What's New With Strata Wind-Ups?

• Published date: 11 June 2021
• Subject Matter: Real Estate and Construction, Construction & Planning, Real Estate
• Law Firm: Gowling WLG
• Author: Ms Paulina Kam and Jimmy Burg

A strata wind-up is an excellent way to realize the economic potential of a multi-unit residential property (the "strata") by leveraging the value of each unit in the strata as a whole to a developer that may want to re-develop on the strata's property. This article summarizes the onset and development of this emerging sector in light of recent case law and current events.

Introduction to strata wind-ups

A strata wind-up is a process that allows the owners of the strata corporation to sell a stratified property in its entirety for re-development. Historically, strata wind-ups were not common because unanimous approval of the strata owners was required. In 2016, a change in legislation lowered the approval threshold to 80% of the strata owners, making it easier to wind up and sell stratified properties in British Columbia, and causing an increase in redevelopments of previously stratified property in the Greater Vancouver area.

Years later, and despite the COVID-19 pandemic and its associated economic effects, strata wind-ups are still thriving in today's market.

When to consider a strata wind-up

The strata wind-up and sale can be an attractive option for developers and owners alike. Strata wind-ups can be particularly appealing for aging, low-rise buildings located in a desirable location with the potential to develop more density on the land, especially in instances where the impending maintenance costs of an aging building are significant. This usually results in the value of the land being higher than the sum of the value of the individual strata units.

However, the sequence of steps from start to finish is complex and requires court supervision, and if the process is not strictly compliant with legislation, the court may decline to approve it.

Steps in a strata wind-up

The process typically begins with the owners canvassing interest among each other to sell the strata complex. Real estate brokers, developers, or the unit owners themselves may initiate the process by approaching the strata council in question.

If a critical threshold of owners wish to pursue a wind-up, they will authorize the strata council to retain appraisers, real estate agents, and legal counsel. These advisors will assist with the initial stages of the strata wind-up by, among other necessary steps, determining the value of the strata property, soliciting a bid from a developer, and negotiating a purchase contract with a developer.

The remaining steps in the wind-up process must...