Executive Summary: Key Legal and Evidentiary Issues

• The Strata sought court approval under s. 173(2) of the Strata Property Act for a $3,400,000 special levy after failing to achieve the required ¾ vote at owner meetings.

• Engineering reports confirmed the parking garage's roof membrane and floor slab had exceeded their service life, with water ingress causing structural deterioration and safety hazards.

• Dissenting Owners argued the proposed work was excessive, included unnecessary betterments, and that Council members with ground floor units had conflicts of interest.

• The court applied the Thurlow test, finding that s. 173(2) does not require repairs to be immediately necessary or the minimum required—only that the proposed work be a reasonable way to address demonstrated risks.

• Allegations of conflict of interest were rejected, as improvements to ground floor patios were incidental to necessary membrane replacement work.

• Financial hardship on owners, while acknowledged, was held to be only one factor and could not dictate the result given the necessity of repairs to prevent significant loss or damage.

Background of the dispute

The Beach House is a three-story residential building with 39 strata units located on York Avenue in Vancouver, constructed in 1974. Beneath the building sits a single-level parking garage with about 66 parking stalls. The garage's asphalt waterproofing membrane protecting the concrete roof slab had exceeded its estimated 30 to 35 year service life and failed, allowing water to leak into the garage. Moisture was also seeping up through the floor slab, particularly in the southwest corner.

History of engineering assessments

In 2015, a depreciation report observed signs of water ingress into the garage ceiling and possible groundwater seepage into the southwest corner, recommending that the Strata replace the roof slab membrane within the next five years. In 2016, a building envelope condition assessment report found signs of water ingress in several locations within the garage ceiling and some ground floor units. In 2019, a plumber inspected the patio drainage and rainwater leaders and found water and blocked patio drainpipes causing damage to the garage floor asphalt surface. Repairs were made to the drainage system, including new sump pumps, but water continued to seep into the garage. In April of 2022, the Strata retained WSP Canada Inc. to review and evaluate the condition of the parking garage. WSP's key findings included: the roof membrane had failed, resulting in water leaking into the parkade and deterioration of the concrete structure; the garage floor asphalt slab-on-grade was in poor condition and posed a tripping hazard; the storm water drain system was not managing storm water adequately; the insulation on the ceiling was loose and falling off in some sections; the ventilation was inadequate and not in compliance with the BC Building Code and posed a health risk; and the lighting was poor with no emergency lighting and posed a safety risk.

Proposed work and voting outcomes

WSP presented three management strategies: a "monitor and defer" approach; "Strategy 1" to replace the roof membrane on the south elevation at an estimated cost of $1,403,000; and "Strategy 2" to replace the full roof membrane at an estimated cost of $1,980,000. The Strata also retained Horizon Engineering to conduct a geotechnical review, which recommended removing the asphalt, replacing the sand with drain rocks, constructing a new concrete floor slab, and installing a new gravity draining system. WSP subsequently endorsed Horizon's recommendations. Council decided to replace the full roof membrane, replace the asphalt-on-grade with a new concrete floor slab, install a new gravity drainage system, upgrade components of the garage, and improve aspects of the common property affected by the construction. Three bids were obtained, and Council chose a bid by Skymark Projects Ltd., which was recommended by WSP and was the lowest bid. WSP provided a total recommended budget of $3,392,411.

At an annual general meeting on June 11, 2024, two resolutions to raise $3,400,000 were proposed but both received less than the ¾ vote required. On September 26, 2024, at a special general meeting, two further resolutions were moved. Twenty-four owners voted in favour of the $3,400,000 special levy (representing 65 percent of the vote) and 13 voted against. Twenty-five owners voted in favour of the $2,497,000 special levy (representing 68 percent of the vote) and 12 voted against. Neither resolution achieved the required ¾ vote.

Arguments raised by Dissenting Owners

A group of eight Strata unit holders opposed the petition on several grounds. They contended the scope of the project was excessive and went beyond what was necessary; more economical alternatives supported by the consulting engineers were not presented to the owners for their consideration; the proposed work included numerous betterments and improvements which would primarily benefit owners of ground floor units; a majority of the members on the council that put forward the proposal were owners of ground floor units, which put them in a conflict of interests; and the special levy would impose a substantial financial burden on the owners.

The court's analysis

Justice Elwood applied the principles from Thurlow & Alberni Project Ltd. v. The Owners, Strata Plan VR 2213, 2022 BCCA 257, which established that s. 173(2) permits the court to authorize special levies to effect repairs that are necessary, but does not require that the repairs be immediately necessary, or that the proposed repair be the minimum necessary to address the problem. If the evidence establishes the existence of a risk, and that one reasonable way to deal with that risk is to do the work proposed by the strata, then the threshold in s. 173(2) is overcome.

On the full membrane replacement, the court found that while replacing only the south elevation might have been an option in 2022, the professional engineer leading the WSP team, David Evans, confirmed that a full membrane replacement was "inevitable and required" and that deferring the full replacement beyond 2027 would "risk damage to the structural integrity of the building." The court found that replacing the membrane in two separate projects within a span of just two or three years was unlikely to save the owners any money, and that separate projects would only increase the combined cost. Regarding the floor slab and drainage system, the engineering evidence established that the full asphalt-on-grade floor slab was past its service life and needed to be replaced. Horizon recommended a gravity draining system over a sump pump system due to improved long-term performance, reduced maintenance costs, and no electricity costs. Skymark confirmed the gravity draining system would only cost about $20,000 more than a new sump pump system.

The court found that Council members who owned ground floor units were not in a conflict of interests that could invalidate the special levy resolution. The patios are and would remain common property, and any improvements to the ground floor patios were minor components of the project and incidental to the necessary repairs. The court also found Council had provided transparency through establishing a committee open to all owners, posting relevant documents on Townsq, holding a Zoom session in August 2023, distributing a survey in May 2024, and holding a townhall-style meeting on August 22, 2024. On financial hardship, the court acknowledged that the average per unit share of the special levy was approximately $87,000, with individual amounts ranging from $65,042 to $103,802, and that the levy would be significant and difficult for some owners. However, financial burden was but one factor in the overall consideration, and no one owner's personal situation could dictate the result.

Ruling and outcome

The court approved the resolution of the Strata on September 26, 2024, to raise $3,400,000 from the owners by way of a special levy payable in four installments, with the proviso that the cost of the proposed EV conduits ($53,912.24) be removed from the special levy imposed. The Strata was entitled to costs of the petition to be paid by the Dissenting Owners following agreement on a bill of costs or assessment by the registrar. Justice Elwood declined to deny the Strata costs, noting that while the Dissenting Owners raised good-faith objections supported by reasonable concerns, the majority should not be asked to bear the full cost of litigation forced on them by a minority of owners, and that the allegations by the Dissenting Owners that Council members breached their obligations to act in the interests of all owners were without merit.