, paid on or before the effective date, or withheld from the last month's rent.

Because that notice depends on permits, check the sale terms on possession with your lawyer before you promise your tenant anything. I cover the wider rules in Selling a Tenanted Home in BC.

Buying into an older building

A building that could be wound up isn't a reason to walk away, but if the vote passes and the court confirms it, your unit is sold even if you voted against it, and your share follows the interest schedule, not the price you paid. Before you remove subjects, check:

• Form B. It shows any wind-up resolution that has been passed, and any notice given for a resolution needing an 80% vote that hasn't been voted on. I explain the rest in the strata documents to read first.
• Minutes. Look for developer offers, information meetings or a listing agreement.
• The filing date. When the strata plan was filed decides which formula sets your share.
• Repairs and zoning. Read the depreciation report and the official community plan for the area, since those are the common reasons owners sell.

Questions owners often ask me

Can I be forced to sell if I vote against a wind-up?

Yes. If the resolution passes with 80% of the votes of all eligible voters and, with five or more lots, the court confirms it, every unit is included. You can object in court, and the court must weigh any significant unfairness to owners.

How is my share of the sale calculated?

By the interest schedule. For strata plans filed after 2000, it is your strata lot's assessed value as a share of the total for all the lots; older buildings use unit entitlement or a schedule of interest on destruction.

Do I pay tax on the money from a strata wind-up?

Generally not, if the unit was your principal residence for every year you owned it, though you still report the sale to CRA. If you rented it out, some or all of the gain may be taxable, so speak with an accountant.

What happens to my mortgage?

It is paid out of your share. Paying it off early can mean a prepayment penalty, so ask your lender for the amount and whether you can port the mortgage to your next home.

Does a wind-up end my tenant's lease?

Not by itself. To demolish, the landlord needs the permits first and must give at least four months' notice, and the tenant receives one month's rent as compensation.

Weighing an older strata building? Read how strata fees and reserve funds work, see who pays special levies when a strata home sells, or check recent sales in your area.

This article is general information, not legal or tax advice. The rules come from the Strata Property Act, the Residential Tenancy Act and guidance from the Province, BCREA, CRA and the Financial Consumer Agency of Canada, current at the time of writing; the share example uses made-up figures. For the Province's guide, see strata termination (winding up).