Selling Common Property or a Strata-Owned Lot in BC

A 1980s building in Coquitlam owns a two-bedroom caretaker suite it has not used for a caretaker since 2004. It sits empty most of the year. The building also needs a $900,000 envelope repair. An owner does the obvious arithmetic and asks why the strata does not simply sell the suite.

It is a fair question with a longer answer than anyone expects. A BC strata can sell common property or a strata lot it owns — but it is an owner decision, not a council one, and the money does not automatically go where people assume.

This article is general information about the Strata Property Act and is not legal or tax advice. Disposing of land is a conveyancing transaction with title, vote and tax consequences. Engage a strata lawyer before you market anything.

Three different transactions people call "selling"

Getting the category right determines the vote, the paperwork and the tax treatment.

Selling a strata lot the corporation owns. A caretaker suite, a guest suite, a spare parking lot registered as its own strata lot. The corporation is the registered owner and is selling real property like any other vendor.

Disposing of common property. Selling off a strip of land, a portion of the parkade, or converting part of the common property into a new strata lot to sell. This changes the strata plan and is materially more complex.

Granting a right rather than transferring ownership. Leasing rooftop space to a carrier, granting an easement or statutory right of way, licensing a wall for signage. No sale occurs, but an interest in common property is still being disposed of, and the approval requirements still bite. See easements and statutory rights of way on BC strata land and telecom and fibre right-of-entry agreements.

This is an owners' decision

The single most important point. Council cannot decide to sell. Disposal of land forming part of the common property, and disposal of a strata lot owned by the corporation, require approval by resolution at a general meeting — in the ordinary case by a 3/4 vote, and in some circumstances by a higher threshold or with additional consents.

A council that negotiates a price, signs a contract of purchase and sale and then goes to owners for ratification has done it backwards and may have created a personal problem for the signatories. The order is: council investigates, owners authorise, council executes within the authority given.

Draft the resolution carefully with legal help. It should identify the property precisely, state the minimum acceptable terms, and authorise named signatories to complete on those terms. A resolution that simply says "authorise the sale of the caretaker suite" leaves the council exposed on every term that follows.

What the process actually looks like

Get advice first. A strata lawyer, before anything else. The structure of the transaction determines almost everything downstream.

Establish what you actually own. Order a title search on the common property and on any strata lot the corporation holds. Confirm the registered charges — a statutory right of way across the land you are selling changes the deal, and so does a covenant restricting use.

Check the strata plan. Where the disposal changes the boundaries of common property, you are into surveyor territory: a plan amendment, possibly approval from the municipal approving officer, and a Land Title Office filing. Where you are selling an existing strata lot intact, this is much simpler. How to read a BC strata plan is a useful starting point for the conversation.

Value it properly. An independent appraisal, not a council member's estimate. Owners are being asked to give up an asset and will reasonably want evidence of what it was worth. It also protects council from the accusation later that the building sold too cheaply.

Consider unit entitlement and fee consequences. Selling a strata lot the corporation owns adds a fee-paying owner and changes the arithmetic of everyone's contribution — often favourably, which is worth explaining. Removing common property may affect maintenance obligations and insurance.

Take it to a general meeting with the appraisal, the legal advice, the proposed resolution and a clear statement of what happens to the proceeds.

Complete, and account for it. The transaction is the corporation's, the funds are the corporation's, and the accounting should be visible in the financial statements.

Where the money goes

This is the part owners argue about, and the part councils most often get wrong by assuming.

The proceeds belong to the strata corporation, not to owners individually. What happens to them is a decision made by the owners, by resolution, and the realistic options are:

• Into the contingency reserve fund, which is usually the right answer where the building has known upcoming work
• Applied against a specific project, reducing or removing a planned special levy — the most persuasive proposition at a general meeting, because owners can see the benefit directly
• Distributed to owners, generally in proportion to unit entitlement

Distribution is the one to be careful with. It requires proper authorisation, and it carries tax consequences for both the corporation and the recipients that are not intuitive. A building that distributes a windfall and then levies for the roof eighteen months later will have a difficult AGM.

Whichever route, model it against the depreciation report before recommending anything. If the report shows a shortfall, spending a one-time windfall on anything other than the shortfall is a decision that needs a very good explanation — see your depreciation report says you're underfunded, now what and strata loan, special levy, or higher fees.

The tax questions to put to an accountant

Do not guess at any of these, and do not rely on what another building did.

Is there a taxable gain to the corporation? A property held for years and sold at a profit raises a real question about the character and treatment of that gain.

Does GST apply? The sale of a residential unit and the sale of a commercially-used unit are treated very differently, and a strata that has been renting a suite out has a history the CRA may look at. GST and strata fees in BC covers the surrounding registration question.

What happens on distribution? Amounts distributed to owners are not automatically tax-free in their hands, and the analysis differs depending on how the proceeds are characterised.

Does this affect the corporation's filing position? Does a BC strata corporation have to file a tax return sets out the general position, which a significant disposition can change.

Get it in writing, before the general meeting rather than after, so owners are voting on the net figure rather than the gross one.

When selling is the wrong answer

Councils reach for a sale because it is the only lever that does not involve asking owners for money. Test it honestly first.

Could the asset earn instead? A rentable guest suite, leased parking or a licensed rooftop can produce recurring revenue without a one-time disposal. Note the GST implications above.

Is it actually surplus? A caretaker suite that has no caretaker today may be exactly what a building needs in ten years, and buying one back is not an option.

Does it solve the underlying problem? A disposal that funds one project while contributions stay too low leaves the building in the same position in five years with one fewer asset. The uncomfortable version of this is that the sale is often a symptom of chronic underfunding rather than a solution to it.

Is the process worth it? Legal, survey, appraisal and conveyancing costs on a common property subdivision are substantial, and on a small parcel the net can disappoint.

Where the honest answer is that the building simply needs more money in the reserve, how much should a BC strata's contingency fund be is the more useful conversation.

One further caution. A disposal takes months and consumes a great deal of council's attention, and buildings frequently let ordinary maintenance drift while it runs. Decide up front who is carrying the sale and who is carrying everything else, or you will complete the transaction and discover the year's other work never happened.

Frequently asked questions

Can a BC strata sell common property? Yes, but not by council decision. Disposing of land forming part of the common property requires approval by resolution at a general meeting, ordinarily by a 3/4 vote and in some circumstances a higher threshold, and may require a surveyor, an amended strata plan and municipal approval.

Who decides whether a strata sells its caretaker or guest suite? The owners, at a general meeting, by resolution. Council can investigate, obtain an appraisal and legal advice, and recommend, but it cannot commit the corporation to a sale before owners have authorised it.

What happens to the money when a strata sells property? The proceeds belong to the strata corporation. Owners decide by resolution whether they go into the contingency reserve fund, are applied against a specific project, or are distributed. Distribution carries tax consequences for the corporation and the recipients.

Does a strata pay tax on selling common property in BC? Possibly, and the treatment depends on the facts. There may be a taxable gain to the corporation, GST may apply depending on the use of the property, and distributions to owners are not automatically tax-free. Get written accounting advice before the vote.

Can a strata lease rooftop space instead of selling it? Yes, and it is often the better option because it produces recurring revenue. It is still a disposition of an interest in common property requiring owner approval, and the revenue is a taxable supply for GST purposes.

Related reading

• Easements and Statutory Rights of Way on BC Strata Land
• GST and Strata Fees: When a BC Strata or Section Has to Register
• How to Wind Up (Dissolve) a Strata Corporation in BC
• Strata Loan, Special Levy, or Higher Fees? How BC Stratas Fund Big Projects
• Does a BC Strata Corporation Have to File a Tax Return?

The disposition provisions sit in Part 6 of the Strata Property Act, and title searches and plan amendments run through BC Land Title and Survey.

A disposal is the rarest transaction a council will ever run, which is exactly why it should not be run alone. Onehive provides strata management across Metro Vancouver — request a proposal.