Conflict of Interest on a BC Strata Council: What Sections 32 and 33 Require

A council member's brother-in-law does landscaping. He is good, he is local, and he is cheaper than the incumbent. The council votes to award him the contract, the council member says nothing because "everyone knows," and eighteen months later the strata is answering questions it cannot answer well.

Nothing in the Strata Property Act prevents a strata from hiring a council member's relative. What the Act does is prescribe exactly how the decision must be made — and the cost of skipping those steps is borne by the whole building.

This article is general information about the Strata Property Act, not legal advice. Conflict-of-interest questions are fact-specific and the consequences are personal to council members. If you are close to the line, get advice from a strata lawyer before the vote, not after.

The baseline duty

Before conflicts, there is the standard. Under section 31, each council member, when exercising the powers and performing the duties of the strata corporation, must:

• act honestly and in good faith with a view to the best interests of the strata corporation, and
• exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances

That is the frame the conflict rules sit inside. A conflict of interest is simply the most common way that duty gets compromised.

Section 32: the four things you must do

Section 32 applies where a council member has a direct or indirect interest in a contract or transaction with the strata corporation, or in a matter that is or is to be the subject of consideration by the council, and that interest could materially conflict with the member's duty or interest as a council member.

When it applies, the council member must do all four of the following:

1. 1.Disclose fully and promptly to the council the nature and extent of the interest
2. 2.Abstain from voting on the contract, transaction or matter
3. 3.Leave the council meeting while it is discussed and while the vote is taken
4. 4.Not attempt in any way to influence the voting

Most councils do the first two and skip the last two. That is a failure to comply, not a technicality. The fourth item is the one that catches the member who steps out of the room and then works the phones beforehand.

"Indirect" is doing a lot of work

The interest does not have to be the member's own. Interests held through a spouse, a child, a parent, a business partner, an employer, a company the member has shares in, or a person the member owes money to are all capable of being indirect interests. The question is not whether the member personally profits; it is whether there is an interest that could materially conflict with their duty to the corporation.

What is not a conflict

Council members are owners, and owners benefit from the strata's decisions. That shared benefit is not a conflict:

• Voting on the budget, which raises the member's own fees along with everyone else's
• Voting on a roof replacement that improves the member's own unit along with the rest
• Voting on a bylaw that applies to all owners equally

The conflict arises where the member's position differs materially from that of owners generally — because they, or someone connected to them, stand to gain or lose in a way the others do not.

Where it actually shows up

• A contractor connection. The member's company, family member's company, or employer bids on strata work.
• The member's own enforcement file. A council member cannot sit on the decision about a complaint against their own unit, their tenant, or their family's unit.
• The member's own alteration or arrears. Same principle. Approving your own balcony enclosure is not a grey area.
• Realtors, brokers and insurance producers on council. A member who could earn commission from a strata decision — placing the insurance, listing units, referring a restoration contractor — is squarely in section 32 territory.
• Developer ties on a new strata's first council. Common, rarely disclosed, and the reason the 2-5-10 warranty sometimes goes unclaimed.
• Multiple-unit owners voting on matters that affect their units disproportionately — for example a levy allocation that differs by unit type.
• Payment for services. A member who is paid by the strata for anything beyond permitted remuneration has an interest in the arrangement continuing. On the general question of paying council members, see should strata council members be paid.

Section 33: what happens if the rules are ignored

Section 33 is the enforcement side, and it is personal.

Where a council member fails to comply with section 32, the strata corporation or an owner may apply to court. The court may, among other things:

• require the member to compensate the strata corporation for any loss suffered
• require the member to account for and pay over any profit made
• deal with the contract itself, including setting it aside where it is unfair to the strata corporation

The Act also provides a cure: a contract or transaction can be ratified by a 3/4 vote at a general meeting. That is the right route where the strata genuinely wants the arrangement and wants it beyond argument — full disclosure to owners, the facts on the page, and a recorded vote.

Note what this means in practice. Ratification is not a formality you slip into an AGM agenda under "other business." It is a resolution that has to survive owners reading it.

How to run a council meeting that does this properly

Make it routine and it stops being awkward.

1. 1.Put "declarations of interest" as a standing item at the top of every council agenda. When it is asked every month, disclosing is normal behaviour rather than an accusation.
2. 2.Minute it precisely. Record that the member disclosed the nature and extent of the interest, that they abstained, and that they left the room — with the time they left and returned. Our guide to what belongs in council minutes covers the surrounding practice.
3. 3.Take the decision without them. The remaining members deliberate and vote.
4. 4.Watch your quorum. If departures leave the council without enough members to act, you cannot simply carry on. Adjourn and deal with it at a general meeting.
5. 5.Get more than one quote whenever a connected party is bidding. A competitive process is the single best evidence that the decision was made in the corporation's interest.
6. 6.Escalate anything significant to owners. A 3/4 vote ratification costs one agenda item and removes the issue permanently.

The connected question: your strata manager

Council members are not the only people at the table with potential interests.

Strata managers in BC are licensed and regulated by the BC Financial Services Authority, and licensees carry their own disclosure obligations — including around remuneration expected or received from anyone other than their client. If a manager, or a firm connected to the manager, receives a commission, referral fee or other benefit in connection with your building's insurance, restoration work or contractors, you are entitled to know about it.

Ask the question directly and ask for the answer in writing. A straightforward manager will not blink. Our guide to measuring the value of your strata management company covers the wider set of questions worth asking annually.

What owners can do

If you believe a council member has a conflict they have not disclosed:

• Ask, in writing, at a council meeting or through a records request. The minutes, contracts and correspondence are all records you can request under section 36 — see requesting strata records in BC.
• Request a council hearing under the Act to put the concern formally.
• Raise it at a general meeting, where a contract can be ratified — or conspicuously not ratified.
• Consider removal. Owners can remove a council member at a general meeting; the process is set out in how to remove a strata council member in BC.
• Take it to the Civil Resolution Tribunal, which handles most strata disputes, or to court for the remedies in section 33.

A word of caution in the other direction. "Conflict of interest" has become a general-purpose accusation in strata politics, and volunteers who are doing a thankless job well are frequently accused of it for making unpopular decisions. Disagreement is not a conflict. If you cannot articulate the specific interest and how it materially conflicts with the member's duty, you probably have a governance complaint rather than a section 32 one — and our guide to dealing with a difficult council is the better starting point.

Frequently asked questions

Can a strata council member's company do work for the strata in BC? Yes, provided the Act is followed. The member must fully and promptly disclose the nature and extent of the interest, abstain from voting, leave the meeting during discussion and the vote, and not attempt to influence the outcome. Getting competitive quotes and ratifying the contract by a 3/4 vote at a general meeting puts it beyond argument.

What must a council member do when they have a conflict of interest? Four things, all of them: disclose fully and promptly, abstain from voting, leave the meeting while the matter is discussed and voted on, and make no attempt to influence the vote. Doing two of the four is not compliance.

Is it a conflict if a council decision affects a council member's own unit? Not if it affects their unit the same way it affects everyone else's — a budget or a roof replacement, for example. It is a conflict where their position differs materially from owners generally, such as an enforcement action against their unit or approval of their own alteration.

What happens if a council member does not disclose a conflict? The strata corporation or an owner can apply to court. The court can order the member to compensate the strata for losses or to account for and pay over profits, and can deal with the contract itself. The contract can alternatively be ratified by a 3/4 vote at a general meeting.

Does our strata manager have to disclose commissions? Strata managers in BC are licensed by the BC Financial Services Authority and carry disclosure obligations around remuneration from parties other than their client. Ask directly, and ask for the answer in writing.

Related reading

• Strata Council Roles & Responsibilities in BC
• Strata Council Code of Conduct in BC
• How to Remove a Strata Council Member in BC
• What Must Be Included in Strata Council Meeting Minutes in BC
• Dealing With a Difficult or Bullying Strata Council in BC
• How to Measure the Value of Your Strata Management Company

Sections 31 to 33 sit in Part 4 of the Strata Property Act and are short enough to read at a council meeting.

A neutral professional in the room makes conflicts easier to name and easier to handle. Onehive provides strata management to communities across Metro Vancouver — request a proposal.