The Strata Property Act deals with three general categories of property: common property of the strata corporation, common assets of the strata corporation, and personal property of the strata lot owners. This article reviews how the Strata Property Act conceptualizes and regulates these three different categories of property.

In our day to day lives, we think of property as things capable of ownership. However, property is not just things: property can better be understood as a bundle of rights which may be enforced and used in certain circumstances in relation to assets and objects. Generally, a distinction is drawn between real property and personal property. Real property is understood as fixed, immovable property, such as land, and things attached to land, such as buildings. Personal property is movable and includes any property that is not real property.

At law, personal property (i.e. non-land property) falls into one of two categories: either ‘chose in possession’ or ‘chose in action’. Chose in possession are rights of property which are tangible and physical and can be claimed by taking physical possession. For example, a book is a chose in possession since you can take personal possession of the book. Chose in action are rights of property which are intangible, have no physical form and can only be claimed or enforced by taking an action. For example, a debt (specifically the right to enforce and receive payment on a debt) is a chose in action since you cannot take physical possession of the debt, but you do have the right to enforce payment on the debt.

Types of Property under the Strata Property Act

The Strata Property Act deals with property under three categories: common property of the strata corporation and common assets of the strata corporation, and personal property of the strata lot owners.

Under the Strata Property Act, the owners own the common property and common assets of the strata corporation as tenants in common in proportion to the unit entitlement of their strata lots.

Common Property

The Strata Property Act defines common property as:

(a) That part of the land and buildings shown on a strata plan that is not part of a strata lot, and

(b) pipes, wires, cables, chutes, ducts and other facilities for the passage or provision of water, sewage, drainage, gas, oil, electricity, telephone, radio, television, garbage, heating and cooling systems, or other similar services, if they are located

(i) within a floor, wall or ceiling that forms a boundary

(A) between a strata lot and another strata lot

(B) between a strata lot and the common property, or

(C) between a strata lot or common property and another parcel of land, or

(ii) wholly or partially within a strata lot, if they are capable of being and intended to be used in connection with the enjoyment of another strata lot or the common property.

The owners own the common property of the strata corporation as tenants in common in proportion to their unit entitlement.

Boundaries of Common Property

The definition of common property as the “part of the land and buildings shown on a strata plan that is not part of a strata lot” requires knowing where a strata lot ends and the common property begins. Unless otherwise shown on the strata plan, the boundary of the strata lot is midway between the surface of the structural portion of a wall, floor or ceiling that faces the strata lot and the surface of the wall, floor or ceiling that faces another strata lot, the common property or another parcel of land.

It is useful to keep in mind that walls between strata lots are not common property. Each half of the wall, from the exterior surface to the midpoint, is a part of the respective strata lot which the wall faces. Only if the walls contain pipes, wires, cables, chutes, ducts and other such facilities would there be common property in the walls between strata lots.

Common Assets

The Strata Property Act defines common asset as:

(a) personal property held by or on behalf of a strata corporation, and

(b) land held in the name of or on behalf of a strata corporation, that is

(i) not shown on the strata plan, or

(ii) shown as a strata lot on the strata plan

Notably, common assets include personal property which is held by the strata corporation. The personal property which can be held as a common asset includes both tangible and intangible property. As with common property, the owners own the common assets of the strata corporation as tenants in common in proportion to their unit entitlement.

Land owned by the strata corporation is only a common asset of the strata corporation if it is either:

• not shown on the strata plan, or
• shown as a strata lot on the strata plan.

If the land owned by the strata corporation is shown on the strata plan and is not a strata lot, it is common property and not a common asset.

Personal property of owners

The Strata Property Act does not define personal property. However, personal property has its ordinary meaning and refers to both movable, physical assets and intangible property.

Fixtures vs Chattels

The distinction between fixtures and chattels is key to understanding how the Strata Property Act treats property.

At common law

Nothing in the Strata Property Act eliminates the common law relating to fixtures and chattels. At common law, a fixture is a piece of personal property that has become sufficiently affixed to land or a building such that it is considered part of the land or building and a chattel is a tangible piece of personal property that is not land or a building.

The common law test to determine whether an object is a fixture consists of two parts:

1. The first part of the test concerns the degree to which the object is affixed. If the object is merely attached to the land by its own weight, it is considered a chattel unless it can be shown that there is an intention that it become part of the land. Conversely, if the object is affixed to the land or building, even slightly, it is presumptively considered a fixture unless it can be shown that there is an intention that it is chattel.
2. The second part of the test concerns the purpose of the affixation. Where an object is affixed for the purpose of better use and enjoyment of the object as an object, it is a chattel. However, where the object is affixed for the purpose of better use and enjoyment of the land or building, it is a fixture.

Essentially, the common law on fixtures provides that personal property installed on common property may become part of the common property.

Under the Strata Property Act

The Strata Property Act defines “fixtures” in connection with two provisions concerning the insurance obligations of the strata corporation. The Strata Property Regulations define “fixtures” as:

“items attached to a building, including floor and wall coverings and electrical and plumbing fixtures, but does not include, if they can be removed without damage to the building, refrigerators, stoves, dishwashers, microwaves, washers, dryers or other items”

This statutory definition mirrors the common law definition of fixtures.

An Example

An example of the distinction between personal property and a fixture can be found in relation to the difference between carpets and rugs.

A rug merely rests upon the floor. A rug is usually not affixed to the floor of the building in anyway other than by gravity pulling the rug to the ground. This method of attachment is not enough to meet the legal test for a fixture, nor does it meet the definition of fixture under the Strata Property Act. If the rug is in a strata lot and owned by the owner, it is the personal property of the owner. If the rug is on common property, it is a common asset of the strata corporation.

Conversely, a carpet is usually affixed to the floor by some type of nail or fastener. This degree of attachment, coupled with the fact that a carpet is usually affixed to a floor to make the use and enjoyment of the room better, presumptively meets the legal test for a fixture. If the carpet is on common property, it is part of the common property and not a common asset. If the carpet is on a strata lot, it is a common-law fixture of the strata lot. Under the Strata Property Act, if the carpet had been installed by the owner developer, the strata corporation has an insurable interest in the carpet and is obligated to insure the carpet.

How the Treatment of Property Impacts Insurance Coverage

Strata corporations are obligated to obtain property insurance for both common property and common assets. In addition, strata corporations are required to obtain property insurance on fixtures (as defined in the Strata Property Act) built or installed on a strata lot, if they were installed by the owner developer. Considering that the property inside the boundary of the strata lot is the personal property of the owner, the insurance provisions of the Strata Property Act require the strata corporation to insure the personal property of owners.

To bring the Strata Property Act’s insurance framework into coherence with insurance law principles, the Strata Property Act grants the strata corporation insurable interest in the common property, common assets and the fixtures it is required to insure.

How the Treatment of Property Impacts Proceeds from Insurance

The Strata Property Act requires insurance money received by the strata corporation with respect to property damage to be used without delay for the repair or replacement of the damaged property, unless the strata corporation decides not to repair or replace the damage property by following the procedure outlined in the Strata Property Act. The decision not to repair or replace damaged property must be made in a resolution passed by a ¾ vote no later than 60 days after the receipt of the insurance money. The strata corporation must then distribute the insurance money to each person with interest in the money. In the case of common property or common assets, the owners have interest in the insurance money equivalent to their interest in the common property or asset (i.e. according to their unit entitlement). In the case of original owner developer fixtures on a strata lot, the owner of the strata lot is wholly entitled to the insurance money as the only interested person.

Acquiring Common Assets

Under the Strata Property Act, the strata corporation may acquire personal property or land held in the name of the strata corporation or on behalf of the strata corporation as a common asset.

Strata corporations are empowered by the Strata Property Act to acquire land outside the strata plan and strata lots within the strata plan as common assets. Land can be acquired as a common asset through purchase, gift or even lease. Acquisition of land in this way must be approved by resolution passed by a ¾ vote at a general meeting.

Strata corporations are also empowered by the Strata Property Act to acquire personal property as common assets. This includes moveable assets capable of possession, as well as intangible property. To acquire personal property, strata corporation must obtain prior approval by a resolution passed by a ¾ vote at a general meeting if the personal property has a value of more than $1000 (or the relevant amount set out in the strata corporation’s bylaws). This ¾ vote requirement is not required in relation to investment instruments acquired with money from the strata corporation’s contingency reserve fund under section 95.

Acquiring Common Property

Acquiring common property requires an amendment of the strata plan. Generally, acquiring common property can occur by two methods: 1) the strata corporation adds land from outside the strata plan it owns as a common asset to the common property, or 2) the strata corporation converts all or part of a strata lot it owns within the strata plan to common property.

A strata corporation may purchase land outside of the strata plan as a common asset and then convert it to common property by filing an amendment to the strata plan. Both acquiring the land as a common asset and adding the land to the common property require a resolution passed by a ¾ vote at a general meeting.

To convert a strata lot owned by the strata corporation as a common asset to common property requires a resolution passed by unanimous vote at a general meeting.

Disposal of Common Assets

Under the Strata Property Act, the strata corporation may sell, mortgage, lease or otherwise dispose of personal property or land held in the name of the strata corporation or on behalf of the strata corporation as a common asset.

Strata corporations are empowered by the Strata Property Act to dispose of land it owns outside the strata plan and strata lots within the strata plan. Disposition of land in this way must be approved by resolution passed by a ¾ vote at a general meeting.

Strata corporations are also empowered by the Strata Property Act to dispose of the personal property it owns. This includes moveable assets capable of possession, as well as intangible property. To dispose of personal property, strata corporation must obtain prior approval by a resolution passed by a ¾ vote at a general meeting if the personal property has a value of more than $1000 or the relevant amount set out in the strata corporation’s bylaws. The ¾ vote requirement also applies to the disposition of intangible property. For example, a ¾ vote resolution is required to discontinue or settle a lawsuit if the amount claimed or settled exceeds $1000 or the amount set out in the bylaws. This ¾ vote requirement is not required in relation to investment instruments acquired with money from the strata corporation’s contingency reserve fund under section 95.

Disposal of Common Property

Under the Strata Property Act, a strata corporation can only dispose of common property by subdividing the common property in accordance with section 253 or disposing of the common property in accordance with section 80.

Disposal of common property under section 253 applies to disposition of common property through subdivision of land. The Strata Property Act deems the following to be subdivisions of land and subject to Part 7 of the Land Titles Act:

• transfer of common property to a freehold estate,
• a lease for a term longer than 3 years, and
• an interest that confers or may confer a right to acquire a freehold estate or a lease exceeding 3 years.

There is no vote requirement under the Strata Property Act for a subdivision of land. Instead, section 97 of the Land Titles Act requires the signatures of the owners and registered charge holders of all strata lots in the strata plan and the signatures of all registered charge holders of the common property being subdivided whose interests are affected by the subdivision of land. Once common property is subdivided, it becomes a common asset of the strata corporation and may be disposed of in accordance with the Strata Property Act.

Disposal of common property under section 80 applies to any disposition of land that is not a subdivision of land. This provision usually applies to a lease of less than 3 years or the registration of a charge on the common property, such as the granting of an easement or right of way. Disposition of common property under section 80 requires approval by a resolution passed by a ¾ vote at an annual or special general meeting,

Additionally, the Strata Property Act specifically prohibits strata corporations from mortgaging the common property.

Takeaways

Understanding how the Strata Property Act treats property is important when the strata corporation makes decisions concerning the common property or common assets. For example, strata corporations are often tasked assigning parking spaces in common property parking lots. If the strata corporation elects to lease out parking spaces to owner, it will trigger the Strata Property Act provisions concerning the disposal of common property. For the strata corporation to validly lease the common property, potentially a ¾ vote of the owners would be required, or even potentially more onerous requirements under the Land Titles Act might need to be met (depending on the lease’s term length). In the alternative, the strata corporation may prefer to enter short-term exclusive use agreements for parking spaces with owners in the strata corporation to avoid the procedural requirements for the disposal of common property.