Retroac­tive fees wrong way to pay the bills

The Province - - HOMES - Tony Gioventu Tony Gioventu is ex­ec­u­tive di­rec­tor of the Con­do­minium Home Own­ers As­so­ci­a­tion. Email tony@choa.bc.ca

Dear Tony: We just pur­chased a condo in Lan­g­ley and within a week of be­com­ing own­ers were sent an in­voice from our prop­erty man­ager that we owed back strata fees for Novem­ber and De­cem­ber.

These are the in­creases to the strata fees that were not ap­proved un­til the an­nual gen­eral meet­ing at the end of De­cem­ber 2017 and we only be­came the own­ers as of Jan. 5.

Our strata fis­cal year runs from Nov. 1 to Oct. 31. While the amount is not sig­nif­i­cant, it is the prin­ci­ple of the claim and the penal­ties be­ing im­posed by the strata man­ager that have us irate. Is a strata al­lowed to back charge retroac­tive fees from pre­vi­ous own­ers to new own­ers?

Carol and Dave J.

Dear Carol and Dave: The sim­ple an­swer is no, there are no pro­vi­sions for retroac­tive fees. How­ever, this is a more com­pli­cated prob­lem and re­quires an un­der­stand­ing of how the Strata Prop­erty Act, reg­u­la­tions and the by­laws of each strata cor­po­ra­tion func­tion.

Here are the ba­sic ac­count­ing prin­ci­ples for a strata cor­po­ra­tion.

Every strata must ap­prove an an­nual bud­get for a fis­cal year. It may ap­prove this be­fore the year end for the next year or no later than two months af­ter the fis­cal year end. To en­sure a strata cor­po­ra­tion does not run out of op­er­at­ing funds, own­ers con­tinue to pay the same pre­vi­ously ap­proved strata fee un­til the next bud­get is ap­proved.

When the bud­get is pro­posed in the no­tice pack­age, the no­tice must also in­clude the sched­ule of pro­posed strata fees for the fis­cal year. This is where the own­ers would be no­ti­fied of how in­creases will be cov­ered in the next fis­cal year and by hav­ing ap­proved ei­ther the bud­get or amended bud­get, the own­ers are also con­sent­ing to the fee sched­ule.

If the bud­get is ap­proved be­fore the new fis­cal year be­gins, the so­lu­tion is sim­ple: The new fees come into ef­fect. If it is ap­proved af­ter the fis­cal year end, the bal­ance of the fee in­creases have to be paid for the re­main­der of the year.

The strata must col­lect the amount ap­proved in the bud­get for the fis­cal year as that is the le­gal re­quire­ment un­der the act, which is the to­tal amount of the bud­get di­vided by the unit en­ti­tle­ment/to­tal unit en­ti­tle­ment of each lot for the fis­cal year.

If the strata ap­proves $100,000 in op­er­at­ing and a $25,000 con­tin­gency for the 2018 fis­cal year, it must col­lect it. If it does not and re­sults in a deficit, the strata must pay that deficit back to the bud­get in the next fis­cal year.

Many strata cor­po­ra­tions that ap­prove their bud­get af­ter the fis­cal year ends choose to cal­cu­late the bal­ance of the in­creases over the next 10- or 11-month pe­riod, so it has the least im­pact on the own­ers and sets a com­pa­ra­ble fee for the next year’s pe­riod with the least in­crease. But some also in­tro­duce an ad­just­ment for the next pay­ment and call it a retroac­tive fee, which is in­cor­rect as the fee was not ap­proved for that pe­riod, it en­com­passes the full fis­cal year.

This is where your by­laws come into ef­fect. Strata cor­po­ra­tions have mod­i­fied their by­law on pay­ment sched­ules and meth­ods and this af­fects the abil­ity of the strata cor­po­ra­tion to man­age and col­lect fees. This is es­pe­cially vul­ner­a­ble when there is a sale that oc­curred dur­ing the bud­get-ap­proval process.

In your strata, the by­laws re­quire the pro­vi­sion of 12 post-dated cheques for the next fis­cal year, but that would be im­pos­si­ble as your strata does not ap­prove its bud­get un­til the end of the two-month pe­riod af­ter your fis­cal year ends. A close look at the no­tice pack­age for the AGM should in­di­cate what the strata had in­tended and ap­proved for the pay­ment sched­ule.

A re­cent Civil Res­o­lu­tion Tri­bunal de­ci­sion in­volv­ing strata plan NW2729 will hope­fully open the di­a­logue on this is­sue and help strata cor­po­ra­tions plan their bud­get ap­provals, by­laws and man­age their in­creases in strata fees cor­rectly.

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