Date Issued: June 16, 2022

File: ST-2021-008486

Type: Strata

Civil Resolution Tribunal

Indexed as: Klassen v. The Owners, Strata Plan LMS 1710, 2022 BCCRT 705

Between:

PETER KLASSEN

Applicant

And:

The Owners, Strata Plan LMS 1710

Respondent

REASONS FOR DECISION
Tribunal Member:	Eric Regehr

INTRODUCTION

1.      This dispute is about unit entitlement. Peter Klassen co-owns strata lot 6 (SL6) in The Owners, Strata Plan 1710 (strata). SL6 was built as part of the first phase of a 5-phase strata plan. It is undisputed that the unit entitlements in the filed strata plan for the strata lots in the first phase are wrong. For example, these strata lots’ unit entitlement includes their garages and air space, while the unit entitlements for the strata lots in the 4 other phases do not. This means that SL6 has a higher unit entitlement than comparable strata lots in later phases, and thus has to pay a greater share of the strata’s expenses. Mr. Klassen says he has overpaid strata fees as a result of this error and asks for $5,000.

2.      The strata argues that Mr. Klassen’s claim is outside the Civil Resolution Tribunal’s (CRT) jurisdiction because only the BC Supreme Court can hear applications to amend a Schedule of Unit Entitlement (SUE). The strata asks me to refuse to resolve this dispute.

3.      The strata also says that it has attempted to persuade the owners to amend the SUE. However, amendments to the SUE require a unanimous resolution, and the resolution only received about 85% support. The strata says that unless the SUE is amended, it has no choice but to divide strata expenses based on unit entitlement as set out in the filed strata plan.

4.      Mr. Klassen is self-represented. The strata is represented by a council member.

JURISDICTION AND PROCEDURE

5.     These are the CRT’s formal written reasons. The CRT has jurisdiction over strata property claims under section 121 of the Civil Resolution Tribunal Act (CRTA). The CRT’s mandate is to provide dispute resolution services accessibly, quickly, economically, informally, and flexibly. The CRT must act fairly and follow the law. It must also recognize any relationships between dispute parties that will likely continue after the CRT’s process has ended.

6.     The CRT has discretion to decide the format of the hearing, including in writing, by telephone, videoconferencing, or a combination of these. I am satisfied an oral hearing is not required as I can fairly decide the dispute based on the evidence and submissions provided.

7.     The CRT may accept as evidence information that it considers relevant, necessary and appropriate, whether or not the information would be admissible in court. The CRT may also ask the parties and witnesses questions and inform itself in any way it considers appropriate.

8.     Under section 123 of the CRTA and the CRT rules, in resolving this dispute the tribunal may order a party to do or stop doing something, order a party to pay money, or order any other terms or conditions the CRT considers appropriate.

9.     Mr. Klassen uploaded into evidence the first page of a multipage spreadsheet. Because it appeared that he had inadvertently failed to provide evidence he intended to, I gave him the opportunity to provide the entire spreadsheet. Klassen responded that the spreadsheet was not evidence, but rather his own “personal data” and the first page was uploaded in error. CRT staff informed Mr. Klassen of his obligation to provide all relevant evidence. In response, Mr. Klassen described the spreadsheet, which consisted of his calculations of strata fees under the filed SUE and correct SUE for all of the lots in the strata. However, he did not provide the spreadsheet because he felt the strata should do it.

10.  I decided to proceed with a final decision without requiring Mr. Klassen to provide the spreadsheet. Based on Mr. Klassen’s description, I find that the spreadsheet was not evidence. Rather, I find that his calculations were essentially submissions, which the CRT’s rules do not require him to provide.

ISSUES

11.  The issues in this dispute are:

a.    Should I refuse to resolve this dispute?

b.    Is it significantly unfair for the strata to allocate expenses according to the existing SUE?

c.    If so, what remedy, if any, is appropriate?

BACKGROUND AND EVIDENCE

12.  In a civil claim such as this, Mr. Klassen as the applicant must prove his case on a balance of probabilities. While I have read all the parties’ evidence and submissions, I only refer to what is necessary to explain my decision.

13.  The facts are generally undisputed.

14.  The strata consists of 46 residential strata lots constructed in 5 phases. The strata plan was filed in 1994. The unit entitlement for the strata lots in the first phase was calculated differently in several ways. In particular, the first phase strata lots’ unit entitlements included their garages, excluded entryways and storage areas, and counted some parts of the strata lots twice. The overall effect of these errors is that the unit entitlement was higher than it if it had been calculated in the same way as the later phases. Following section 99 of the Strata Property Act (SPA), the strata has always collected strata fees from the owners based on the unit entitlements set out in the strata plan.

15.  In its submissions the strata does not explicitly admit that the unit entitlement for the first phase is “incorrect”, only that it is “different”. However, as set out below, the strata has consistently told the owners that the unit entitlement is wrong and needs to be changed. The strata has based this on advice from both its lawyer and a surveyor. More importantly, the strata has applied to the Land Title Office (LTO) to amend the SUE, subject to passing a unanimous resolution. I therefore find that the strata has admitted through its actions and words that the unit entitlement in the filed SUE is not just different, it is wrong.

16.  It appears that the issue of unit entitlement first came up in 2009. In 2010, the strata received a legal opinion that essentially said that the strata’s only option was to get a unanimous resolution to amend the SUE, which the strata did not believe would be possible. The strata took no other steps at that time.

 

17.  In 2018, the strata hired a lawyer and surveyor to revisit the unit entitlement issue. On May 1, 2019, the lawyer sent a letter to the strata advising that the only way to correct the error was with a unanimous resolution under section 261 of the SPA. The lawyer warned that the strata was exposed to claims for reimbursement from affected owners if it failed to amend the SUE. In July 2020, the LTO approved the strata’s application to amend the SUE, subject to the owners passing a unanimous resolution approving the amendment.

18.  On March 4, 2021, the strata’s lawyer circulated a unanimous resolution to amend the SUE, along with a new survey outlining the new unit entitlements. Under the amended SUE, SL6’s unit entitlement would be 152 out of 5930. It is currently 177 out of 6189. This amounts to Mr. Klassen’s share of unit entitlement being about 12% higher under the current SUE than the corrected SUE.

19.  On June 1, 2021, the strata’s lawyer wrote to the owners advising that they remained 5 votes short of a unanimous resolution. It is unclear whether these 5 outstanding owners objected to the resolution or simply failed to respond. In any event, the strata would need 3 additional votes to be able to apply to the court for an order passing the unanimous resolution under section 52 of the SPA.

20.  With that, on October 30, 2021, the strata’s lawyer confirmed that the strata was out of options. While section 246(7) of the SPA allows strata corporations to apply to the court to amend an incorrect SUE, section 14.13(a) of the Strata Property Regulation (SPR) creates an exception for errors that existed when the strata plan was initially filed at the LTO. In other words, without a unanimous resolution, the SPA provided the strata with no way to amend the SUE.

21.  Mr. Klassen started this CRT dispute on November 4, 2021.

ANALYSIS

Should I refuse to resolve this dispute?

22.  The strata argues that Mr. Klassen’s claim is outside the CRT’s jurisdiction. Under section 10 of the CRTA, the CRT must refuse to resolve claim that are outside its jurisdiction.

23.  The strata relies on section 122(1)(m) of the CRTA, which says claims under section 246 of the SPA are outside the CRT’s jurisdiction. However, Mr. Klassen does not ask for an order that the SUE be amended, which is what section 246 of the SPA is about. While Mr. Klassen does not say what the legal basis for his claim is, I find that his claim is that the strata’s decision to divide its expenses based on an incorrect SUE is significantly unfair. The CRT has jurisdiction over significant unfairness claims under section 123 of the CRTA. I find that the CRT has jurisdiction over this dispute.

24.  Section 11 of the CRTA sets out circumstances where the CRT may refuse to resolve a claim, when another legal process (such as a court proceeding) would be more appropriate.

25.  The strata relies on Luck v. The Owners, Strata Plan NW 1370, 2019 BCCRT 359, which is not binding on me. There, the applicant owner made 2 claims, one for an amended SUE and one for significant unfairness. The CRT member found that the claim for an amended SUE was outside the CRT’s jurisdiction and would need to be made by court application. The CRT member then found that the significant unfairness claim was closely linked to the issue of amending the SUE. The CRT member exercised her discretion under section 11 of the CRTA to refuse to resolve the significant unfairness claim because she determined it would be more appropriate for the BC Supreme Court to determine both issues.

26.  I find that this dispute is different because Mr. Klassen does not ask for an amended SUE. There is no suggestion that anyone has or will bring a court application to amend the SUE under section 246(7) of the SPA, perhaps because of the strata’s legal advice that section 14.13 of the SPR precludes such an application. For that reason, I decline to refuse to resolve this dispute.

Is it significantly unfair for the strata to allocate expenses according to the existing SUE?

27.  As mentioned above, the CRT has jurisdiction under section 123(2) of the CRTA to make orders directed at a strata corporation if it is necessary to prevent or remedy a significantly unfair action or decision.

28.  In Reid v. Strata Plan LMS 2503, 2003 BCCA 126, the BC Court of Appeal interpreted a significantly unfair action as one that is burdensome, harsh, wrongful, lacking in probity or fair dealing, done in bad faith, unjust or inequitable. See also King Day Holdings Ltd. v. The Owners, Strata Plan LMS3851, 2020 BCCA 342.

29.  As mentioned above, section 99 of the SPA clearly states that each owner must contribute to the strata’s operating fund and contingency reserve fund in proportion to their unit entitlement. The SPA contains no mechanism or authority for a strata corporation to depart from that rule absent a unanimous vote. The strata says that it has tried hard to amend the SUE with a unanimous resolution, but it has not been successful, although it continues to try. The strata therefore argues that its hands are tied because of section 99 of the SPA.

30.   However, several court decisions have concluded that dividing expenses based on unit entitlement can be significantly unfair. I discuss them below.

31.   In Strata Plan VR1767 (Owners) v. Seven Estate Ltd., 2002 BCSC 381, the strata corporation consisted of 28 strata lots: 25 residential, 2 commercial, and a parking lot. Seven Estate Ltd. owned the parking lot. Based on square footage, the parking lot had by far the highest unit entitlement of any strata lot. However, Seven Estate complained that it received no benefit from most strata expenses. In 1989, the strata corporation passed a special resolution halving the parking lot’s unit entitlement but did not amend the strata plan. When the strata corporation had to raise $700,000 by special levy for building envelope repairs, it demanded that Seven Estate pay based on unit entitlement.

32.   The court found that it would be significantly unfair for the strata corporation to divide expenses based on the filed unit entitlement. The court said that the high unit entitlement was the result of a developer error, and that it would be unfair to allow the other owners to benefit from this error.

33.   In King Day Holdings Ltd. v. The Owners, Strata Plan LMS3851, 2018 BCSC 1772, affirmed 2020 BCCA 243, King Day Holdings Ltd. owned 9 parking lot strata lots, which accounted for about 30% of the unit entitlement. After the building was completed in 1999, King Day and the strata corporation reached several agreements about how much King Day would contribute to various strata expenses, which was always considerably less than 30%. In 2015, the strata corporation decided that it would allocate expenses based on unit entitlement. The court found that this was significantly unfair. Among other things, the court ordered the other owners to reimburse King Day the amount of its “over-contributions” to the strata corporation’s budget after the strata corporation changed to unit entitlement.

34.   Finally, in Brown v. The Owners, Strata Plan VR 42, VR 64, VR 153, 2022 BCSC 812, the strata corporation was created in 1972 but had never divided expenses based on the unit entitlement in the filed strata plan. In 1981, the owners passed a resolution to divide expenses based on square footage, but the strata corporation never filed it with the LTO. In 2020, an owner demanded that the strata corporation calculate expenses based on the unit entitlement filed in the strata plan, as required by section 99 of the SPA. The strata corporation initially declined because it considered the filed unit entitlement unfair. However, the strata corporation later indicated that it might change its practice and use the filed unit entitlement.

35.   The court found that if the strata corporation used the filed unit entitlement, a set of owners would pay about 16% more than if expenses were divided by the strata lots’ actual square footage. The court found that this would be significantly unfair.

36.   Taken together, I find that these court cases show that rigid adherence to an incorrect or manifestly unfair SUE can be significantly unfair. Here, I find that the filed, incorrect SUE requires Mr. Klassen to pay 12% more towards strata expenses than he should have to. This is comparable to the 16% discrepancy in Brown that the court found significantly unfair. Applying the same reasoning, I find that it is burdensome, harsh, and inequitable for the strata to require Mr. Klassen to contribute to strata expenses based on the filed SUE.

37.   I acknowledge that the strata was in a difficult position. It knew that the existing SUE was unfair and incorrect, but also knew that dividing expenses correctly would require it to contravene the SPA. I also acknowledge that the strata has been diligent in its efforts to pass the unanimous resolution. In other words, I accept that the strata has acted in good faith. However, I find that using the filed SUE is significantly unfair to Mr. Klassen.

What remedy, if any, is appropriate?

38.   As mentioned above, Mr. Klassen claims $5,000 in damages for overpayment of past strata fees. Mr. Klassen does not explain how he arrived at that figure other than saying he pays about $50 too much per month in strata fees. The strata essentially made no submissions about the claimed damages.

39.   The strata’s budgets since 2019 are in evidence. They include a breakdown of each strata lot’s strata fees based on unit entitlement, ostensibly to reflect the filed SUE. However, having compared these budgets to the filed SUE, it appears that the strata has been calculating SL6’s strata fees wrong for years.

40.   As mentioned above, on the strata plan, SL6 has a unit entitlement of 177. Strata lot 5 (SL5) has a unit entitlement of 141. In each of the last 4 budgets, the strata has calculated SL5’s strata fees based on a unit entitlement of 177 and SL6’s strata fees based on a unit entitlement of 141. Put simply, the strata seems to have mixed them up. As a result, since at least 2019, Mr. Klassen appears to have paid strata fees based on a unit entitlement of 141 out of 6189, which is about 2.28%. As mentioned above, under a correct SUE Mr. Klassen would pay based on a unit entitlement of 152 out of 5930, which is about 2.56%. In other words, due to the strata’s apparent administrative error, Mr. Klassen appears to have paid lower strata fees than he would have paid if the strata had used the corrected SUE.

41.   This finding assumes that the strata has charged strata fees in accordance with its budgets. The only evidence before me about how much any owner actually paid is a handwritten calculation that Mr. Klassen put on a piece of evidence. Confusingly, this calculation is for SL5’s strata fees, not Mr. Klassen’s SL6. As noted above, Mr. Klassen bears the burden of proving all aspects of his claim, including his damages. In light of the error in the strata’s budgets and in the absence of any evidence about how much Mr. Klassen actually paid, I find that Mr. Klassen has not proven that he has overpaid strata fees.

42.   So, while I have concluded that it is significantly unfair for the strata to allocate expenses based on the filed SUE, I dismiss Mr. Klassen’s damages claim as unproven. As mentioned above, he did not ask for any orders about the strata’s future conduct, so I make no order about that.

TRIBUNAL FEES AND EXPENSES

43.   Under section 49 of the CRTA, and the CRT rules, the CRT will generally order an unsuccessful party to reimburse a successful party for CRT fees and reasonable dispute-related expenses. Even though I dismissed Mr. Klassen’s claim for damages, this was only because of a strata error that neither party has apparently noticed for years. Given that I agreed with Mr. Klassen on the main issue – that the strata’s use of unit entitlement is significantly unfair – I find that it is appropriate to order the strata to reimburse his $225 in CRT fees. Mr. Klassen did not claim any dispute-related expenses.

44.   The strata must comply with the provisions in section 189.4 of the SPA, which includes not charging dispute-related expenses against Mr. Klassen.

DECISION AND ORDERS

45.   I order the strata to pay Mr. Klassen $225 in CRT fees within 30 days of this order.

46.   Mr. Klassen is entitled to post judgement interest under the Court Order Interest Act.

47.   I dismiss Mr. Klassen’s remaining claims.

48.   Under section 57 of the CRTA, a validated copy of the CRT’s order can be enforced through the British Columbia Supreme Court. Under section 58 of the CRTA, the order can be enforced through the British Columbia Provincial Court if it is an order for financial compensation or return of personal property under $35,000. Once filed, a CRT order has the same force and effect as an order of the court that it is filed in.