Choosing Strata Management Services and a Strata Management Company

DOES THE COUNCIL CHOOSE WHAT STRATA MANAGEMENT SERVICES TO CONTRACT FOR?

The property management industry is very robust in British Columbia. In general, Stratas can choose the level of service that they require. The decision of what services and what company to contract with is generally a decision that is made by the Council with a majority resolution. However, Owners do have the ability to direct the Council to contract with a specific property management company (see our article on Responsibility for Strata Management Services for more information).

Similarly, the decision to cancel that contract in accordance with its terms or to not renew a strata management services contract when it expires can be done without requiring a resolution from the owners (s.39(2) of the Act).

WHAT SCOPE OF STRATA MANAGEMENT SERVICES ARE AVAILABLE?

There is no mandated form of “strata management services” and the services offered by property management companies and the fees for those services are determined by market forces.

In general, the services offered come in three different categories:

Full Service, which often includes:

• Financial services (as described below, and including receiving strata fees and paying invoices).

• Attending meetings and creating minutes.

• Recommending and supervising contractors.

• Keeping the records of the Strata.

Financial-Only, which often includes:

• Receiving and recording strata fee payments.

• Report on strata fee arrears.

• Preparing monthly accounting statements.

• Maintaining bank accounts for the Strata.

• Paying invoices on behalf of the Strata.

• Assisting with the preparation of annual budgets.

Flex-Plans, which often provide some base level of support, plus the ability of the Strata to add additional services as required. For example, a Strata primarily require financial support but want the property management firm to attend and take minutes at a general meeting or to instruct legal counsel regarding the collection of a debt.

HOW DOES THE STRATA BUDGET AFFECT STRATA MANAGEMENT SERVICES?

The Council should carefully consider the scope of services that will benefit the Strata and identify the likely cost. This expected expense is then included in the budget that is presented to the owners.

The approval of the budget requires a majority vote at a general meeting. This is the primary method for owners to have input into the scope of services that a property management company will provide.

WHEN SHOULD OWNERS CONSIDERING DIRECTING THE COUNCL REGARDING CONTRACTING FOR STRATA MANAGEMENT SERVICES?

There are situations where, in addition to approving the expected expense for property management services, Owners want more authority regarding which property management company will be hired.

Our experience is that this is usually for one of two reasons: the Owners were not happy with the service provided by the current property management company or the Owners are very interested in a property management company that either is offering a new service or that is recommended.

It is important to recognize that property management companies are free to market and advertise their business offerings to Owners. There is no reason why a property management company would not provide a quote or description of what it provides to Owners that are not on Council.

The Strata Property Act, section 27, permits the Owners by a resolution passed by a majority vote at a general meeting to direct the Council in its exercise of powers. It is valid for the owners to direct the Council to sign a contract with a particular property management company.

Although not necessary, a best practice for a Strata when distributing the notice for a general meeting involving the approval of the budget is to make available a copy of the contract with a proposed property management company.

HOW DOES A STRATA CHOOSE A STRATA MANAGEMENT COMPANY?

If there is no direction to Council regarding a specific property management company, the Council decides who will provide strata management services.

There is no requirement for the Council to ‘tender’ this contract or to source multiple quotes.

If there are multiple quotes received from different property management companies, there is no requirement for the Council to choose the least expensive option.

It is important to recognize that often a key aspect determining which property management company to hire is the actual person that will be acting as a property manager. It is important that the Council can assess whether there is a good personality fit with the property manager and can decide if the property manager has sufficient experience with the services the Strata requires. Although the contract is with a property management company, it is possible that a term of that contract involves either an identification of the property manager or the right of the Council to select the property manager.

HOW DOES A STRATA END A STRATA MANAGEMENT SERVICES CONTRACT?

The contract with the property management company is a contract and, like all contracts, can include a term regarding the process for ending the contract. Property management contracts are often several years in length and that means that the Council that forms the contract might not be the Council throughout the duration of the contract.

When a property management contract includes a term regarding the process for ending the contract, there is no requirement for a resolution from the owners for the Council to use that term to end the contract (Strata Property Act, section 39(2)).

In addition to any terms regarding ending the contract, the Strata Property Act provides a specific power for the Strata to end the contract. This is because a property management contract often is for several years and the decision which company to hire made by one Council should not bind a future Council, particularly if there are personality conflicts with members of the Council and the property manager.

The decision to end a property management contract in a way different from a term in the contract cannot be made by the Council, it must be made by the Owners at a general meeting. This is likely to prevent it being abused by a Council. Section 39(1) of the Strata Property Act permits a strata management contract to be terminated by a Strata on two months’ notice if the cancellation is approved by a resolution passed by a 3/4 vote at an annual or special general meeting, despite any provision in the contract to the contrary. In other words, regardless of the termination provisions in the contract, a Strata can always terminate a strata management contract on two months’ notice once a 3/4 vote of the owners has been obtained. If the contract is ended this way, the Strata does not need to pay any penalty to the property management company and they are not liable for any claim for compensation for breach of the contract.

There is a similar power for the property management company. If the property management company wants to end the contract it needs to provide the Strata with two (2) months’ notice. If this notice is provided, the property management company can end the contract without having to pay any penalty or be liable to the Strata for any expenses the Strata incurs because of the end of the contract.

It is important for Council and owners to be aware of this power from the Strata Property Act. We have been involved in an uncounted number of situations where the relationship between a property management company and a Strata has been severely damaged by the involvement of Owners that are not members of Council in directly contacting the property management company or property manager. It is important to consider what responsibilities are delegated to the property manager to ensure that owners cannot negatively impact the relationship between the Strata and the property manager.

HIRING A STRATA MANAGEMENT COMPANY IS VERY COMMON AND THE STRATA PROPERTY ACT INCLUDES MANDATORY TERMS IN THAT CONTRACT

It is very common for Stratas to hire a property management company to provide strata management services. It is important that those services are properly funded through the budget and that there is a thorough and thoughtful process to select the property management company.

If there is a breakdown in the relationship between the Strata and the property management company, either one has the legal power under the Strata Property Act to end the contract without having to pay any penalty or be liable for any costs that the other party incurs.