COVID-19 (Coronavirus) – Update #7

Dear Strata Councils,

We’d like to provide you with the latest updates on COVID-19 and it’s impact on Strata Corporation operations:

• Annual General Meetings – The Province has announced a Ministerial Order under the Emergency Program Act which will allow all Strata Corporations (regardless of having an applicable bylaw) to conduct their Annual or Special General Meetings via electronic means for so long as the state of emergency remains in place.  Previously, only those Strata Corporations with Bylaws explicitly allowing electronic meetings were permitted to do so.  For some Strata Corporations, particularly very small ones where it might be possible to manage the number of attendees electronically (a 20+ attendee electronic meeting may not go very well) this might make an ideal alternative to the Restricted Proxy method being utilized by some Strata Corporations and being endorsed by both our firm and leading industry organizations. 

• Restricted Proxy AGMs – Further to the point above, some Strata Corporations are starting to call AGMs intended to be physically attended by only a small group of volunteers from Strata Council, in accordance with the current restrictions on in-person gatherings.  These meeting notices are being sent with detailed proxy appointment forms, described as “restricted proxies” which ensure that the proxy appointee will vote according to the wishes of the proxy grantor.  Our Property Managers are able to assist you with developing these notices and arranging these meetings.  While there are some drawbacks to this method, such as the inability to engage in discussion at the meeting itself, the AGM can be carried out with a great deal of success by Restricted Proxy and allow for the most important business to be completed. We have a variety of tools and ideas available to Councils to seek feedback (even nominations for Council) in advance of the AGM to try to address these drawbacks.  Generally, Strata Councils will have to be “hands on” with this approach to ensure that they are answering Owners’ inquiries in advance of the AGM, giving them the confidence they need to provide a proxy form to the Strata Council to vote on their behalf.  Please discuss this with your Property Manager if you are approaching your year-end or have already passed it.  Using this method may be imperfect, but it is an excellent option to ensure the continued smooth operations of your Strata Corporation. 

• Insurance – In an effort to ensure Owners’ questions are adequately addressed in advance of your General Meetings, we will be including an information package from BFL Canada providing deeper insight into proposed insurance premium increases in any AGM notices where it is applicable.  It is our hope that this will address many, if not all of the questions that are likely to come up at your AGM.  While we, and other stakeholders, continue to consult with Government and the insurance industry on the broad impacts of these rate increases especially during COVID-19, no relief is immediately available on the horizon and all Strata Corporations should be prepared for significant policy premium increases if you have not already received one.  Needless to say, the timing for this could not be worse, but it’s important to prepare for the reality of higher insurance premiums and Strata Fees. Below is a recent update from BFL on their role in this situation and some of the key points to consider: 

In light of the current situation, we understand the additional stress this pandemic adds to an already stressful situation for Strata Corporations, their councils and owners. We want to do our best to help our clients during this time wherever possible, and have been in communication with both insurers and third party finance companies to look for and create solutions. 

Financing:

• Moving forward, all proposals will include a finance contract, financing insurance premiums and paying monthly can be a great tool to manage cash flow.
• In special circumstances where the increase in premium is substantial and a Strata is unable hold an AGM/SGM to approve amendments to their budget, the third party finance company may consider offering some solutions but at this stage this needs to be looked at on a case by case basis.
• BFL can/will facilitate the discussion between the lender and the strata corporation as required.
• BFL is also in active negotiations with finance companies to offer other solutions, we’ll keep you updated on this front as negotiations progress.  

Strata’s Buying Loss Limit Property Policies (i.e.. less than full replacement cost coverage):

• As you’re aware, the Strata Property Act (SPA) Section 149 (1) requires each Strata Corporation to obtain and maintain property insurance coverage based on full replacement cost, and it’s important to note that a policy on a Loss Limit structure is not insured to full replacement value.
• The only time that BFL would recommend a Loss Limit policy to a strata corporation, is when the Strata has exhausted all other available options and those terms are the ONLY option available to the Strata.
• Outside the requirements of the SPA, loss limit policies in a lot of cases might not meet mortgage requirements either.
• Reducing the limit does not always reduce the cost. Many insurance companies cap their participation by percentage not necessarily limit of coverage. So reducing the limit doesn’t always mean that the insurers charging the higher rate can be dropped (not used).
• BFL is working on many solution to make the purchase of full limit coverage more affordable and available. We have changed the entire structure of our Strata Protect program to Primary / Excess placements for Frame buildings with values in excess of $20M and Concrete buildings with values in excess of $40M. The change in structure helps do the following:

1. Reduce Earthquake exposure for the traditional strata insurers (Primary insurers) by 30-40% and allows those insurers to continue to write more strata business at more competitive terms.
2. Transfers risk to Excess Insurers and Reinsurers that haven’t typically been willing to participate in insuring strata corporations.

• Attract more insurers (new capacity) to the strata class on both a Primary and Excess basis.
• Our goal is and has always been to present clients with the best coverage and pricing options available in the market, at this stage the Primary and Excess structure is the best option.
• We are diligently looking into different structures / solutions that can be offered. When a better solution is created / negotiated that solution will be offered to clients immediately. 

• Strata Fee / Special Levy Arrears – As the economic crisis exacerbated by COVID-19 deepens, it becomes more likely that Owners will be unable to pay Strata Fees and other amounts owing to your Strata Corporation on time.  Strata Councils should be mindful of their obligations to ensure financial solvency for your Strata Corporation, while managing the very real needs of the people living in your communities.  Collections efforts themselves may be hampered by COVID-19.  Our friends at Lesperance Mendes have written this excellent summary of the dilemmas and options available to Strata Councils.  We encourage you to read it and seek legal advice on any particular dilemmas raised by Owners at your properties.  A reminder that we are not a substitute for legal advice and that Strata Councils should avail themselves of such when facing complex situations. 

We appreciate that the amount of information we are providing through these updates may seem daunting.  We attempt to convey only the most important matters, and those of a general nature applicable to most/all Strata Corporations.  We will continue to “push” updates via email directly to Strata Councils, and we encourage you to visit the COVID-19 section of our website where this and our previous communications are posted. We also recommend that you share the link to the site with Strata Lot Owners since it has a lot of useful information and answer many of the questions they might have during this time.

We thank you for taking the time to review these bulletins, and for your hard work on behalf of your fellow Owners.