Understanding Sections in a Strata

WHY WOULD A STRATA CREATE SECTIONS?

Strata developments often include different types of Strata Lots, such as a mix of residential and commercial lots, townhouse and condominium lots, or condominium lots in separate buildings. These groups may not use the same parts of the Common Property and they might want bylaws that apply to Strata Lots in their "group" that would not apply to Strata Lots in a different "group".

When specific portions of the Common Property benefit only one group of strata lots, the owners of strata lots that do not receive a benefit may not want to contribute to expenses to repair and maintain those areas. This division of expenses can be achieved, with some limitation, if the Strata creates Sections.

A Section is essentially a group of Strata Lots that can be made responsible for the Common Property that only they use and that can control through bylaws the use and enjoyment of Strata Lots that are only in that group.

HOW DOES A STRATA CREATE A SECTION?

The Strata creates Sections through a bylaw. The bylaw must be approved at a general meeting by an overall ¾ vote from all Strata Lots and a ¾ vote of each Strata Lot that would be in a section.

This can be confusing, so as an example, imagine a Strata consisting of eight strata lots that has four residential Strata Lots and four non-residential Strata Lots. The vote to create two sections would need to be passed by six of the votes cast (which is ¾ of eight votes) that needs to include three votes of residential Owners (which is a ¾ vote for the residential section) and three votes of the non-residential Owners (which is a ¾ vote for the non-residential section). If the vote was six of the votes in favour, but divided so it was all four residential votes and only two non-residential votes, the bylaw creating the sections would not be adopted.

Once created, each Section must elect an executive, who exercises the powers and obligations of the section (the same as the Strata Council for the Strata). The Section can then hold meetings and vote on resolutions concerning that Section’s matters, including adopting bylaws that apply to only strata lots in that Section. Each Section must also have a budget and an Operating Fund and a Contingency Reserve Fund. We have discussed how budgets are created, and the consequences if there is a budget surplus or budget deficit in other articles .

HOW DOES A STRATA CANCEL A SECTION?

The Strata can cancel a Section by amending the bylaws to remove the bylaw that created the Section. That bylaw has the same requirement that it be approved both by an overall ¾ vote from all strata lots and a ¾ vote of each strata lot divided into sections.

An important consideration when a Section is being cancelled is addressing any changes in responsibility for Common Property. If a Section was obligated to repair Common Property and there is work that will need to be done, that becomes an expense of the Strata that all Owners must contribute towards. This should be considered when the Owners are considering whether to cancel the Section.

Related to the change in responsibility for Common Property is the cancellation of the Sections' Operating Fund and Contingency Reserve Fund. This money was collected to meet Common Expenses, and there is a question about how it should be distributed – is it returned to the Owners of the strata lots that were in the Section or is it transferred to the Strata’s Operating Fund or Contingency Reserve Fund? If the Sections had different amounts in their Contingency Reserve Funds, is there a requirement to balance the amount transferred to the Strata's Contingency Reserve Fund by imposing a Special Levy on the Owners in the Section with less money or to return money to the Owners in the Section with a greater Contingency Reserve Fund?

STRATAS AND OWNERS SHOULD CONSIDER WHETHER SECTIONS ARE A VALUABLE OPTION FOR CREATING A ROBUST AND RESILIENT STRATA COMMUNITY

Sections are a practical tool for managing mixed-use and other complex Stratas. They allow responsibility for repair, maintenance, and decision-making to follow actual use within the Strata.

Sections allow costs to be allocated more fairly. Owners pay for the repair and maintenance of property that benefits them, rather than subsidizing parts of the development that they do not use.

They also allow decisions to be made by the owners who are most affected. This can make governance more efficient and reduce conflict between different groups of owners.