The Importance of a Strata's First Annual General Meeting

WHAT IS A FIRST ANNUAL GENERAL MEETING?

The First Annual General Meeting (First AGM) is a critical event that transfers the governance of the Strata from the Developer to the Owners. The are several requirements imposed by the Strata Property Act for what the Developer must do during the First AGM so that the Owners are empowered to govern the Strata.

Unfortunately, we have worked with several Stratas where the First AGM has not occurred as required by the Act and the result has been that the Strata has struggled with governance.

Significant problems arising after the First AGM primarily involve:

• Inadequate financial information for budgeting.

• Inadequate records for maintenance and warranties.

• Inadequate records regarding contracts.

WHEN DOES THE DEVELOPER NEED TO HOLD THE FIRST ANNUAL GENERAL MEETING?

The Strata Property Act, section 16(1)(a) requires an Owner Developer hold a first annual general meeting on the earlier of:

1. The six (6) week period that begins on the date on which 50% plus one of the Strata Lots has been conveyed to purchasers.

2. The six (6) week period that begins on the date that is nine (9) months after the date of the first conveyance of a Strata Lot to an Owner.

WHAT FINANCIAL DOCUMENTS NEED TO BE IN THE NOTICE FOR THE FIRST ANNUAL GENERAL MEETING?

The Strata Property Act, sections 16(2) and 21(2) require the Developer, with the notice of first annual general meeting to include a first annual budget and a financial statement.

The annual budget must include the opening balance in the operating fund and contingency reserve fund (owners have been paying into it during the interim budget), the estimated expenditures from the operating fund itemized by category of expenditure, the total of all contributions to the operating fund, the total of all contributions to the contingency reserve fund, each strata lot’s monthly contribution, and the estimated balance in the operating fund and contingency reserve fund at the end of the fiscal year.

The financial statement must include the details of all income and expenses during the interim budget, expenditures and accrued expenses not included in the interim budget and the amount in the contingency reserve fund. This is so that owners can see what happened with their strata fee payments while the Owner Developer acted as council.

WHAT DOCUMENTS NEED TO BE PROVIDED BY THE DEVELOPER AT THE FIRST ANNUAL GENERAL MEETING?

The Strata Property Act, section 20(2) and the Strata Property Regulation, section 3.2, 3.3 and 6.6 prescribe the documents that a Developer must give to the Strata at a First AGM. Those documents include:

• Copies of contracts entered into on behalf of the Strata.

• Names of persons that supplied labour or materials to the Strata.

• Warranties.

• Operating instructions regarding repair, maintenance and servicing of any common property or common assets.

• Insurance policies for the last 6 years.

• Income tax returns for the last six years.

WHAT SHOULD OWNERS DO WITH THE INFORMATION FROM THE FIRST AGM?

Owners should review the financial information during the period of the Interim Budget. This can inform the budget that the Owners will adopt and also identify any unusual or unexpected expenses that were incurred during that period that should be investigated or discussed with the Developer.

Owners should review the contracts of the Strata. Some of these contracts may have been formed by the Developer and that the Strata may not be specifically compelled to continue. However, the Strata needs to be aware that, legally, if they continue to receive the benefits from a contract that they will be forced to accept the obligations imposed on the Strata (most commonly, the payment for services).

Owners should review the warranties and information about work that was completed. This is important for many reasons, including that the Strata is likely covered under a warranty under the New Home Warranty Protection Program and it is important that the Strata make a note about all contractors and the dates work was done and materials supplied.

IS THE FIRST AGM FOR THE BENEFIT OF THE DEVELOPER OR THE BENEFIT OF THE STRATA?

The First AGM is for the benefit of the Owners. It is often the first opportunity for Owners to get together with the explicit purpose of discussing the Strata. This is a critical opportunity for Owners to articulate their preferences and vision of the future and to adopt a budget that reflects those preferences and vision.

It is likely that this will also be the first time that several Owners will be exposed to a Strata general meeting and it is an excellent opportunity to review the procedures for a general meeting, provide information regarding expectations around minutes, and explain how voting is conducted.

It is also the first time that Owners will be elected as members of the Council. This is particularly important because the initial Council will likely have to make several decisions for the first time for the Strata and therefore will have a limited ability to rely on previous decisions and discussions for direction.

It is not uncommon for a Developer to hire a licensed property manager to chair the First Annual General Meeting and this can be very effective. However, Owners must be aware that although a strata manager may be the most experienced person at the meeting regarding the governance of a Strata, it is the Owners that have the responsibility and authority to make the decisions that will have a profound effect on the Strata Community in the future.