Commercial and Mixed-Use Strata Management in BC: What's Different

A twelve-storey building with a grocery store at grade, two floors of offices and nine floors of apartments is one strata corporation on paper and three completely different buildings in practice. The grocery store runs refrigeration around the clock and takes deliveries at 5 a.m. The offices are empty at weekends. The residents want quiet, and none of them wants to pay for the loading bay.

Managing that well is a different discipline from managing a residential tower, and it is worth understanding what actually differs before you choose a manager — or before you accept an allocation of costs you should be questioning.

This article is general information about the Strata Property Act and common practice in BC mixed-use buildings, not legal, tax or accounting advice. Cost allocation, sections and tax treatment in mixed-use stratas are technical. Confirm your building's position with a strata lawyer and your accountant.

What "commercial" and "mixed-use" mean here

• A commercial strata is a strata corporation whose lots are non-residential: retail, office, industrial, warehouse or a mix of them.
• A mixed-use strata contains both residential and non-residential strata lots in the same corporation — the pattern behind most transit-oriented development in Metro Vancouver.

The strata corporation is the same legal creature either way. What changes is that the owners have genuinely divergent interests, and the Strata Property Act gives you tools for that.

Sections: the structural answer

Part 11 of the Act allows a strata corporation to be divided into sections. Sections may be created to distinguish between:

• owners of residential and non-residential strata lots
• owners of non-residential lots with different uses
• owners of different types of residential strata lots, as prescribed

A section is a substantial thing, not a committee. Within its own sphere it functions like a strata corporation: it can pass its own budget, collect its own fees, hold its own funds, enter contracts, sue, and make and enforce its own bylaws for matters that relate solely to the section. It elects an executive with powers equivalent to a strata council. What a section cannot do is act in the name of the strata corporation itself.

How sections come to exist. The owner developer can create them when depositing the strata plan. After that, creating or cancelling a section requires a 3/4 vote of the strata corporation and a 3/4 vote of the section concerned — a high bar, deliberately.

What sections cost. Two budgets instead of one, two sets of meetings, two sets of minutes, two ledgers, and a standing question about which expenses are shared and which are sectional. That is real overhead, and it is why not every mixed-use building has them. Our guide to sectioned stratas in BC covers the mechanics and the trade-off in more depth.

Even without sections, allocation is the whole game

This is where mixed-use disputes actually live.

Every expense in a mixed-use building falls into one of three buckets, and getting a building's expenses sorted properly is the single highest-value thing a manager does there:

• Strata-wide common expenses — the roof, the structure, the envelope, the strata's insurance, the general liability, the audit. Allocated by unit entitlement.
• Limited common property expenses — where a facility serves only certain lots and is designated LCP, the regulation permits contributions to be calculated across only the benefiting lots. See common property versus limited common property.
• Type or section expenses — where the bylaws identify types of strata lots, or where sections exist, the regulation permits contributions to be calculated across only the lots of that type or section.

Real examples that should never be shared equally:

• The residential lobby, corridors, elevators and amenity rooms are not used by the retail units
• Commercial garbage and recycling, grease interceptor servicing and kitchen exhaust cleaning are not residential costs
• Residential parkade gates and fobs may serve only residents
• Retail HVAC typically runs on separate equipment and separate hours
• Signage, awnings and storefront maintenance belong to the commercial owners
• Loading bay maintenance follows the use

When a mixed-use building has never done this work, the residential owners are usually subsidising commercial operating costs, or the reverse, and nobody has ever produced the arithmetic. Producing it is often the first thing a competent manager does.

Unit entitlement works differently

For residential strata lots, unit entitlement is generally derived from habitable area. For non-residential lots, the Act and regulation permit a different basis — which is why a large retail podium can carry a unit entitlement that looks surprising against its floor area.

Because unit entitlement drives both fees and, on some votes, influence, this is worth understanding before you argue about either. Our explainer on unit entitlement in BC covers the residential side; for a non-residential lot, read the Schedule of Unit Entitlement on the registered strata plan and ask on what basis it was calculated.

Insurance is where mixed-use gets expensive

A strata corporation insures the building as a whole, and the whole building's risk profile is set by its riskiest occupancy.

A commercial kitchen, a dry cleaner, an automotive use, a cannabis retailer, a fitness studio with a pool — each can affect the premium, the deductible, the available limits and sometimes whether the building is insurable at the price the residential owners expected. Residential owners in mixed-use buildings often discover this only when the renewal arrives.

What good management looks like here:

• The broker knows every commercial occupancy in the building and has been told when one changes
• The bylaws require commercial owners and their tenants to carry appropriate liability coverage and to name the strata corporation where appropriate
• Higher-hazard uses come with specific bylaw obligations — hood cleaning intervals, interceptor servicing, fire suppression servicing — with proof filed annually
• The strata understands whether and how a premium differential can be allocated, and has taken advice on it rather than assuming

Our articles on why strata insurance is so expensive in BC and strata insurance deductibles apply here with extra force.

Operating differences that show up weekly

• Hours. Deliveries, waste collection and cleaning that are normal for a retailer are a nuisance complaint upstairs. Bylaws need to set hours that a commercial business can actually operate within, or you have written a bylaw that guarantees conflict.
• Fire separations. Occupancy separations between commercial and residential are life-safety elements. Penetrations made during a tenant fit-out are one of the most common serious deficiencies found in mixed-use buildings.
• Backflow prevention, grease interceptors and kitchen exhaust. Testing and servicing on regulated intervals, with records.
• Tenant fit-outs. Retail tenancies change; each fit-out is an alteration to a strata lot and often to common property, and each one needs to go through the approval process. See strata alteration requests.
• Security and access. Separate entrances, separate fob groups, separate hours.
• Elevators. Freight use, protection pads, and the reality that residential and commercial peak demands collide.

The tenancy distinction nobody should get wrong

A residential tenant in a strata lot is governed by the Residential Tenancy Act, and the owner must give them a Form K Notice of Tenant's Responsibilities.

A commercial tenant is not. Commercial tenancies in BC are creatures of contract, supported by the Commercial Tenancy Act — different rules, different remedies, no Residential Tenancy Branch. The strata's rental provisions in Part 8 of the Act are directed at residential strata lots.

A manager who applies residential thinking to a commercial tenancy, or who assumes the Residential Tenancy Branch is the forum, will get it wrong in an expensive direction.

Tax and accounting

The tax position of a strata corporation is technical at the best of times — see does a BC strata corporation have to file a tax return — and mixed-use adds layers. GST treatment can differ as between residential and commercial strata lots, and a corporation with commercial revenue or recoveries may have registration and filing obligations a purely residential strata does not.

This is not an area for a council to reason its way through. Get an accountant who has done mixed-use strata work, and have the position documented so it survives council turnover.

Governance: the majority problem

In a building with ninety residential lots and four commercial lots, the residential owners can outvote the commercial owners on almost everything — including matters that only the commercial owners pay for. The reverse arises in buildings where a few large-entitlement commercial lots carry disproportionate weight.

The Act provides a remedy for significantly unfair actions of a strata corporation or council, and mixed-use buildings are where that remedy gets used. The better answer is structural rather than litigious:

• Get the cost allocation right, in writing, so votes are about genuinely shared matters
• Consider sections, if the divergence is permanent and material
• Consider bylaws identifying types of strata lots where full sections are too heavy
• Keep commercial owners represented on council in practice, even where the numbers do not require it
• Circulate budgets that show the allocation, not just the totals — see how a BC strata budget is built

What to ask a manager before you hire them

• How many mixed-use or commercial strata corporations do you currently manage, and how many have sections?
• Can you run separate ledgers and separate budgets per section, and produce section financial statements?
• How do you allocate shared costs, and will you review our current allocation and put your findings in writing?
• Who handles GST and commercial accounting, and have you worked with a strata accountant on a mixed-use file?
• How do you handle commercial tenant fit-out approvals and fire separation compliance?
• What is your after-hours coverage for a commercial occupancy — a restaurant loses stock in hours, not days?
• Do you understand the difference between a commercial and a residential tenancy in BC, and who at your firm handles each?

If a manager answers the sections question by describing a residential building, keep looking. Our broader guide to choosing a strata management company beyond price covers the rest of the diligence.

Frequently asked questions

What is a mixed-use strata in BC? A single strata corporation containing both residential and non-residential strata lots — typically retail or office at grade with residential above. It operates under the same Strata Property Act as a residential strata, but the owners have divergent interests and the Act provides tools such as sections to manage that.

Do mixed-use stratas have to create sections? No. Sections are optional. They can be created by the owner developer at deposit of the strata plan, or afterwards by a 3/4 vote of the strata corporation together with a 3/4 vote of the section concerned. Many mixed-use buildings manage divergence through cost allocation and bylaws identifying types of strata lots instead.

Can commercial and residential owners pay different strata fees? Strata-wide common expenses are allocated by unit entitlement. Where expenses relate to limited common property, to a defined type of strata lot, or to a section, the regulation permits contributions to be calculated across only the lots that benefit. Getting that allocation right is the core financial task in a mixed-use building.

Does the Residential Tenancy Act apply to a commercial tenant in a strata? No. Commercial tenancies are governed by contract and the Commercial Tenancy Act, not the Residential Tenancy Act, and the Residential Tenancy Branch is not the forum. The Form K notice requirement applies to residential strata lots.

Does a commercial occupancy affect the whole building's insurance? It can, significantly. A strata corporation insures the building as a whole, so a higher-hazard commercial use can affect premiums, deductibles and available coverage for every owner. Tell your broker about every occupancy and about every change of use.

Related reading

• Sectioned Stratas in BC: How Sections Work and What They Cost
• Common Property vs Limited Common Property in BC Stratas
• Why Is Strata Insurance So Expensive in BC?
• Does a BC Strata Corporation Have to File a Tax Return?
• How to Choose a Strata Management Company in BC (Beyond Price)
• What Does a Strata Manager Actually Do (and Not Do) in BC?

Part 11 of the Strata Property Act sets out how sections work.

Onehive takes commercial and mixed-use work. See what we manage for commercial and industrial properties and mixed-use buildings with sections, or request a proposal.