What s the right time for a strata to consider liquidation?

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1 What s the right time for a strata to consider liquidation? Tony Gioventu, Executive Director CHOA tony@choa.bc.ca

2 Assess the Condition vs Use Life cycle costs on buildings are the principle consideration for liquidation, but best use and actualized property asset value may be the higher driving force for consideration.

3 Compare the benefits Life cycle Building Age 40 years Lowest density use Projected cost of renewals and operations Cost/sq ft larger units Aging community Assessing real strata fees The overall cost of staying Actual property value Impact of building Age Higher density use Elimination of projected renewals and operations Higher value/sq ft Renewing the community and increasing density New structures stable management of fees

4 Options for Liquidation OD Buys every Strata lot - Without liquidator Clean sale No unanimous or 80% vote required Liquidator not required No delays in strata decision making process OD controls all schedules including zoning Easier land assembly Cleaner process for sellers Strata Corporation Sells Wind up with Liquidator Dependent entirely on the voting success of the strata Liquidator must be appointment Time 1-3 years depending on conditions of the sale Sequencing of decisions is essential Strata community management critical

5 The strata process Communications Understanding the dynamics of the strata community Development a relationship as a working business partnership Clear understanding of the strata procedures Ensuring the strata has independent representation Process Information meetings & support for owners as they consider sale Managing the relocation and housing needs of residents Coordinating the liquidation sequence Coordinating the time periods for move out and transitions after liquidation completion

6 Step by Step 1. The strata is approached by a commercial agent or buyer M 1 2. Council raise the issue with owners, info meeting to determine if they are interested in considering offers. Info meeting. M Convene a general meeting to authorize council to consider offers. Approve funding for legal representation to review terms and conditions of an offer, listing agreements and subsequent meetings. Title reviews conducted. M 4-5

7 Step by Step 4. Negotiation or listing agreement is completed and an offer(s) stipulating terms, conditions and subjects is presented to the owners at a general meeting. The owners determine their interest in considering the liquidation and instruct council to discontinue/continue negotiations to bring the proposal to a vote ( 100/80%) for consideration. M 4-8

8 Step by Step 5. Lawyer reviews the terms and conditions of the offer(s), which may be countered or negotiated. Council approve development of the notice package. M Lawyer develops the notice package for General meeting to develop the resolutions of liquidation including terms and conditions of the agreement, appointment of the liquidator, authorization for court applications ( application for the vesting order or confirmation of the 80%+ vote ), and funding for lawyer, liquidator, liquidator s legal representation, fees and commissions. M 8-12

9 Step by Step Resolve the distribution of funds issue: Section 278: Based on assessed value unless the strata was developed under the Condominium Act and Interest on Destruction was established. Regulation permits cancelling IOD and reverting to assessment. Unanimous vote! Other options: Unanimous vote

10 Step by Step 7. The resolution is approved, court applications are commenced, and the liquidation process begins subject to any conditions within the time sequencing of the appointment of the liquidator and vesting order. M The liquidation process is complete, funding is transferred, vesting order is filed, and owners are given a 90 day window for purchase/moving. M 12-16

11 Step by Step What happens if the resolution is defeated? Why vote if there is no support? A critical step that is over looked is the person to person meeting with each owner. Best coordinated by the strata council or their appointed representative to ensure the support is confirmed prior to the meeting and that any person who cannot attend has provided a proxy and written consent for the resolutions. An absent or abstained vote will not be counted in favour.

12 What we have learned Communications: Any speculation or misinformation derails the process instantly. Information must be managed closely. Value: sellers are well informed and keen to negotiate and waiting for 80%. Process: Information meetings are essential. Owners perspective become defensive if building condition is argued as a value loss. Culture: For success, owners require assistance in the change of lifestyle and relocation Cost: Legal, liquidator and commissions approach 5% of the negotiated price.

13 Thank you Condominium Home Owners Association Richmond St Cook St Spall Rd. New Westminster, B.C. Victoria, B.C. Kelowna, B.C. V3L 5P5 V8V 4A1 V1Y 4R