Copyright 2016 by the UBC Real Estate Division

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1 DISCLAIMER: This publication is intended for EDUCATIONAL purposes only. The information contained herein is subject to change with no notice, and while a great deal of care has been taken to provide accurate and current information, UBC, their affiliates, authors, editors and staff (collectively, the "UBC Group") makes no claims, representations, or warranties as to accuracy, completeness, usefulness or adequacy of any of the information contained herein. Under no circumstances shall the UBC Group be liable for any losses or damages whatsoever, whether in contract, tort or otherwise, from the use of, or reliance on, the information contained herein. Further, the general principles and conclusions presented in this text are subject to local, provincial, and federal laws and regulations, court cases, and any revisions of the same. This publication is sold for educational purposes only and is not intended to provide, and does not constitute, legal, accounting, or other professional advice. Professional advice should be consulted regarding every specific circumstance before acting on the information presented in these materials. Copyright: 2016 by the UBC Real Estate Division, Sauder School of Business, The University of British Columbia. Printed in Canada. ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced, transcribed, modified, distributed, republished, or used in any form or by any means graphic, electronic, or mechanical, including photocopying, recording, taping, web distribution, or used in any information storage and retrieval system without the prior written permission of the publisher.

2 LESSON 11 SECTIONS Required Reading 1. UBC Real Estate Division Strata Management Licensing Course Manual. Vancouver: UBC Real Estate Division. Chapter 14: Sections General Objectives Students should be able to describe the creation, cancellation and functions of sections, which constitute separate legal entities from the strata corporation itself and provide a more flexible method of cost allocation. Learning Objectives Upon completion of this lesson, a student should be able to: 1. recognize when sections have been created and the types of strata lots that can form sections; 2. describe the governance requirements imposed on sections by the Strata Property Act; 3. identify the implications of the Real Estate Services Act when managing a strata corporation with sections; and 4. identify the types of conflicts that can arise with sections and the ways in which a licensee s duties can be modified to address these conflicts.

3 11.2 Strata Management Licensing Course Workbook ASSIGNMENT 11 CHAPTER 14: SECTIONS Submitting Your Answers You should submit your answers to the questions in multiple choice assignments on your Course Resources webpage. See "Multiple Choice Assignments: A How To Guide" in the Foreword for more information. Viewing Assignment Answer Guides As soon as your assignment has been received, graded and passed, you can download the answer guide. See your Student Handbook or visit your Course Resources webpage ("Assignment History/Answer Guides") for more information on how to download assignment answer guides. Marks: 1 mark per question. 1. Strata Corporation ABC ( ABC ) contains 120 strata lots, 80 of which are apartment-style units located in a single high-rise tower, and 40 of which are townhouse-style units located in multiple separate buildings on the strata property. The townhouse owners do not have access to the high-rise tower. There is a separate amenities building on the property to which all owners have access. The townhouse owners are unhappy about having to contribute to expenses that they feel relate solely to the high-rise tower. Therefore, the townhouse owners would like to amend ABC s bylaws to create two sections: an apartment section and a townhouse section. At the following AGM, which all of ABC s owners attend, resolutions to amend the bylaws to create the two sections were put to a vote. Brenda, the strata manager, accurately counts and records the following results: Apartment Owners Townhouse Owners Total Votes FOR the creation of the sections Votes AGAINST the creation of the sections TOTAL Assuming that ABC did NOT have any existing sections prior to this vote, Brenda would be correct in declaring that: (1) Since less than ¾ of the apartment owners voted in favour of the resolutions, neither of the sections has been created. (2) Since at least ¾ of the total owners voted in favour of the resolutions, the two sections have been created. (3) Since at least ¾ of the townhouse owners and at least ¾ of the total owners voted in favour of the resolutions, but less than ¾ of the apartment owners voted in favour of the resolutions, only the townhouse section has been created. (4) Since at least ½ of the apartment owners, the townhouse owners, and the total owners voted in favour of the resolutions, the two sections have been created. Assignment 11 continues on next page

4 Lesson A strata corporation has just successfully created a townhouse section. Which of the following is TRUE about this newly formed section? (1) The section must pass its own set of bylaws. (2) The section must elect an executive. (3) The strata corporation and section may not use the same strata management company. (4) All of the above 3. Due to a major illness of Gordon, one of Strata Plus Services Inc. s ( Strata Plus ) strata managers, the brokerage was forced to re-assign Gordon s clients to the brokerage s other strata managers. Angela, another strata manager at Strata Plus, was assigned to one of Gordon s strata properties, the Luxor. The Luxor contains 120 strata lots, 80 of which are apartment-style units located in a single high-rise tower, and 40 of which are townhouse-style units located in multiple separate buildings on the strata property. Both the apartment units and the townhouse units are organized into separate sections. Gordon, through Strata Plus, acts for both the strata corporation and the townhouses section of the Luxor. The apartments section is managed by another brokerage. One day, Angela receives a cheque from one of the owners in the townhouses section, payable to the strata corporation in the amount of $345, with September s strata and section fees written on the subject line. For this particular owner, September s strata and section fees should have totalled $445, not $345. How should Angela deal with this cheque? (1) Angela should consult the strata corporation s bylaws, the townhouses section s bylaws and the agreement between the strata corporation and townhouses section, if any, for the appropriate course of action to follow. (2) Pursuant to the formula set out in the Real Estate Services Act, Angela should apportion the $345 between the strata corporation and townhouses section using the same percentage through which the $445 payment would have been apportioned. (3) According to the Real Estate Services Act, because the strata corporation and townhouses section are separate legal entities, Angela cannot accept a single cheque for payment to both entities; therefore, she should return the cheque to the owner. (4) The Real Estate Council Rules specify that any under-payment of a blended payment must not be deposited by the brokerage until both the strata corporation and townhouses section authorize the deposit. 4. Which of the following statements about a section s budget is accurate? (1) A section s budget includes both an operating fund and a contingency reserve fund. (2) A section s budget must be approved by both the owners in the section and the owners of the strata corporation as a whole. (3) A section may not require the owners of the section to pay special levies. (4) A section should have its own budget approved in conjunction with the strata corporation s budget at the strata corporation s annual general meeting, preferably as a separate column in the strata corporation s budget. Assignment 11 continues on next page

5 11.4 Strata Management Licensing Course Workbook 5. Strata Corporation XYZ ( XYZ ) has a bylaw that prohibits having more than one pet in one strata unit, and the townhouse section of XYZ ( the section ) has also adopted an identical bylaw. James, an owner, suspects that his neighbour, Harry, is keeping multiple dogs in Harry s townhouse unit. James investigates and is able to gather multiple photographs of several dogs entering and leaving Harry s unit over a period of one month. James forwards the evidence to the executive of the townhouse section, which, after a properly held hearing, issues a $100 fine, as stated in the bylaw. Over the course of the next year, Harry continues to refuse to abide by the bylaw, and as permitted in the bylaw, numerous fines relating to his dogs are issued. Harry refuses to pay the fines, and is trying to sell his townhouse unit and move to a new residence that is more pet-friendly. Which of the following accurately describes what the section may do next? (1) The section may file a lien against Harry s strata lot in the appropriate land title office. (2) The section may withhold issuing a Certificate of Payment (Form F) to prevent the sale of Harry s strata lot. (3) The section may sue Harry in court for the amount owing. (4) The section may not do any of the above. 6. Ann, who works for Happy Homes Strata Brokerage Ltd. ( Happy Homes ), is the strata manger for Strata Corporation EFG ( EFG ). EFG has recently created a commercial section and a residential section. The executives of both of these sections ask Ann if she can also provide strata services to both of the sections. Ann correctly responds to the executives that: (1) since she is already providing strata management services to EFG, she is restricted to only providing management services to one of the two sections. (2) because of the conflict of interest, she is not permitted to act for more than one legal entity within a single strata development. (3) because the sections are part of the strata corporation that Happy Homes already acts for, acting for the sections falls within the scope of the management agreement between Happy Homes and EFG. (4) she may provide strata management services to EFG and both sections; however, because of the conflict of interest, Ann must either provide limited representation to all three entities or provide full representation to one of the entities and limited representation to the other two entities. 7. Kellogg Towers ( Kellogg ) is a strata development in West Vancouver, BC. The multi-building complex includes both residential and non-residential units, and Kellogg has both a residential and a nonresidential section. Neither of the sections has passed its own bylaws. Recently, some members of the residential section became dissatisfied over how vehicles belonging to the owners of the non-residential units are parking in the parking spots reserved for residential owners. Several residential owners want to pass a resolution to amend the strata corporation s bylaws to increase the parking violation fine from $50 to $200. What is required for this resolution to be passed? (1) A majority vote (i.e., greater than 50%) from both the residential and non-residential sections is required. (2) Only a ¾ vote of the residential section is required. (3) A ¾ vote from each of the residential and non-residential sections is required. (4) Only a ¾ vote of the non-residential section is required. Assignment 11 continues on next page

6 Lesson Violet is the strata manager for both the strata corporation and the commercial section at Hazel Estates, a single-building complex with 2 commercial units on the ground floor and 30 residential apartment units in the remaining five storeys. The service agreements specify that, should a conflict of interest arise, Violet will designate the strata corporation as the primary client and the commercial section as the secondary client. Recently, the strata corporation is considering passing a noise bylaw prohibiting continuous noise louder than 45 decibels and lasting longer than three minutes between 10 p.m. and 7 a.m. One of the commercial units is occupied by a coffee shop that is open until 11 p.m. The commercial units tell Violet that they plan to oppose the bylaw and ask her for advice in stopping the bylaw from being passed. Meanwhile, the chairperson of the strata corporation tells Violet that 20 apartment unit owners have already expressed their support, and that several out-of-town owners are already prepared to give him full proxy rights to vote in favour of the bylaw. He asks her to prepare for a special general meeting to vote on the bylaw as soon as possible. In this situation, Violet: (1) must continue to prepare for the special general meeting to vote on the bylaw, as instructed by the chairperson of the strata corporation. (2) must tell the commercial section about the proxy arrangements and how a substantial amount of apartment units may already be prepared to vote in support of the bylaw. (3) must advise the commercial section on the best strategies to adopt in order to stop the bylaw from being passed. (4) must refuse the requests for services from both the strata corporation and the commercial section until the bylaw has been put to a vote. 9. Liston Hall is a mixed-use strata building with both residential and non-residential units. There is a residential section and a commercial section, which were created by the owner developer at the time of development. In light of the administrative costs associated with maintaining the sections, the strata corporation is reconsidering the usefulness of the sections. In particular, because all of the units are situated in a single building, there are very few, if any, expenses that are purely attributable to only one of the sections. A resolution to cancel the commercial section is put to a vote at an annual general meeting of the strata corporation. To cancel the commercial section, which of the following would be required? (1) A majority vote of the eligible voters of the strata corporation, and a ¾ vote of the eligible voters in the commercial section only. (2) A ¾ vote of the eligible voters in the commercial section, and a ¾ vote of the eligible voters in the residential section. (3) A ¾ vote of the eligible voters of the strata corporation, and a ¾ vote of the eligible voters in the commercial section only. (4) Since the sections were created by the owner developer, only the owner developer can cancel them at the appropriate land title office. 10. The Hermitage and The Icon are two separate high-rise strata buildings in Vancouver. Both buildings contain residential and non-residential strata units. The Hermitage has created a non-residential section. On the other hand, The Icon does not have sections, but rather, has designated a non-residential type in its bylaws. Which of the following statements about the allocation of costs for types and sections is TRUE? (1) Contingency reserve type expenses can be allocated to the non-residential units in both The Hermitage and The Icon. (2) Contingency reserve type expenses can only be allocated to the non-residential units in The Icon. (3) Contingency reserve type expenses can only be allocated to the non-residential units in The Hermitage. (4) Contingency reserve type expenses cannot be allocated to the non-residential units in either The Hermitage or The Icon. End of Assignment 11