What is a Strata section?

Strata sections are formed to allow a group of owners with a specific common interest within the strata corporation to oversee and administer themselves. They function as “mini-strata corporations” for the property, operations and interests of the section owners. Strata sections collect fees, administer bylaws and manage funds. While strata sections are still part of the strata corporation, they are also a distinct entity.

Examples of strata sections include:

  • Commercial and residential sections within a mixed-use strata corporation
  • Two residential towers with distinct occupancies and entrances
  • Townhouse and condominium/apartment sections within a strata corporation with multiple building types
  • Commercial unit owners using their units for significantly different purposes

How are Strata sections governed?

Strata sections are governed under the British Columbia Strata Property Act (Part 11, Sections 190-198).

What are the powers and duties of a Strata section?

Section 194.2 states, with respect to matters that pertain solely to the section, the section is a corporation and has the same powers and duties as the strata corporation:

(a) To establish its own operating fund and contingency reserve fund for common expenses of the section, including expenses relating to limited common property designated for the exclusive use of all the strata lots in the section

(b) To budget and require section owners to pay strata fees and special levies for expenditures the section authorizes

(c) To sue or arbitrate in the name of the section

(d) To enter contracts in the name of the section

(e) To acquire and dispose of land and other property in the name of or on behalf of the section

(f) To enforce bylaws and rules

What are some insurance considerations for Strata section?

While the strata corporation must still obtain insurance (property and liability) per the Strata Property Act, a section may obtain insurance:

  • Against perils not insured by the strata corporation
  • For amounts more than the amount insured by the strata corporation

While the owners within the section retain the benefit of the insurance policies that the strata corporation must obtain, these policies may not extend to the section's distinct operations, assets and exposures. Regarding the section as a corporation, it is prudent that a section insures these distinct property and liability exposures. Common examples include:

  • Directors and officers (D&O) liability
    • In the context of strata corporations, D&O policies may provide professional liability coverage, including defense costs, for the corporation and council members for alleged wrongful acts
      • In some cases, coverage may be extended to include a property manager.
  • While it may be possible to add the section under the strata corporation’s D&O policy, it may not be preferable for both parties.
  • Sections can obtain D&O insurance to protect the section and executive board members.
  • Legal expense coverage
    • May provide legal expense coverage to defend/pursue disputes, including contract/debt recovery, property and bodily injury.
    • Access to a legal advice helpline and document review/drafting services.

  • Crime
    • This coverage may extend to employee dishonesty, forgery, acceptance of counterfeits and loss of money/securities.
    • If a section handles money and/or employs people who have access to section funds, this coverage is prudent.

  • Cyber and cybercrime
    • These policies are increasingly critical and extend to a wide range of exposures, including:
      • Data compromises: Including accidental or improper disclosure/distribution of personal information electronically.
      • Computer attacks and extortion: Usually involves hacking, malware, ransomware, denial of service and a demand for money.
      • Identify theft: May extend coverage for case management and expenses necessary to respond to identify theft.
      • Social engineering and funds transfer fraud: May extend to the good faith transfer of money/securities according to fraudulent instructions.
      • Electronic theft of funds: Involves the unauthorized transfer/theft of funds by cyber criminals.

What is the most common example of a claim involving a Strata section?

The most common circumstance in which we see strata sections exposed to potential expense, loss and liability is related to disputes. These disputes may be between the section and:

  • Other sections
  • Owners within the section
  • The strata corporation
  • Other third parties

Common dispute types include:

  • Parking allocation, cost sharing and amenity usage/access
  • Bylaw enforcement
  • Property damage

How can I find out more?

Contact your HUB representative to discuss insurance involving strata sections or reach out to [email protected].

Disclaimer: This bulletin is intended to provide readers with general information only and is not a confirmation of coverage. Readers are urged not to rely solely on the content of the bulletin but to consult with appropriate professionals on a case-by-case basis.