A recent inquiry from a Richmond strata owner has highlighted a critical and often misunderstood aspect of British Columbia's strata law: the obligation to refund special levies collected for an insurance deductible once that money is recovered.
The $250,000 Levy and Subsequent Sale
The case involves a strata corporation in Richmond that faced a major flood in November of last year. The incident was caused by an owner who altered their own bathroom fixtures, resulting in significant water damage to nine units within the building.
Since the at-fault owner did not have personal homeowner insurance, the strata corporation was forced to cover the $250,000 insurance deductible. The strata council levied this substantial amount against all the owners, as the corporation's bylaws and the Strata Property Act typically allow.
According to the reader, Ken, the strata council did not pursue legal action through the Civil Resolution Tribunal or the courts to recover the cost from the responsible owner. The council's reported position was that "that's the way it is and not everyone can afford insurance."
The situation took a turn when the unit owned by the person responsible for the flood was sold. Fortunately, the outstanding $250,000 levy was collected from the proceeds of that sale. This recovery prompted the central question: must the strata corporation now refund that money to the owners who paid the special levy?
Legal Obligations Under the Strata Property Act
Tony Gioventu, Executive Director of the Condominium Home Owners Association, provides a clear answer based on provincial legislation. He emphasizes that the Strata Property Act sets definitive rules for this scenario.
"When it is either approved by the owners at a general meeting, or a strata council has to impose a levy for an insurance deductible, the details of what the levy is for, the total amount and due dates of payments, how much each unit contributes and whether a rate of interest applies are minimal requirements," Gioventu explains.
He argues that if the sole purpose of the levy was to cover the insurance deductible, and that deductible has now been collected from the responsible party, the funds must be refunded to the owners. The refund should be calculated using the same contribution formula that was applied when the levy was initially collected.
"The Strata Property Act is clear," Gioventu states. "If any owner is entitled to $100 or more, based on the remaining balance, the full amount must be refunded to the owners based on the same formula applied for the levy."
Best Practices for Strata Councils
To avoid disputes and ensure legal compliance, Gioventu offers several key recommendations for strata corporations facing similar situations.
First, he advises that the resolution authorizing the levy should explicitly detail the terms for both collection and potential refund. "Where an insurance deductible is collected by levy, the terms over the collection and refund on collection are best detailed in the levy resolution," he notes. This document becomes vital evidence if a disagreement arises.
Second, he highlights that interest earned on levied funds belongs to the owners who contributed, not to the strata corporation's general operating fund. "In a situation where there are large amounts for major repairs, levies may generate significant interest to offset inflation and costs... these are not discretionary costs for the corporation. It is interest generated by the levy owners contributed," Gioventu clarifies.
Perhaps most importantly, he strongly recommends seeking professional legal assistance. "Best practice: for a small amount your law office can draft your levies. It is a practice of law under the Legal Professions Act to draft levies and bylaws," he advises. A legally sound levy is crucial because a defect in its drafting could prevent the strata from collecting owed amounts. Conversely, a proper levy supports serious collection actions, including applying for an order for sale against a unit in arrears.
Finally, Gioventu warns strata councils against delay. "Start a formal collection/notice procedure as soon as possible. Failure to act can result in failure to collect," he cautions, referring to legal limitation periods that can bar late claims.
This case underscores the importance of precise legal processes in strata governance and reaffirms that funds collected for a specific purpose must be returned when that purpose is fulfilled, as mandated by B.C.'s Strata Property Act.
