British Columbia became the first province to license strata property managers. This change occurred in 2006 as a way to ensure that managers have the required competencies needed to effectively serve strata corporations and the people who live in them.
All strata managers provide services through licensed brokerages. They are supervised by managing brokers who are responsible for the staff employed by the brokerage.
The strata managers in B.C. are skilled, motivated individuals who work hard to maintain and improve operations for their clients. But this doesn’t mean every professional relationship between a manager and a strata corporation works out well.
Whether it’s ongoing miscommunication, or the costs are just becoming too much, sometimes stratas must make the tough choice to end their relationship with their manager.
Starting and ending a professional relationship with a strata manager is a formal process
In order to change strata managers, the strata (namely the council members) must terminate their current strata management contract.
A strata management contract is a legally binding agreement between the strata corporation and the strata management company. Before we look at how to terminate a contract, it’s important to understand what a good contract looks like. This way, you can make a more informed choice when selecting your next strata manager.
What does a good contract look like?
There is no official or standard strata management contract, which means every contract will look a little bit different. Nonetheless, there are some important elements that every good contract should have.
- A good contract should be in writing
- It should clearly lay out the rights and obligations of the strata manager
- There should be a clear and comprehensive list of duties, powers and limitations of the strata manager and the strata management company
- It should specify how the strata management company is paid. That includes details about fees paid by third parties (for example, fees for the preparation of a “Form B: Information Certificate”) and whether those fees are to be handled by the corporation or the strata management company
- The contract should address who will have signing authority for, and access to, strata corporation finances, and what kind of account the money will be held in
- It needs to have a clear termination procedure, including when the contract expires and fees associated with terminating the contract before that date
- The contract should comply with the Strata Property Act and the Real Estate Services Act, which governs licensed strata managers and brokerages
Note that the strata management company may assign more than one strata manager to take care of the strata corporation. In some cases, the contract may be assigned to another licensed strata property management company. Whether this is permitted, and how it is handled, can be negotiated in the contract.
The contract can be developed or revised provided both parties agree to the terms or changes. Strata corporations should always seek independent legal advice before signing a strata management contract.
Who can enter a strata management contract?
A strata management contract may be entered into by a strata council, on behalf of the corporation. The strata council could also be directed to enter a contract by the majority of owners at a general meeting. Strata council members have an obligation to disclose any direct or indirect interest in a strata contract, and they cannot participate in any activity relating to the approval or rejection of the contract.
What happens when the strata is unhappy with the manager?
Once a company and manager have been hired, it’s up to the strata council to provide direction to the manager. It is also the council’s responsibility to bring up concerns with the strata property manager or management company.
Concerns can be addressed through direct communication with the manager or management company. The strata management contract may also address processes for resolving issues. If you like the manager, but are not happy with some of the actions taken by them, try to find a way to resolve the issue together. Don’t be afraid to have an honest conversation with them. They may not have even been aware that the strata was unhappy.
If, however, the problem cannot be fixed, the council can begin to look for a new strata manager and management company. As a best practice, consider putting together a request for proposal, and ask the new candidates to come to the strata for a site visit. This is a great opportunity to discuss issues and goals, and you can get a better idea of which company best aligns with your needs and expectations.
The termination date and process/penalties for early termination will impact if/when you find a new manager.
If the issue impacting the strata relates to the conduct of the manager or company, and it contravenes the Real Estate Services Act, the strata council is encouraged to submit a complaint to the Real Estate Council of British Columbia (RECBC).
As a general policy, the RECBC requires complaints to be submitted by strata councils, and the complaint needs to be accompanied by a copy of the minutes of a council meeting that confirms the passing of a motion to send a complaint to the RECBC.
In situations involving significant financial concerns, individual owners are permitted to send a complaint directly to the RECBC. An owner would do this if there were allegations of fraud or misappropriation of funds by the property manager or management company.
Termination of strata management contracts
Strata management contracts can be terminated without penalty to the strata corporation, depending on:
- the terms specified in the contract
- whether the strata management company also wants to terminate the contract. Often, if the management company wants to sever ties, they will give the corporation two months’ notice.
In many cases, the strata corporation may also give two months’ notice to the strata management company, if first approved by a 3/4 vote from owners. Votes can be obtained during an annual general meeting, or a separate special general meeting. After obtaining a 3/4 vote from owners, the strata corporation will need to give 60 days notice to the outgoing management company, provided the contract does not say something different.
When a strata management contract comes to an end, the brokerage must return all strata corporation records to the corporation within four weeks of the contract termination. This is where having a cloud-based strata management software system in place comes in handy. Instead of having to worry about sorting through and compiling all of those paper documents, everything is already saved in the file library.
The RECBC also requires that strata management companies keep some strata records, or more commonly, copies of strata records, for at least seven years after their creation. Those documents include:
- Any accounting statements prepared by or on behalf of the strata management company that are provided to the strata corporation
- Invoices for expenditures incurred on behalf of the strata corporation
- Monthly banking statements from the savings institutions for all trust funds held on behalf of the corporation
- Monthly reconciliations of banking statements of all trust accounts held on behalf of the corporation
Once the contract has been terminated, the new property manager and management company can take over.