Orders of the Day

Hon. M. Farnworth: In this chamber, I call continued Committee of the Whole for Bill 14, Municipal Affairs and Housing Statutes Amendment Act, (No. 2).

Committee of the Whole House

BILL 14 — MUNICIPAL AFFAIRS AND
HOUSING STATUTES
AMENDMENT ACT (No. 2), 2020

(continued)

The House in Committee of the Whole (Section B) on Bill 14; S. Gibson in the chair.

The committee met at 2:43 p.m.

The Chair: As we know, the division was deferred to later on today for section 3, so it’s my understanding that this will be stood down, section 3, and we’ll now proceed with section 4 today.

Section 3 stood down.

On section 4.

T. Stone: Section 4 of Bill 14 deals with some changes to rules around depreciation reports.

[2:45 p.m.]

My first question to the minister would be this. The minister has mentioned several times, in comments that she’s made in and out of the House, about the changes in this section addressing the reality that the previous government left a supposed loophole with respect to depreciation reports. Yet while there are some changes here related to the depreciation reports in section 4, in section 12 of this very same bill, there are regulation-making powers that the government will have with respect to depreciation reports.

I’m just wondering if the minister believes that referring to the closing of loopholes in this provision, when the minister is actually still going to allow for exceptions to the changes she’s proposing through the new change in section 12 later in the bill…. I’m wondering if she feels that it was legitimate and fair criticism to refer to loopholes in the legislation prior to these changes here today.

Hon. S. Robinson: Encouraging stratas to repair and maintain their common property and assets, we know, will help to alleviate insurance costs. We also know that stratas that have and act on depreciation reports are likely to get lower risk and, at the end of the day, save owners money in the long run. Prescribing this information by regulation will allow government to create more stringent, robust and flexible depreciation reporting requirements to encourage stratas to repair and maintain their common property and assets. Far too many strata corporations were exempting themselves, and this has contributed to the problem that we have before us.

For example, depending on further consultation — this is, I think, what the member was referring to — regulations could be introduced to limit or eliminate the ability of the strata corporation to waive or defer a depreciation report requirement by a three-quarter vote or introduce a more consistent template for reporting. So there’s certainly some consultation that needs to be done. We want to enhance the depreciation reports so that, at the end of the day, strata corporations have a more robust understanding what the needs are, going forward, that will help with insurance rates.

I have to say that enhancements to depreciation reports have been recommended by the Condominium Home Owners Association as well as the Insurance Bureau of Canada.

T. Stone: Thanks to the minister for that.

I guess the challenge in understanding the government’s intent here…. When the minister, on the one hand, has made a lot about the fact that, through this particular section, the government has decided to “close a loophole” that currently allows for the deferral of depreciation reports, only to allow for the prescribed regulations, which would be determined at some later date, to allow for exactly that — the deferral of depreciation reports — it is a bit confusing.

The minister, in her last response, used both…. In describing the regulations that will be developed after further consultation, she uses the words “stringent” and “flexible” in the same sentence. That’s somewhat confusing.

[2:50 p.m.]

I’m wondering if the minister could walk us through what the circumstances might look like that would be provided for in these prescribed regulations and that would allow for stratas to continue to, in some cases, defer the depreciation reports.

Will that be based on the type of strata? Will she take into account the very different realities of the different types of stratas — the condo, apartment-style strata versus a bare land strata, which has a different reality wrapped around it? Will the prescribed regulations that determine these circumstances be based on the appraised dollar value of the strata, on the strata’s common property asset, on the size of the strata and the number of units involved? What would those circumstances look like that would, again, through a prescribed regulation, enable the deferment of a depreciation report?

Hon. S. Robinson: The member talked about different types of stratas — they’re quite varied — as well as different sizes of stratas. We recognize that it is a varied strata landscape. It’s for that reason that we are going to be doing a robust consultation to make those determinations so that we can get a very balanced perspective. That information will be reflected in the regulation.

T. Stone: As the minister and her team in the ministry develop these prescribed regulations, will the minister be taking into account the realities that smaller stratas have unique circumstances and characteristics? They are often very well governed, but because of the unique circumstances of their size, being very small, many of them need flexibility with respect to depreciation report requirements.

Hon. S. Robinson: The answer is yes.

T. Stone: Will the minister ensure that the absolute requirement of depreciation reports doesn’t create an unnecessary financial burden on strata corporations, strata owners, that are already facing significant financial distress due to the realities of soaring strata insurance costs?

Hon. S. Robinson: Again, the intent here, of course, is to encourage stratas to repair and maintain common properties and assets. The idea behind the depreciation report is to understand exactly what investments need to be made — again, to save owners in the long run.

[2:55 p.m.]

That’s, I think, something we can all agree on in this House: that the value of depreciation reports is about making sure that buildings are maintained and that repairs are done so that, at the end of the day, the strata corporation and, of course, the strata owners can save money in the long run.

T. Stone: Well, I understand that. But to the minister, what protections will she be building into these prescribed regulations to ensure that the absolute requirement to do the depreciation report, which she says is closing a loophole, is not going to add additional financial burden to strata corporations that are already struggling due to the soaring strata insurance costs that they’re having to deal with?

Hon. S. Robinson: Like I said, this is what the consultation is for. This is why engaging with various stakeholders to identify how to best move forward with this so that we can, at the end of the day, really get robust depreciation reports where they’re needed so that we can get the investments needed in the right place…. That would also lower risk and so reduce insurance premiums as well as have well-maintained buildings. That, at the end of the day, will reduce costs as well.

T. Stone: Is the minister contemplating, as part of the new requirement for depreciation reports, that there would be a flexibility around the dates that those depreciation reports would have to be submitted? Or will there be a universal deadline that all stratas will have to work towards and meet?

Hon. S. Robinson: How this actually gets implemented is a key focus of our consultation with all the stakeholders. We’ll have that question as part of our consultation process.

T. Stone: Will there be any kind of transition period for this requirement? More specifically, when would a strata that has just recently deferred a depreciation report be expected to commission and conclude a depreciation report?

Hon. S. Robinson: As I said earlier, we’re going to continue, certainly, consulting with our partners in the strata sector this fall so we can develop the necessary regulations. We want to move quickly on this. This is a priority file for us. A phase-in period will be necessary so that strata corporations and depreciation report providers do have time to adjust. We need to remember that depreciation reports now typically happen on a three-year cycle.

But I also want to say, for the record, that stratas should not be waiting for these changes to come into effect to really act proactively to address any maintenance deficits. They really ought to be improving their risk profile so that it makes them, certainly, more attractive to insurers and saves strata owners, of course, in the long run.

[3:00 p.m.]

T. Stone: Well, I understand that. I think the issue that we’re hearing from a lot of strata corporations, a lot of strata owners, is what the new world is actually going to look like.

Again, in this section 4…. The minister, with a lot of fanfare, has pointed to it as the closing of a loophole. In reality, the loophole has not been closed, because in section 12, which comes later in the bill, there is a new regulation-making power for the government to develop and implement prescribed regulations that would outline the circumstances by which depreciation reports would not be required, presumably.

I think it’s incumbent on the minister to provide, if not the fine details of what she and her government are thinking here, at least some general guidelines that will guide the process of consultation. The minister has acknowledged there’s a wide variety of different types of stratas. I want to really emphasize the importance, therefore, of understanding what the government’s intent here is, because the depreciation report requirement, the universal requirement that the minister says she wants to impose, barring some exceptions that will be made through regulation, is going to impact different stratas in very different ways.

The minister knows well that one of the most common types of stratas that’s growing rapidly around the province are bare land stratas, where you have the common property asset mix. It’s a very different look and feel and a very different reality from the common area asset mix in a 20 or 30 tower condo building. A townhouse complex that might have four units side by side is, again, a very different profile. So the requirements in a one-size-fits-all approach are just not going to work for some of these stratas.

When can the minister confirm that the consultation that she refers to…? When is that consultation process going to begin? When is it going to end? When will the government actually be making decisions on this piece — i.e., fleshing things out a bit so that everyone in the strata sector understands exactly what the new prescribed regulations are going to be, relating to depreciation reports and under what circumstances exceptions would be allowed? What would be the timing for the implementation of these new rules? Will there be transition timing? Will there be protections built in to ensure that this doesn’t become an onerous additional financial burden?

When can we expect some answers and details on all of the above, which presumably will come as part of a consultation process in the weeks ahead?

[3:05 p.m.]

Hon. S. Robinson: We are and have been in consultation with the sector in the development of this legislation. Consultation is going forward. We’re prepared to start imminently, with the intent of bringing in regulations this fall.

I just want to point out, you know, that the member has recognized there are very diverse types of stratas, different sizes. These are all things that we’re very alive to. That is why we need to do the consultations so that we can find the right balance — recognizing the variety of strata frameworks, different strata types — so that we can have a more robust system that works better on the ground for these folks who live in different types of stratas.

T. Stone: Well, recognizing that this section comes into force only after the regulations are developed, that will be, again, at some point in the future.

A two-part question for the minister. First, what is the exact timeline or deadline that she has set for the consultation to be done, for the regulations to be developed and for strata corporations, strata owners, to know what the rules are pertaining to depreciation reports? And secondly, recognizing that that’s likely weeks, if not months, down the line, how does this section provide any immediate relief for strata owners who are facing soaring strata insurance costs here and now?

Hon. S. Robinson: We’ve been moving quickly on this because it is a critical bill. We believe we need to move quickly. I think there’s a desire on all sides to move quickly to address this problem. As part of developing this regulatory model, our intent and our plan is to not make it a linear process but to consult as we develop so that it’s a parallel process so that we can move as quickly as we can on this. We know that we need to move quickly, and we’re putting every element in place to do it as quickly as we can.

T. Stone: Well, one word I don’t think would be right to describe the minister’s pace or the government’s pace on bringing forward solutions to address this strata insurance crisis is “quickly.” The minister used that word many times in her last response. I certainly have heard many words of frustration from strata owners around the province who are facing these massive increases in their insurance premiums and deductibles and related monthly strata fees and one-time special assessments in many cases. Nobody is commenting or noting that the government is moving quickly on any of this.

[3:10 p.m.]

We even tabled an amendment yesterday that would put on the table a strong commitment from government, a signal from government that it would be willing to pursue the whole concept of self-insurance in this space — again, as a creative solution to say to strata owners we recognize the magnitude of the problem, and we’re going to put some ideas on the table. The minister was not interested in that. So I wouldn’t say “quickly” is a word that describes the government’s approach to addressing the challenges in strata insurance.

I’m going to ask again. I do think that in light of the fact that the vast majority of this bill…. Fourteen of 16 sections don’t kick in until regulations are developed, and there’s more consultation and engagement to be held. When are the details going to be determined in the prescribed regulations that relate to depreciation reports?

This is a really important piece, a self-declared piece of the government’s action plan. People have a right to know when. What is the target date? To say, “We’re working on it quickly. We want it to happen as soon as possible,” is not good enough. Are we talking weeks? Are we talking months? Are we talking before the end of the year? Are we talking next spring? What does that timeline look like for the creation of the prescribed regulations around depreciation reports?

Hon. S. Robinson: I already said that our intent is to — we’ve been in consultation — carry on these regulatory conversations imminently, and our intention is to have regulations in place this fall.

T. Stone: Okay. So this fall. We’ll hold the government to that. I would encourage, on behalf of the hundreds of thousands of strata owners out there, moving as expeditiously as possible. Let’s try to get these regulations developed sooner than the fall, if possible.

That concludes my questions on section 4, Mr. Chair.

The Chair: Are there any further comments by members on section 4? Are there any further remarks to address section 4, Members?

Section 4 approved.

On section 5.

The Chair: Any comments on section 5, Members?

T. Stone: One question on section 5. If the provisions in section 5 are meant to encourage repairs, what is the timeline that we might see this provision have a meaningful impact on strata insurance rates?

[3:15 p.m.]

Hon. S. Robinson: Again — we spoke about this yesterday — we need to recognize that the dynamics driving these increases are playing out in the private insurance industry and that government itself doesn’t regulate pricing. The issue of insurance is complex, and it is impacted by many factors, including the cost and availability of reinsurance in the global market.

This amendment and others…. What it aims to do is to give strata owners and corporations more transparency and tools so that they can plan and be more proactive. They can do the investments that they need to do. That will deal with the high costs of strata insurance, and it will bring relief over time. This is an important step.

I try to imagine that if, ten years ago, some of this work had been done, perhaps there wouldn’t be such challenges today.

T. Stone: Well, even three years ago, we weren’t seeing increases in strata insurance premiums in the neighbourhood of 30, 40, 60, 100, 500 percent like we are today. This crisis has unfolded on the minister’s watch. It has unfolded on the government’s watch.

The solutions, the suggestions that we’ve been trying to bring forward, including the amendment that has been proposed by the member for Abbotsford West yesterday, were to urge the government to seize this opportunity to signal the need for some significant change here, to be proactive in positioning some significant change. That’s what we’re trying to do. The government has opted not to embrace that suggestion.

I guess my last question on this section 5, just kind of a recurring theme through the back and forth we’ve had on this bill up to this point, is: what aspect of this particular change, what aspect of this section 5 is actually going to provide strata owners relief in the immediate or in the short term?

[3:20 p.m.]

Hon. S. Robinson: First of all, I want to say that the suggestion that we canvassed yesterday won’t provide immediate relief, as the member somehow seems to suggest. As I pointed out yesterday in my comments on that previous section, it would actually make things worse, not better.

Right now there is opportunity for self-insurance, and we are in conversation with…. And we’ve heard, certainly, from private organizations that are interested in exploring that further. That’s certainly an opportunity, going forward. So for him to suggest that their suggestion somehow is the magic pill or the silver bullet, I think, is not accurate, because that, too, would pose some significant challenges.

Having said that, I think that with this particular section, what we’re doing here is that the majority vote requirements, as opposed to the usual three-quarter vote requirement, will help to support the maintenance and repair of the common property and common assets of the strata corporations.

Some strata owners have argued that the use of the phrase “as recommended in the most current depreciation report” means that the majority vote threshold, permitted under section 96(b)(i)(A)(II), only applies during the same year that the depreciation report estimated that an action was needed. For example, the depreciation report may advise that the windows are expected to require replacing in, let’s say, 2025, given their estimated service life. Deleting the word “as” removes the implication that the estimated year is essential to the ability to proceed with the majority vote.

Stratas need a more clear and flexible legislative authority to repair or replace items, regardless of the date estimated in the depreciation report. Without needing a three-quarter vote of the owners, it allows stratas to do the necessary repairs. That, I have to say, will make a difference in the risk assessment, and that, in the long run, will certainly be a benefit to them on their insurance rates.

T. Stone: I’m not wanting to debate the amendment that was tabled yesterday. We’ll have a vote on it later today. But again, I come back to the very different approaches here. We have tried, on the one hand, to offer some suggestions that would provide some immediate financial relief. We suggested the waiving of the 4.4 percent insurance premium tax on strata insurance premiums. The minister and government have said no to that.

We suggested an extension of the property tax deferment program to include strata owners under significant financial distress. No interest in doing that with government.

We’ve suggested a water damage prevention program that would help strata owners make the kinds of investments in maintenance and upgrades to prevent major water damage events from occurring in the first place. No interest in the government in doing that.

On a separate track, yes, we did suggest yesterday, through the amendment from the member for Abbotsford West, a concept that would represent systemic change. It’s a very proactive suggestion that, if examined, would result in systemic change, as opposed to the minister’s approach, the government’s approach, which has been to, effectively, focus on tinkering with the Strata Property Act through sections like this one.

The minister cannot say it would provide immediate relief because it doesn’t provide immediate relief. There’s nothing in this bill that provides any relief here and now for seriously financially distressed strata owners. That’s highly regrettable.

[3:25 p.m.]

With that, I don’t have any further questions on section 5, Mr. Chair.

Section 5 approved.

On section 6.

T. Stone: Section 6 is the section that will enable strata corporations to access their contingency reserve funds in order to obtain and maintain insurance.

My first question to the minister would be this. We’ve heard — and I’m sure she has as well — from a lot of strata owners who have said: “Great. We are facing a 200 percent increase in our premium this year. Sure, there’s a $70,000 gap in what we had budgeted for insurance this year as a result of that, versus the actual costs that have come in. So sure, let’s go and access our contingency reserve fund.” The strata in question might have the dollars in their reserve fund to do exactly that in the first year.

The question to the minister is: what do they do in the second year? What do they do in the third year? What do they do beyond this first year if, in actual fact, a strata corporation has substantially depleted or even entirely depleted their contingency reserve fund in order to pay for insurance?

What are they supposed to do in the subsequent year, barring the unimaginable reality of these international insurance companies coming forward next year and saying: “Oh, good news. We know we hit you with a 200 percent increase to your premium last year. We’re going to give that all back to you and reduce your insurance premiums this forthcoming year by a couple of hundred percent”? What are stratas supposed to do beyond that first year, where they likely have significantly depleted their reserves that are in that fund?

[3:30 p.m.]

Hon. S. Robinson: I think it’s important to note that the act does require that the strata corporation obtain and maintain property and liability insurance. Their bylaws may require other coverages as well. But in some cases, the necessary expenditures to get insurance can exceed what was approved in the budget. Strata corporations may also be made aware of changes to insurance coverage without enough lead time to give proper notice and draft resolutions to be voted on at a general meeting. They have to bring everyone together, and that can take a significant amount of time to do that.

This amendment would clearly indicate the prevention of significant loss. That includes expenditures required to obtain and maintain required insurance. This is available in future years as well. This is when they haven’t budgeted sufficiently for insurance, and they need to act. There is an opportunity here for them to do so.

[R. Chouhan in the chair.]

T. Stone: Well, I understand that. My question was: what is the strata corporation supposed to do in year 2 if, in year 1, they substantially depleted their contingency reserve fund in order to cover insurance costs? What are they supposed do in subsequent years if their insurance rates continue to remain at that high level or, God forbid, continue to increase further?

Hon. S. Robinson: Again, I know that strata corporations spend time putting together a budget based on good data about what the costs are going to be for the coming year. That is how they develop what strata fees are. This particular amendment is…. Should there have been a situation where there hasn’t been sufficient budget….

I do imagine that many that have been challenged with the insurance premiums are getting good data around what they can expect for the coming year so that they can budget appropriately. This is a change so that, should it not be sufficient, they can access their reserves in order to cover those costs.

The Chair: The member for Kamloops–South Thompson.

T. Stone: Thank you, Chair. Welcome to the chamber.

Okay. To the minister, I’m again just looking for an answer to the question.

[3:35 p.m.]

Considering that the minister has made such a big deal about the ability that this legislation provides, or will provide should it be passed, for a strata corporation to be able to access its contingency reserve fund to pay insurance costs, when you run the numbers on any one of the scenarios, the hundreds of stratas that have contacted us — I know the minister is receiving the same letters, because they typically are sent to her and copied to me or vice versa — this will result in a lot of these strata corporations depleting their contingency reserve fund.

They won’t have anything in that contingency reserve fund, or they certainly won’t have the ability to access those funds in a subsequent year. Perhaps this measure is not the panacea. It’s not the viable solution to the skyrocketing insurance challenge that’s facing so many strata corporations. Does the minister agree?

Hon. S. Robinson: I never said that this was a panacea. What we said was that we were going to give stratas tools to address a current situation, based on an interim report. There’s more information coming with the final report, but in the meantime, we felt it critical to act to give strata corporations more tools, to bring in more transparency. This is one more tool to give strata corporations the flexibility that they need to manage their budgets and to address the maintenance of their buildings.

T. Stone: Let the record show that the minister was not able or willing to answer the question: if a strata corporation depletes their contingency reserve fund in the first year, how are they supposed to access it the second year if their insurance costs haven’t gone down — or, God forbid, have gone up?

My next question on this point would be this. We just spent a considerable amount of time talking about depreciation reports and the minister’s decision to remove the ability to defer a depreciation report, except for some prescribed circumstances which we won’t know about for many months. The whole argument that the minister makes about the underlying policy rationale for removing the ability to defer depreciation reports — again, as she says over and over — is about ensuring that strata corporations are investing in the maintenance and the upgrades of their buildings.

That requirement in this bill seems to be greatly at odds with the provisions of this section 6, where the minister is essentially saying, “Strata corporation, go ahead and access your contingency reserve funds,” the very funds that are supposed to be there for strata corporations to be able to fund unplanned or significant upgrades and maintenance issues that take place in their buildings. Does the minister agree that there is a conflict here, in terms of the underlying policy purpose of the new depreciation report requirements, as detailed in sections 4 and 5 of this bill, and the contingency reserve fund provisions of this section 6? Is there a contradiction here, Minister?

[3:40 p.m.]

Hon. S. Robinson: This section is about giving strata corporations flexibility. If they haven’t been adequately putting reserves away, then they really do have difficult decisions to make, but this gives them some flexibility in the short term to help get them on the right track.

The other thing I think it’s important to recognize…. This is the tension. The member is accurate. There’s tension between these two principles. But it’s also why, as part of consultation, we need to talk about a phase-in period so that stratas have the time to adjust. We recognize the importance of doing that.

T. Stone: Enough said, I suppose, on this section — other than to say again that there does seem to be tremendous inconsistency in the depreciation report changes that this bill includes, as well as the contingency reserve fund changes. They seem completely at odds with one another.

That concludes my questions on section 6. If there’s no one else that has questions on section 6 — I don’t have any questions on section 7 either — I’d be happy to move to section 8.

Sections 6 and 7 approved.

On section 8.

T. Stone: This section deals with an important change to the current requirement of insurance coverage being in place that provides for full replacement-cost coverage. I have a few questions here.

I guess the first question would be: what would be the circumstances that the minister might have in mind that would allow for not requiring insurance at full replacement value?

[3:45 p.m.]

Hon. S. Robinson: This section is about ensuring that strata councils that are unable…. We’ve been hearing about some that are unable to get full replacement insurance, through no fault of their own, and are no longer compliant with the Strata Property Act.

I want to make it really clear to the House that this is not lowering the replacement-value requirement. We expect that strata councils will make every effort to get full replacement coverage, if possible. This change is being made to acknowledge the current market realities and prevent strata councils from being non-compliant with the Strata Property Act through no fault of their own.

T. Stone: Just to be absolutely clear, the intention here is for stratas to go out and seek 100 percent replacement cost coverage. If they can’t obtain that…. We know that a growing number of stratas are finding themselves, as the minister says, offside with the legislation. They’re finding themselves in a position of not having full replacement-cost coverage.

I think the latest numbers I saw, industry analysts were suggesting that there’s a growing and significant number of stratas that are kind of in that ballpark of 60 to 70 percent coverage that they’re able to attain, leaving a 30 to 40 percent gap.

Is it then going to be a continued expectation that stratas will seek 100 percent replacement-cost coverage and that only in the situations where they can’t obtain it, there will be some provisions that will allow for that to happen and for the strata to not be offside with the requirements in the Strata Property Act?

Hon. S. Robinson: That’s correct.

T. Stone: What does the minister believe is an adequate level of replacement cost coverage, if it’s not 100 percent? Let me back up and rephrase that. First, does the minister believe that 100 percent replacement-cost coverage is absolutely the required ideal on a go-forward basis?

[3:50 p.m.]

Hon. S. Robinson: We certainly do believe, of course, that 100 percent is the ideal. This amendment is about, again, keeping strata corporations from being offside of the legislation. So it does reflect current market realities.

Having said that, we do have work to do to get the market working better so that stratas can get 100 percent coverage. That’s work that we’re continuing to do. We’re looking forward to the final report from the BCFSA that will help to do that, as well as continuing to consult with all sides of this current situation to address the significant increase in insurance rates.

I have a sense of where the member might be going, so I’ll wait to hear his next question.

T. Stone: Well, we’re in big trouble if you can read my mind, Minister.

My next question would be this. If it’s the minister’s view that 100 percent replacement cost coverage is the ideal, and there is, I think, some intent here to provide a bit of a stopgap measure so that stratas that can’t obtain that 100 percent are not offside with the Strata Property Act….

If 100 percent is unattainable, what is the minister’s view of what an acceptable level of replacement cost coverage would be? Certainly, there must be some consideration in terms of what that prescribed regulation would actually say. Will the ministry and the government be good with 60 percent replacement cost coverage, 70, 80? What level of replacement cost coverage would the minister deem to be acceptable if it isn’t 100 percent?

[3:55 p.m.]

Hon. S. Robinson: Stratas have the opportunity to determine what they’re most comfortable with in terms of their insurance needs. This is about making sure they’re not offside. What I can share with the member is that we’ve certainly been hearing that the Insurance Bureau has been working very closely, one-on-one, with strata corporations that are struggling to get full replacement value. They’ve been bringing partners to the table to get as much insurance as they can. Really, at the end of the day, it’s up to the strata corporations to make the decisions that best meet their needs.

T. Stone: What replacement cost coverage percentage is the minister comfortable with? I appreciate that she has said that strata corporations will have a comfort level in terms of a level they’re comfortable with. What level of comfort will the minister have with respect to a percentage of replacement cost coverage that is less than 100 percent?

Again, we really tried to hammer this point home in second reading. The reality is that strata corporations, strata owners, are making these gut-wrenching financial decisions, like, now. They’re making significant decisions that impact the financial realities of their strata corporation now, in light of the massive increases in their premiums and so forth. It’s cold comfort to these folks to hear that there is going to be a consultation. There’s going to be engagement. It’s going to be months down the road before we know where this is going to land.

If it’s not 100 percent, again, is the minister comfortable with 80 percent? Is she comfortable with 60 percent? What is that percentage that the minister would be comfortable with, for replacement cost coverage, if it’s not at 100 percent?

Hon. S. Robinson: The member was talking about the tough decisions that strata corporations need to make. They are tough decisions. They’re very, very difficult. This amendment is about not wanting to add to their stress by not only having to make tough decisions, but we don’t want them to be offside of the act. This is about making sure that they’re not offside of the act and reducing some of that stress.

I want to be really clear. It’s not about my comfort level. It’s about how stratas…. Making sure that they’re not doubly burdened, and this relieves them of that burden.

T. Stone: The reality is that strata corporations, strata owners, are making financial decisions as we speak and are making them based on what the current rules provide for.

[4:00 p.m.]

A change in the full replacement cost coverage amount — presumably, it should have an impact on the premiums that are charged to that strata corporation and, through the corporation, the strata owners by their fees. Understanding what percentage the ministry, the minister, will consider acceptable…. At the end of the day, it’s the minister and the government that she’s part of that will make the decision around when those prescribed regulations are developed — what that acceptable percentage of full replacement cost coverage will be if it’s not 100 percent. I think that’s the clarity that we’re striving to achieve here.

I guess a related question would be this: what process does the minister envision putting in place that will facilitate this piece? As the minister has explained, to this point, the intention will continue…. She can correct me if I’m wrong on any of this, but what I’ve heard is that the intention for a strata to seek to obtain 100 percent of full replacement cost coverage will still be there. However, if they’re unable to obtain it, there will be provisions that will ensure that they’re no longer offside with the act.

What does that process actually look like? What is the minister contemplating? A strata corporation finds out from their broker that they’re no longer covered at 100 percent. The best that can be offered is now, you know, 70 percent cost coverage. Is that strata going to have a certain timeline that they have to go to the Ministry of Municipal Affairs, to advise them in writing? Is there going to be an adjudication process or some kind of evaluation process? What does the timeliness of that look like?

Can the minister speak to the process of how this — let’s call it an exemption from the 100 percent full cost replacement coverage requirement — would actually, in practical terms, be rolled out for strata corporations that are unable to obtain the 100 percent?

Hon. S. Robinson: The strata council will have to make every effort, and they have to demonstrate to their members — they are accountable to their members; that means the owners — that every attempt has been made to get full replacement value. If a member doesn’t believe that that’s been the case, then they can go to the civil resolution tribunal.

Again, this is about unburdening them. We’ve heard from just a handful of councils that they were unable to get 100 percent coverage, so in this case we said: “Okay, we’re not going to hold you to the legislation, but you still have to make best efforts.” And they have to be accountable to their members, because that’s ultimately who they’re accountable to.

[4:05 p.m.]

T. Stone: Well, again, just for clarity here, I think we all understand that the councils are accountable to their members, or the owners of the strata. What does the process look like, in practical terms, for a strata corporation being essentially deemed by the province — through the Strata Property Act, presumably, or in related regulations — to be off the hook insofar as meeting the 100 percent replacement cost coverage requirement? What does that process look like?

If it’s the government’s intention to maintain the 100 percent replacement cost coverage requirement, all the while allowing for exceptions where a strata council or a strata corporation cannot obtain the 100 percent, at what point…? How does the process actually unfold, in prac­tical terms, that provides the strata corporation, from government, with, essentially, a green light that the corporation can proceed with less than 100 percent replacement cost coverage?

Hon. S. Robinson: The strata corporation will have to demonstrate that they’ve made best efforts, and they’ll have to communicate that to the members. There’s another item later on in this bill that speaks to material changes and communicating clearly and early with members so that they have an understanding about what the material changes are, as well as demonstrating to their membership their best efforts to receive as close to 100 percent as possible if they could not get 100 percent coverage. They need to be able to demonstrate that, again, to their membership.

T. Stone: Is the approach of government, then, going to be that the 100 percent replacement cost coverage requirement will be a guideline, like a suggested best practice, a target, and that the encouragement will be there to do all you can to get 100 percent, but that if you don’t get 100 percent — as long as you can look your members, other strata owners, in the eyes that you’ve made the best effort — you’re not going to be offside with the Strata Property Act. Is that what the minister is saying?

[4:10 p.m.]

Hon. S. Robinson: This amendment is about striving to get 100 percent replacement coverage. In the rare circumstance where they can’t, this is about giving strata corporations just that flexibility when they can’t get the 100 percent because the product just isn’t available to them in the market. This, again, just keeps them from being offside of the legislation. But the commitment is to get 100 percent where they can and as close to 100 percent where they can.

T. Stone: Let’s run one scenario here. Let’s say a broker says to a strata corporation, upon renewal of their policy: “Good news. We’ve actually got two options for you now. One option is for 100 percent full replacement value coverage. The other option is for 90 percent coverage.” The 90 percent option is considerably less expensive than the first option. Will the Strata Property Act and related regulations require the strata corporation to go with the 100 percent replacement cost coverage option, or will the strata corporation have the choice in that situation?

Hon. S. Robinson: The act is clear: for a full 100 percent replacement value, if the product is available.

T. Stone: Okay. If that’s not going to change, that will still be the hard-and-fast requirement.

Then I’m still trying to understand what will let the strata corporation off the hook formally, from the government’s perspective. I get that they have to look their strata owners in the eyes. But certainly, if the minister is saying that to pursue 100 percent replacement cost coverage is still going to be the legal requirement, there must be some process the minister is contemplating that will formally advise the strata corporation that they’re okay at 90 percent, at 80 percent or at whatever the amount is that they were able to obtain, if it’s short of the 100 percent.

I’m really hoping the minister can provide her thoughts on what that practical process — that review, evaluation, whatever you want to call it — will look like that will make it okay for a strata corporation not to be at 100 percent full replacement cost coverage but at some lower amount.

[4:15 p.m.]

Hon. S. Robinson: Once again, it’s only okay to have less than 100 percent if the product is not available to them. They are required to obtain the maximum coverage that is available to them. Just like everything else in the Strata Act, they are accountable to their members.

T. Stone: I wanted, for the purposes of discussion on this section, to touch on the bare land strata piece again. I mentioned it in an earlier question to the minister on a different section. I know the minister probably shares the view that I do that bare land stratas are very, very different than a more traditional condominium-type strata. The common-area assets — that mix — are very, very different with a bare land strata. You’re talking about a common property that is much less reflected in buildings and more in asphalt, concrete, walls, common gardens and those kinds of things.

I’m wondering if the minister, as part of the changes here around full replacement-cost coverage, is taking into consideration a lower than full replacement-cost coverage on an asset mix for a bare land strata, which is very different than other types of stratas. Is that something the minister is thinking about or willing to consider, or is it the intention to move forward with the continued requirement for 100 percent replacement cost coverage for every type of strata — townhome, condo, apartment, bare land strata — moving forward? Will they all continue to be required to obtain the 100 percent replacement cost coverage?

Hon. S. Robinson: The answer is yes. Again, we need to remember that the insurance products change based on which kind of strata it is as well. There are a multitude of opportunities for different products, for different strata types. I guess that the short answer is yes.

T. Stone: Okay. I think we’ve raised this in the House as one example. I just want to reiterate this and ask a question around it, in the context of the subject that we’re talking about at the moment. It’s that Penticton example, which we’ve mentioned a few times. It’s a strata that had a fire, without coverage, because they couldn’t get full replacement cost coverage. They’re now obligated to renew on a prohibitive 100 percent policy with a premium that actually may bankrupt the strata. The premium has gone up so high that it may actually bankrupt the strata.

Could the prospect of bankruptcy due to that premium being so high be cause enough to allow for a less than full-replacement cost coverage amount for that particular type of situation?

[4:20 p.m.]

Hon. S. Robinson: Part of our consultation is to identify extenuating circumstances. But let’s be really clear here. This really is about ensuring adequate protection for strata owners. That’s the principle here — that we’re making best efforts and that we want strata corporations to be making best efforts so that there’s as much insurance as possible. Only when they can’t get a product, when it’s not available, does this amendment address that so that they’re not offside of the legislation.

T. Stone: If a strata corporation will be continued to purchase 100 percent coverage at any price, even though, as I asked a few questions ago, there might be a much less expensive option for, let’s say, 90 percent coverage…. If the minister is going to continue to insist on 100 percent replacement cost coverage in all situations as the desired outcome, does the minister not believe that such an approach is actually giving continued carte blanche to the insurance industry to continue to jack up the insurance rates on strata corporations and strata owners, as they have over the last year or two years?

Hon. S. Robinson: To the member’s question, our consultation is about getting a better understanding of what those extenuating circumstances are in order to best determine this question of 100 percent coverage. I also want to remind the member that mortgage lenders often require 100 percent. So that’s certainly an element that is well recognized in the industry.

[4:25 p.m.]

There is certainly, like I said earlier, a final report coming from the BCFSA. Combined with all these other tools, it is about getting the insurance system back to a healthier balance.

T. Stone: The minister’s comment about the consultations that will take place on this particular provision, as all provisions in this bill, I think is a good segue to my last question on this section, and it would be this.

Again, from a timing perspective, respecting the fact that hundreds and hundreds of strata corporations around the province are making excruciatingly difficult financial decisions respecting their insurance, moving forward, when can they expect the consultations on this piece to be concluded and the regulations to be developed and publicly released? Is the timing within weeks? Are we talking, again, the fall, as the minister has stated on some other sections? What does that timing look like?

I would just say…. I urge the minister, on behalf of so many people we’ve talked to on this or that we’ve heard from on this, to expedite the work on this piece so that people have the clarity that they need in order to factor it into these really difficult financial decisions that they’re making.

Hon. S. Robinson: As I’ve said before, our consultations are imminent, and our intention is to bring in regulations this fall.

The Chair: No questions on section 8, I understand, Member?

T. Stone: Yeah, sorry. One more question.

The Chair: Okay. Proceed.

T. Stone: Thank you, Chair.

I was remiss in asking this before the timing question a moment ago. The research that we’ve done in the official opposition and the industry folks that we’ve spoken to…. We’ve had several different folks confirm for us that in the past 55 years, here in British Columbia, there has only ever been one claim for a total loss.

Does the minister have stats that indicate otherwise? When government is insisting and the minister is insisting on continuing with a hard-and-fast rule around the 100 percent replacement cost coverage as the desired level of coverage that’s in place, isn’t she requiring a degree here of over-insurance that history indicates isn’t really necessary? Again, one total loss in the strata space over the last 55 years in British Columbia.

[4:30 p.m.]

[S. Gibson in the chair.]

Hon. S. Robinson: First of all, we need to remember that mortgage lenders also require 100 percent, so we want to make sure that there are certainly opportunities for people to purchase homes. But I want to make sure that the member understands that if you only get 80 percent coverage, and you have a $50,000 claim, it only covers 80 percent of that claim, and there’s still a gap. It’s not just about 100 percent coverage meaning 100 percent of the building. It’s for whatever the claim is — 100 percent of the claim, 50 percent of the claim, 80 percent of the claim. That certainly, I think, is the…. I want to make sure that the member understands that that’s what that means.

T. Stone: Yes, I do understand that that’s what it means. I guess the question was focused more on: does the minister feel that there is an element of overinsurance being required here? When we look at the requirement for 100 percent replacement cost coverage against the backdrop of only one total loss in this space in the span of the last 55 years…. I mean, that’s what industry analysts and folks in the industry have advised us in the official opposition. I was looking for whether or not the minister had some other statistics that she was privy to that were contradictory to what I suggested there.

In the interests of time, I’ll move on. That’s all the questions that I have on section 8. I have no questions on section 9 or section 10, so I’d be happy to move to section 11.

Sections 8 to 10 inclusive approved.

On section 11.

T. Stone: A couple of quick questions on this section. The first would be this: has the minister decided what the cap level will be? Is she considering a liability cap level in line with other jurisdictions? We know Alberta recently put in a cap of $50,000 here. Just trying to get an understanding of where the minister’s head is at and where government’s head is at around what this cap level might actually look like here in British Columbia.

[4:35 p.m.]

Hon. S. Robinson: This is another element for imminent consultation with determination on the regulation coming this fall, and we’ll certainly be looking at other jurisdictions to help in that consultation process.

T. Stone: Is it the minister’s sense that she may proceed or government may proceed with a liability cap that varies depending on the type of strata? Secondly, will the liability cap be linked to the liability insurance caps that are actually available to the individuals in question? Thirdly, will this individual owner’s liability cap be linked to the strata corporation’s deductibles in any way?

Hon. S. Robinson: The member’s questions are all part of the consultation.

T. Stone: Can the minister provide us with a sense of timing, again, related to when that consultation will be concluded and we will have answers — people in the sector, in the space will have answers — on what this indivi­dual cap will actually look like?

Hon. S. Robinson: As I said earlier, the consultations are imminent, and we will have the regulation ready this fall.

Section 11 approved.

On section 12.

T. Stone: Just one quick question. I know we canvassed the depreciation report changes in an earlier section, but there was one question that I just wanted to make sure was on the record. I’m hoping that the minister can answer.

As they’re doing their consultation and they’re developing the prescribed regulations on this issue of changes to the depreciation report requirements, I’m wondering: will the minister be open to considering different levels of depreciation reports — meaning, perhaps, circumstances where a depreciation report based on a detailed inspection is required versus general observations versus quantitative updates to previous versions of depreciation reports?

Hon. S. Robinson: That’s all going to be part of the consultation. And to anticipate the member’s potential next question, that consultation is imminent, and we expect to have the regulation in place for the fall.

Section 12 approved.

On section 13.

T. Stone: I have no further questions on section 13. We canvassed everything I was hoping to canvass as part of our discussions on section 8.

Section 13 approved.

On section 14.

[4:40 p.m.]

T. Stone: Section 14 deals with banning referral fees. I’m just wondering what data was presented to the minister that really highlighted the prevalence of referral fees for insurance sales to stratas.

Hon. S. Robinson: I want to be clear on the record that this is limited. We did hear, get some data, from the Insurance Council as well as the condominium home owners. We heard that there were seven property management companies that participated in this activity that we know of.

T. Stone: Just to be clear, the minister made the decision to ban referral fees based on information from seven property management companies across the entire province of British Columbia. Did I hear that correctly?

Hon. S. Robinson: I would say that that’s sort of preliminary, but I also want to remind the member that property management companies can service hundreds of strata properties, and that affects, of course, then, hundreds of strata corporations.

T. Stone: Can the minister tell us how common referral fees are? Can she illustrate that commonality in percentage terms or dollar values or percentage of total policies sold? What is the prevalence of referral fees in the industry?

[4:45 p.m.]

Hon. S. Robinson: We don’t have hard numbers, because it’s not a transparent fee. What I can tell the member is that this was raised by the Condominium Home Owners Association. They raised this issue as a problem. I’m just going to read a quote from a report that we received from them into the record, because I think it speaks to this particular challenge. They said:

“As of this report, there are several companies that are receiving commissions, either directly through their brokerages or a parent company or holding company. In some agency examples, brokerages are disclosing they may receive or may be permitted to receive a fee from third parties, with no particulars or amounts being disclosed to the strata corporations, including the origin of the fee or the amount.

“In another example, a gross percentage fee is being disclosed, either as a share of the insurance brokerage amount or an amount of the total cost of the insurance, without any disclosure of the actual amount received. There are also indications on the disclosure that this had no impact on the increase or cost of insurance.

“However, with no disclosure of the amounts earned as commissions by the insurance brokers, the methods of how insurance rates are determined, or the disclosure of the actual amounts received and paid, there is no evidence to indicate that the additional commission has not increased the cost of the insurance.”

According to the report, “Rates have been documented” — where they have been documented — “as high as 8 percent of the gross policy values.” It’s for that reason, hon. Chair, that this amendment is here.

T. Stone: Can the minister confirm whether or not the B.C. Financial Services Authority collected data with respect to how much the referral fees contribute to the price of strata insurance premiums? Perhaps she could express that in percentage terms. What percentage of the total cost of strata insurance relates to referral fees that are provided by brokers to property management companies and others?

Hon. S. Robinson: This particular item came out of another report from the B.C. Condominium Home Owners Association, and the FSA has been tasked with looking at the insurance side.

T. Stone: Just to confirm, is the minister saying that her government is proceeding with a provision in the legislation that she can’t actually quantify, that she can’t quantify the problem that this particular provision is seeking to address? It would seem to me that to take a measure such as this one to ban referral fees may sound like an attractive thing to do. It may very well be the right thing to do. What I’m looking for here is what the underlying basis, the financial basis, is for doing so.

One would think that the minister would be able to provide some sense of what portion of the overall strata insurance premium — the cost to the strata corporation, the cost to strata owners…. What percentage of that cost actually relates to referral fees? I’m not hearing from the minister that she has that quantification well understood or well in hand, yet she’s proceeding with this provision in this legislation. Is that correct?

[4:50 p.m.]

Hon. S. Robinson: Like I said to the member earlier, there’s no transparency in this. So that level of quantification is…. We’re not able to access it because it gets buried. But also, from a consumer protection perspective, we know that that’s not appropriate. We have been able to identify at least seven property management companies that use this, and given their responsibility for hundreds of strata corporations, this will certainly have an impact.

T. Stone: I have no further questions on section 14.

Section 14 approved.

On section 15.

T. Stone: Well, this section deals with enabling the enforcement of the referral fee ban provided for in section 14. My question would be this. What will this enforcement process actually look like?

Hon. S. Robinson: Contravention of the prohibition on referral fees will be an offence for which a person may be prosecuted and subject to a fine of not more than $25,000 for an individual and $50,000 for a corporation. So, for example, insurance brokers may face suspension or revocation of their licence, along with an administrative penalty of up to $25,000 for an individual or $50,000 for a corporation.

T. Stone: No further questions on section 15.

Section 15 approved.

On section 16.

T. Stone: Can the minister tell us what the timeline will be when it comes to non-renewal notifications by insurers?

Hon. S. Robinson: So this is part of consultation that is starting imminently and will be in regulation this fall.

[4:55 p.m.]

T. Stone: Can the minister imminently respond to my next question before the fall? The question would be: does the minister believe that 30 days is appropriate? We’ve received a lot of feedback in the official opposition from folks that 60 days, or even perhaps a bit longer than that, might be more helpful and more appropriate. Does the minister think that 30 days is truly adequate in this situation?

Hon. S. Robinson: I think, understanding the context that we’re working in right now, strata councils only get one or two days. So 30 days is certainly an improvement and really working to balance the needs between the strata corporation and the insurance brokerages and us. That’s really the balance that we’re looking to achieve.

T. Stone: No further questions on section 16.

Section 16 approved.

On section 17.

T. Stone: I’m just wondering. Again, I think the minister has heard a theme — well, a few themes — from us in the official opposition, one very important one being the timeliness of these consultations and engagements that will continue. The minister says they will imminently proceed with regulations, decisions around regulations, to be ready for the fall. When I hear that, I also realize that that coincides with the timing of the Minister of Finance’s economic recovery framework.

Has the minister pushed for strata crisis financial relief to be part of the government’s economic recovery framework, and could we expect to hear some details about that in conjunction with the announcement of regulations that pertain to this act in September of this year?

Hon. S. Robinson: The member will recall that we tabled this in February, March — before COVID, whenever that was — so our intent has been to move on this sooner than we’ve been able to, given that the Legislature wasn’t sitting through the spring. This body of work is completely independent of the COVID situation that is before us.

T. Stone: No further questions, Chair.

Thanks to the hard-working men and women in the ministry for the briefings that they’ve provided us ahead of time and the many questions that we have posed today, the background that they provide the minister and the support for all of us. We really appreciate it.

Section 17 approved.

The Chair: The only outstanding item is the title. We’ll have to leave the title, I am advised, given our time constraints here.

[5:00 p.m.]

Noting the hour, the committee is going to wrap up consideration of the title of Bill 14. We’re going to be, pursuant to the sessional order regulating hybrid proceedings of the House…. As members will know, we deferred a division, which will take place shortly, on the amendment proposed by the member for Abbotsford West, which appears on the order paper, to section 3 of Bill 14, Municipal Affairs and Housing Statutes Amendment Act, which we’ve been discussing today.

Members, pursuant to the sessional order regulating these proceedings, the House will stand recessed until 5:10.

The committee recessed from 5:01 p.m. to 5:10 p.m.

[S. Gibson in the chair.]

The Chair: Members, we’ll call the committee back to order.

[5:15 p.m.]

Members, we’ll proceed with the deferred division vote. The question is whether the amendment proposed by the member for Abbotsford West to section 3 of Bill 14, Municipal Affairs and Housing Statutes Amendment Act, shall pass.

[5:20 p.m. - 5:25 p.m.]

Amendment negatived on the following division:

YEAS — 41
Ashton	Barnett	Bernier
Bond	Cadieux	Clovechok
Coleman	Davies	de Jong
Foster	Hunt	Isaacs
Johal	Kyllo	Larson
Lee	Letnick	Martin
Milobar	Morris	Oakes
Paton	Polak	Redies
Reid	Ross	Rustad
Shypitka	Stewart	Stilwell
Stone	Sturdy	Sullivan
Sultan	Tegart	Thomson
Thornthwaite	Throness	Wat
Wilkinson		Yap
NAYS — 43
Bains	Beare	Begg
Brar	Chandra Herbert	Chen
Chouhan	Chow	Conroy
Darcy	Dean	D’Eith
Dix	Donaldson	Eby
Elmore	Farnworth	Fleming
Fraser	Furstenau	Glumac
Heyman	Horgan	James
Kang	Leonard	Ma
Malcolmson	Mark	Mungall
Olsen	Popham	Ralston
Rice	Robinson	Routledge
Routley	Simons	Simpson
Sims	Singh	Trevena
	Weaver

The Chair: We’ll return to the legislation and the bill. We’re going to go back to section 3, I am advised by staff, because the amendment failed. We’ll now proceed with section 3 and seek comments on this section.

Section 3 approved.

Title approved.

Hon. S. Robinson: I want to just take a moment to thank the staff, who worked diligently. I want to thank the members who participated in this committee.

I move that the committee rise and report the bill complete without amendment.

Motion approved.

The committee rose at 5:27 p.m.

The House resumed; Mr. Speaker in the chair.

Reporting of Bills

BILL 14 — MUNICIPAL AFFAIRS AND
HOUSING STATUTES
AMENDMENT ACT (No. 2), 2020

Bill 14, Municipal Affairs and Housing Statutes Amendment Act (No. 2), 2020, reported complete without amendment, to be considered at the next sitting of the House after today.

Hon. M. Farnworth moved adjournment of the House.

Motion approved.

Mr. Speaker: This House stands adjourned until Mon­day, July 27, at 10 a.m.

The House adjourned at 5:28 p.m.