The Condo Liquidation Phenomenon…

This post is not about the slick (and mindboggling success of) marketing ploys of developers to “liquidate” their bulk over-supply of over-priced condos throughout Metro Vancouver; although just the thought makes me shudder.

The condo liquidation phenomenon I am referring to here is likely to become more prevalent as more buildings realize that their short-sighted focus to keep the condo operating fees low is in fact destructive.

The concept of a longer-term (20-25 years) maintenance plan with a capital budget is not widely practiced by strata corporations in BC, when in fact it should be required by law to protect owners.

More strata corporations with artificially low fees will soon be discovering that the cost to restore their buildings will be beyond, or close to, the value of selling to recover land value (if they’re lucky).  An extra $25 to $50 each month per suite would probably have covered all costs and kept the building in great shape.

The Buchanan v. S.P. VR 1411, 2008 BCSC 977 judgment of BC Supreme Court Justice, Victor Curtis, contains the following comment: “The good intention of the Strata Property Act notwithstanding this strata property, is dysfunctional both on a structural and organization level”.

With the lack of adequate legislation (Strata Property Act) and supporting regulations, I believe we have known the collapse of strata corporations was inevitable. These inadequacies have led to poorly prepared and insufficiently supported owners trying to work within a broken government imposed framework.

The licensing of strata managers a few years back was a half-measure to what was needed, and the fact that Bill 12, the Strata Property Amendment Act, was allowed to die on the Order Paper in the BC Legislature this past week is unbelievable.  But I suppose we shouldn’t be surprised by this nonchalance given the provincial governments atrocious track-record the past decade.

Personally I have contributed different ideas for legislative changes to the Real Estate Board of Greater Vancouver, the Condominium Home Owners Association of BC, and the Vancouver Island Strata Owners Association, all of whom made submissions to the provincial government. 

With all of the consultation and voluntary work completed by an array of organizations and consumers the past number of years, and finally submitted to the Province, the provincial governments continual lack of concern for consumer protection around housing issues has reached new lows in BC.

The consequence is that many more British Columbian families will be losing their homes.

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6 thoughts on “The Condo Liquidation Phenomenon…”

  1. Unfortunately, our good government is not known for its proactivity in matters such as these. It will react to the crisis, well after hundreds, if not thousands of condo owners are on the verge of losing their homes. At that time, it will already be too late. Have we not learned from our short-sightedness of the past?

  2. As a lawyer with almost 15 years experience in the residential real estate market, I always urge clients to be cautious when purchasing in a strata complex. My experience is that a great strata counsel and property management company can be the difference between a good investment or home ownership experience and a bad one. As many clients review the strata documents before they meet with their lawyer, it is the realtor who normally provides advice to clients about the management of the strata and any financial shortfalls there may be. As always, an experienced realtor is worth every penny of their commission if they are helping their client understand the risks and benefits of purchasing a specific unit.

  3. Thanks Stacy for your comment and question. Apparently our government has not learned from the past. BTW Stacy, your video open houses are very popular with my clients whether sellers or buyers; good work.

    I recently met you Laura, although briefly, at the BC Real Estate convention. The tip sheet you were sharing with attendees for PTT splitting was the first time I’d heard of such a thing, and it has already been passed on to some clients. It is very much appreciated when a professional takes the time to share their experience and good advice. Thanks Laura; you’re now on my list of lawyers for my clients to choose from.

  4. John – Thanks for keeping this issue in the forefront.

    As a house inspector I have to agree with Laura. Be very cautious before buying into a Strata and NEVER buy beyond your comfortable means, because it is not a matter of if you will be hit with a special assessment but when.

    It is critical that changes take place in the industry and it is finally held accountable. Builders/Developers need to be held accountable for the product that they put on the market, Government needs to be held accountable for the lacking building standards, Stratas need to be held accountable for the lack of disclosure of building issues in minutes (ban “in-camera” meetings) and for the lack of adequate maintenance, inspectors have to be held accountable for the rushed and incomplete inspections they often provide and Realtors have to be held accountable if they interfere with the inspector’s findings and “downplay” reported defects.

    Only then will the buyer be better protected.

  5. Based on our fairly large data base re: stratas 1-10 years old, we believe at least 90% of them have invalidated their own warranty coverage by their own lack of maintenance and/or maintenance documentation. The arrival of this situation was predicted by multiple presenters at the Barrett Commission in discussions of various assurance and insurance models.

    • Thanks for your comments Sean and Dave.

      I also remember developers at the Barrett hearings saying that there was a lack of maintenance by owners, but back then guidelines or manuals were rarely provided by the builders, if at all. I would have thought that compulsory long-term maintenance operation plans, and the capital funding of such, would have been wrapped into the legislation long ago. I would also expect that licensed strata managers would have a role and responsibility in directing strata councils on such matters.


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