Take cautions when winding up strata
DEAR TONY: Our strata council was approached by a developer interested in purchasing our property outright.
They came to a council meeting, gave us a slick presentation, told us they were prepared to pay 35 per cent over our current assessed values and suggested we hold an information meeting with the owners.
Up to the information meeting, everything was reasonably civil. At the information meeting, several owners demanded to know how many offers we have had on the property. The developer advised they don’t work that way and will retract if we look for other offers.
As a council, we were a bit embarrassed, as we did not investigate this further. I can see the point of owners in wondering whether we solicited the best price and terms or whether we just settled on a higher value. The Strata Property Act gives us no indication of the process involved. Is there, at least, a best practice?
Jenna, North Vancouver
ANSWER: As a strata corporation, you are the collective property holders of a single piece of real estate that has a marketable value.
In many ways, it’s no different than selling your condo. You list the property and accept, reject, or counter offers.
Through this you negotiate the price, terms of the sale and the conditions or subjects.
The sale of a strata corporation, or its winding up, has more requirements to fulfil because the strata council does not have the authority to market the property or approve the terms and conditions of the sale without the consent of the owners.
In addition, unless all the owners approve of the proposed sale and no interest holders object, the strata is required to apply to the Supreme Court of B.C. for ratification of the sale, once the resolutions are approved.
In almost every windup, it has been in the best interest of the strata corporation to retain a commercial broker to act in the exclusive interest of the strata corporation to market the property. The competition for property has generally resulted in the best terms and highest prices, but a word of caution — not all properties will attract multiple offers due to capacity of the sale or current market conditions for buyers, and not all properties will return higher-than-assessed values. Don’t be lured into price based on assessment values, as market values may be higher.
Because your property is a modest size and ideal location for redevelopment, a marketing strategy and invitations for offers may be the best option to determine best price.
There are many conditions to consider in a winding-up process. The location of the property is critical. The current and future zoning of the property, as well as the possibility to assemble neighbouring properties, may have a significant impact on the price.
The terms of the sale are also significant. A closing period in six months may be a much more attractive deal than closing in one or two years. The current condition of your building and future cost facing your owners is also a consideration.
It is possible the strata corporation is due for some major upgrades because of aging assets. It is worth assessing the next five to 10 years of renewal costs when considering a windup. If you are facing $100,000 per unit in upgrade costs in the next five years, a sale near or above current values may be the best option for the owners to consider.
You will need a reliable depreciation plan or engineering study to help determine these liabilities for the owners. For more information on strata windups, go to choa.bc.ca.