Strata Bylaw in Question
One strata has the following bylaws:
Monies received by the strata corporation from an owner or on behalf of the owner shall be applied against the account relating to that owner’s strata lot in the following order of priority;
- the cost of remedying the contravention of a bylaw or rule (including legal fees)
- fines
- costs to repair damage (including but not limited to an insurance deductible) for which the owner is responsible to pay pursuant to the bylaws or the Strata Act
- interest on unpaid strata fees or special levies
- outstanding contributions required pursuant to a special levy
- outstanding strata fees
This bylaw sets out the order in which payments received by a strata corporation are to be applied against an owner’s outstanding debts. In British Columbia, under the Strata Property Act (SPA), strata corporations can enact such bylaws, but they must not conflict with the Act or its regulations to be enforceable.
Could a strata have this bylaw
Generally, yes, strata corporations in BC can set the priority of payments through a bylaw like this. The SPA does not mandate a specific order of applying payments (except in very specific legal contexts), so a bylaw that clearly lays out the order is typically valid and enforceable, as long as it:
- Was properly passed by a 3/4 vote at a general meeting;
- Is registered at the Land Title Office;
- Does not conflict with the SPA.
Practical consideration
If the strata enforces this order (e.g. applying payments to fines first, rather than strata fees), it could result in the owner falling behind on their strata fees or special levies. The strata could then files a lien registration under SPA s.116, as a lien can only be filed for unpaid strata fees or special levies — not for fines or bylaw enforcement costs. This means the strata should exercise caution when relying on this bylaw.
Legal challenges
Are there any direct precedents specifically challenging the enforceability of a bylaw dictating the order of payment application, existing case law underscores the necessity for strata corporations to? Yes, there are direct precedents in British Columbia that challenge the enforceability of bylaws dictating the order in which payments are applied to an owner’s account. These cases primarily address the application of payments to fines and strata fees, highlighting the need for compliance with the Strata Property Act (SPA) and the importance of procedural fairness.
Key Case
The Owners, Strata Plan BCS3648 v. Podwinski (2016)
In this case, the BC Supreme Court ruled that a strata corporation’s bylaw, which required payments to be applied first to fines rather than strata fees, was invalid. The court emphasized that such a bylaw could not override the owner’s right to specify the application of their payments, especially when using preauthorized payments designated for strata fees. The court stated:
“The by-law must be read down in order to avoid that result.”
This decision underscores that while strata corporations can set payment application priorities, they cannot contravene the owner’s rights under the SPA.
Implications for Your Bylaw
Given this precedent, your proposed bylaw, which specifies an order of payment application starting with fines, may face challenges if it conflicts with an owner’s right to designate how their payments are applied. To enhance enforceability, consider the following:
- Owner Consent: Ensure that owners have the opportunity to consent to the payment application order, particularly if using preauthorized payments.Condo Cases
- Clarity and Transparency: Clearly communicate the payment application order to all owners and provide them with the option to direct how their payments are applied.
- Legal Review: Consult with legal counsel to ensure that the bylaw aligns with the SPA and respects owners’ rights.
Conclusion
While strata corporations have the authority to establish payment application priorities, these must not infringe upon owners’ rights under the SPA. The case of Podwinski illustrates that bylaws imposing such priorities without owner consent may be deemed invalid. Therefore, it’s advisable to review and possibly revise your bylaw to ensure its enforceability and compliance with legal standards.
