The terms strata governance and strata management are not defined in either the Strata Property Act or the Strata Property Regulation but they are very important concepts.

Reed Pope uses the term strata governance when referring to the strata corporation making decisions.

Reed Pope uses the term strata management when referring to the strata corporation implementing the decisions.

Governance of the Strata Corporation

We have a separate article addressing in more detail the requirement for a strata corporation to have a collective theory of strata governance. This article focuses on management of the strata corporation

What is Strata Management?

The line between strata governance and strata management can be less than perfectly clear. Determining whether something is strata governance or strata management can be made by asking the question: Why does the strata corporation want to do this?

An action is strata management if the answer to that question is:

1. Because the strata corporation is obligated to by the Strata Property Act or the Strata Property Regulation; or
2. Because the strata corporation is obligated to by the bylaws of the strata corporation; or
3. Because the task or expense is approved in the annual budget;
4. Because the strata corporation has been ordered to do it; or
5. Because the owners passed a resolution requiring the strata corporation to do the task.

Responsibility for Strata Management

The Strata Property Act creates a presumption that the strata council is responsible for strata management.

However, the Strata Property Act does permit the owners by a resolution passed by majority vote to direct or restrict the strata council in its performance of its duties by a resolution passed at a general meeting.

Another potential exception to this presumption is when the Supreme Court has appointed an administrator and ordered the administrator to exercise all of the powers and duties of the strata corporation.

Accountability for Strata Management

The strata council is accountable to the owners for strata management. Accountability means that the strata council needs to be able to explain to the owners what was done, the reason it was done and the authority under which it was done. This explanation is usually done through the minutes of the strata council in which resolutions and the votes on those resolutions are recorded.

It is important for council members to recognize that they cannot avoid accountability by delegating to someone else the authority and responsibility of the council members.

In addition to being able to explain to owners strata management actions, council members are also accountable to disclose if they have a direct or indirect interest in a matter that is to be considered by the council. Essentially, a council member that has a potential conflict between that member’s interest in the matter and the member’s duty to the strata corporation, the member must disclose fully that interest, abstain from voting on that matter, and leave the council meeting while the matter is discussed and voted on. Examples of circumstances where this would apply are when the strata corporation is considering entering into a contract with a relative of a member, and when the council is investigating a bylaw complaint received from a council member.

Delegation of Strata Management Responsibilities

Although the strata council is ultimately responsible and accountable for strata management, it can delegate some or all of its powers and duties regarding strata management. This is very common, particularly when a strata corporation has retained a licensed property management company.

The Strata Property Act provides a strata corporation with the power and capacity of a natural person (except when those powers are specifically subject to a limitation under the Strata Property Act).

This means that a strata council can choose to delegate some or all its authority. It is critical for a strata council to recognize that it can only delegate authorities that it has, it cannot delegate an act that it is not authorized to perform. For example, a strata council cannot delegate to someone the authority to pay money to a contractor from the operating fund unless the strata council is authorized to make that payment (see our article: Paying the Bills for a thorough discussion of spending strata corporation money)

The delegation by a strata council of its authority is most commonly done by a written contract with a person licensed to provide strata management services for a fee (a “strata manager”), but the Strata Property Act does not prohibit or restrict who can be delegated council duties or require that it be done by written contract.

When a strata council has delegated an authority, it is important for the strata council and the person receiving the delegated authority to thoroughly understand the extent of that delegation.

An example of why this is important is a hypothetical situation where the strata council delegates to a “landscape committee” the authority to “find a landscaping company” and that committee interviews companies, decides on significant changes to the common property landscape, and binds the strata corporation to a contract for landscaping services.

What Happens if the Person Delegated Authority Acts Improperly

When the strata council delegates to a person some of its authority a principal/agent relationship is created (unless it is explicitly agreed that relationship is not created).

The law regarding principals and agents is well developed and extensive. However, there are some key points that a strata corporation needs to understand.

Liability for the Person with Delegated Authority

A strata council that delegates its authority to a person should assume that it will be liable for the actions taken by the person. This is referred to as vicarious liability.

The strata corporation may be liable for the actions of the person delegated an authority even if the strata corporation itself did nothing wrong.

The practical consequence of this potential vicarious liability is that the strata council should ensure that a person they delegate an authority to is appropriate.

Some examples of situations where this may apply in a strata corporation is when a strata council delegates to a person the authority to produce the records of the strata corporation and that person does not provide the proper records or provides records that it was not obligated to provide and an owner commences a dispute notice regarding that error.

Responsibility for Contracts made by a Person with Delegated Authority

Sometimes a person with delegated authority agrees to a contract with a third party without getting prior approval of the strata council. The strata corporation likely cannot have that contract cancelled because the person was not properly delegated that authority to agree to a contract.

At the common law the term “Indoor Management Rule” is used to refer to the presumption that if a party agrees to a contract with someone that they reasonably believe represents the strata corporation that they are entitled to assume that person has the authority to bind the strata corporation. This presumption is also reflected in the Strata Property Act which states that the validity of a contract made by the strata corporation is not affected by a “limitation on the authority of the council member or officer to act on behalf of the strata corporation”.

The strata council should be very clear when delegating authority to a person whether that authority is to investigate potential companies or to actually sign a contract with a company.

Responsibility for Unauthorized Spending of Money by Person with Delegated Authority

It is important to be aware that the Strata Property Act and the Strata Property Regulation imposes several constraints on the authority to spend the strata corporation’s money. A strata council cannot delegate to a person the authority to spend the strata corporation’s money unless the strata council has the authority to spend that money itself.

Unfortunately, we do have experience with situations where a person was delegated authority that did not include spending the strata corporation’s money but that person did spend the strata corporation’s money.

In this situation, it is unlikely that the strata corporation would be able to recover the money from the party that received it. However, the strata corporation may be able to recover the money from the person that spent the money if it is clear that person exceeded there delegated authority.

Take-Aways

Strata management is implementing the decisions of the strata corporation. It is presumptively the responsibility of the strata council but there are situations where someone else is responsible.

Although the strata council is responsible and accountable for strata management, the strata council can delegate some or all of its authority.

If the strata council delegates its authority it must clearly describe the extent of the delegation because if the person with delegated authority makes an error it is unlikely that the strata corporation can avoid the consequences.