Considerations When Delegating the Authority of Council

WHAT TASKS SHOULD A COUNCIL DELEGATE?

The Council is responsible for an incredible number of tasks and duties. It is reasonable (and expected) that the Council will delegate some of these tasks, either to other owners or professionals (Strata Property Managers and Lawyers are the most common). It is important for Councils to understand what tasks can be delegated, how they can be delegated and the consequences of delegation.

In general a Council can delegate any task but it cannot delegate a task that the Council does not have the authority to do itself. When a Council delegates a task it remains responsible for the reasonable performance of the task and delegation is not a way to "escape responsibility".

WHAT ARE THE RISKS OF A COUNCIL DELEGATING ITS AUTHORITY?

A Council can choose to delegate some or all its duties and tasks. The decision to delegate is made at a Council Meeting by a resolution. It should be recorded in the minutes of that meeting.

The decision of what tasks and duties can be delegated should involve a risk analysis. Tasks and duties should only be delegated when there is a person willing to be delegated those tasks that can perform those tasks. The scope of the tasks and duties that are delegated needs to be clearly communicated and, especially when the delegation involves the authority to spend Strata money or form contracts that will be binding on the Strata, considerations should be made to ensure that nothing is done that is contrary to the Strata Property Act.

The “Schedule of Standard Bylaws” included with the Act are not legislation and are not binding on any Strata, however, they can be used as a model of a generic risk analysis involving delegation. Bylaw 20 does permit that the council may delegate some or all its powers to people who are not members of the council.

Bylaw 20 (which can be changed, repealed or replaced by a strata corporation) includes some risk management considerations does impose restrictions on the following:

• The delegation of spending powers.

• The determination whether a person has contravened a bylaw or rule.

• The decision whether to impose a fine and the amount of a fine.

• Whether a person should be denied access to a recreational facility.

Another example of a risk analysis regarding what duties it may not be appropriate to delegate is section 27 of the Strata Property Act. This section deals with the power of owners to direct the strata council with a resolution passed by a majority vote. The section prevents owners for directing Council’s discretion to determine:

• Whether a person has contravened a bylaw or rule.

• Whether a person should be fined, and the amount of the fine.

• Whether a person should be denied access to a recreational facility.

• Whether a person should be required to pay the reasonable costs of remedying a contravention of a bylaw or rule.

When a Council is deciding what tasks should be delegated, it is important for them to make that decision thoughtfully and in consideration of the fact that the Council remains responsible for strata management.

When a Council has delegated responsibilities for strata management, it is important that everyone thoroughly understands the extent of that delegation.

WHAT LIMITS ARE THERE ON THE POWER OF A COUNCIL TO DELEGATE IT AUTHORITY?

While a Council can delegate some or all its strata management responsibilities it cannot delegate responsibilities that it does not have, and it cannot delegate to a person who is lawfully prevented from performing those responsibilities.

This is because of the legal maxim that “when something is prohibited directly, it is also prohibited indirectly.”

An example would be making a significant change to the appearance of common property. A Strata is prohibited from making a significant change in the appearance of common property unless that change is approved by a resolution passed by a ¾ vote at a general meeting. This means that the Council cannot delegate to a landscaping company the authority to maintain the landscaping and then have that company decide that trees needed to be removed as part of their delegated authority.

The Council cannot delegate to a person a task that they are lawfully prevented from performing. The most common examples are provision of strata management responsibilities or providing legal services. When the strata council is delegating the performance of strata management services (as defined in Real Estate Services Act) to a person in exchange for payment it is likely that the person must be licensed by the BC Financial Services Authority and when council is delegating to someone the authority to provide what is defined as the “practice of law” in the Legal Profession Act that person must be permitted to engage in the practice of law.

HOW DOES A COUNCIL DELEGATE TASKS AND AUTHORITY?

Under s. 2(2) of the Strata Property Act, a Strata has the power and capacity of a natural person of full capacity including the power to form contracts. Section 38 of the Strata Property Act explicitly provides that a Strata has the capacity to enter into contracts in respect of its powers and duties under the Strata Property Act, the regulations, and the bylaws. The Strata is therefore permitted to form contracts for the provision of strata management services.

When delegating tasks, it should always be done by a written contract. That written contract should directly state at least the following:

• Who the tasks are being delegated to.

• What specific tasks are being delegated.

• How the person delegated tasks can ask questions and report on progress.

• The dates during which the delegation is valid.

• How much the person being delegated the tasks will be paid for the tasks.

The two most common forms of these written contracts are contracts for the provision of strata management services from a property manager or property management company and the provision of legal services from a law firm.

It is important to remember that any delegation of tasks in exchange for a fee necessitates the expenditure of funds from the operating fund. This expenditure must be authorized in the strata corporation’s budget, or by a resolution passed by a ¾ vote at a general meeting (s. 97 of the Strata Property Act). The budget should include a "category of expenditure" for legal services for the payment of these fees. In this way, the decision whether to form a contract for the provision of strata management services is a decision made by the Owners.

WHAT IS THE RELATIONSHIP BETWEEN THE COUNCIL AND THE PERSON DELEGATED A TASK OR AUTHORITY?

Unless a different relationship is specifically created, the delegation of strata management responsibilities results in a principal/agent relationship in which the Strata is the principal and the person delegated authority to perform the strata management responsibilities is the agent.

As an agent of the Strata the person receiving the delegated authority is only permitted to act on behalf of the Strata regarding the specifically delegated authority.

The common law has developed specific duties that an agent owes to its principal. The duties are referred to as fiduciary duties and include the duties of absolute loyalty, confidentiality, and full disclosure.

An important consideration for Councils is describing the extent of a delegated authority when it presents an agent to a third party. As an example, if a strata council holds out an individual as the “Strata Manager” but does not explain the scope of the delegated authority, it is likely that a third party could rely on the assumption that person was delegated the authorities included in the description of strata management services in Real Estate Services Act (for more details of strata management services see our other article).

As an example, if someone is delegated the authority to interview potential service providers and then present quotes and a recommendation to the Council for a decision, it is important that the Strata does not state or imply that they are authorized to ‘hire’ a service provider.

In the legal context, it is important that the Council identify who can give instructions and receive legal advice from a lawyer. If someone is delegated the authority to get a legal opinion on a specific issue, it is important that the lawyer understands that person does not have authority to receive information about other issues or to request that the lawyer provide additional legal services.

The ability of a third party to expect that a delegation is general in nature, unless limits are specifically identified, is consistent with the common law and section 30 of the Strata Property Act. Section 30 of the Strata Property Act states that the validity of a contract made by a Strata is not affected by a limitation on the authority of the council member to act on behalf of the Strata unless the other party to the contract knew or ought to have reasonably known of the limitation. So, if someone signs a contract or requests services without the authority to do that, the Strata cannot benefit from that contract but refuse to pay on the basis that they did not delegate to that person the ability to request those services unless the person providing services knew of the limitation of the delegated authority.

The Council is also responsible to ensure that it delegates authority only to a person that can lawfully exercise that authority. There are two common situations where this must be considered – when the strata council is delegating the performance of strata management services (as defined in the Real Estate Services Act) to a person in exchange for payment (because it requires the person to be licensed) and when council is delegating to someone the authority to provide what is defined as the “practice of law” in the Legal Profession Act (because that person must be permitted to engage in the practice of law pursuant to the Legal Professional Act).

DOES THE DELEGATION OF A TASK OR AUTHORITY CREATE STRAT RECORDS?

The Strata Property Act states that all correspondence sent or received by the Strata or the Council are records of the strata corporation (section 35(2)(k) of the Act) and therefore Owners have a right to inspect those records.

Communications between strata council members are not “records” for the purposes of s. 35(2) (k) and therefore members of Council can communicate relatively ‘freely’ with each other secure in the knowledge that those communications do not need to be shared with other owners.

However, this protection does not apply when a Council delegates a duty or tasks to a third party. In that situation, all communications to that person (for example, emails) become a record of the Strata and therefore must be made available for inspection in accordance with section 36 of the Strata Property Act. This does not apply to communication with legal counsel (except in limited circumstances).

COUNCILS SHOULD DELEGATE TASKS AND AUTHORITY BUT NEED TO DO IT BASED ON A RISK ASSESSMENT

It is reasonable (and expected) that the Council will delegate some of its tasks, either to other Owners or professionals (Strata Property Managers and Lawyers are the most common). When deciding whether to delegate a duty or task the Council should carefully consider the risks. There should be a written statement regarding the extent of the delegated authority and all communications with the person that is delegated authority must be retained as a record of the Strata.