Part 46 published on 01/05/14
Strata corporation obligated to indemnify developer for payments made to concierge service contractor
The developer had entered into a contract for computer based concierge services (the “Concierge Service Contract”). The developer’s intention to enter into the contract, and to then assign the contract to the proposed strata corporation, had been disclosed in the disclosure statement. After establishment of the strata corporation, and before sale of any of the strata lots, the developer assigned the Concierge Service Contract to the strata corporation. The assignment was executed by the developer on behalf of the strata corporation.
The strata corporation refused to make payments under the Concierge Service Contract. One of the strata corporation’s reasons for refusing to pay was that the developer had failed to comply with Section 20 of the Strata Property Act, in that the developer had failed to place before the strata corporation’s first annual general meeting copies of all contracts entered into on behalf of the strata corporation – including the Concierge Service Contract and the related assumption agreement.
The concierge service contractor sued the developer for fees owing under the Concierge Service Contract. The developer settled that claim and sought to recover, from the strata corporation, the amounts paid by the developer to the concierge service contractor.
The developer’s claim against the strata corporation was successful. The Court’s decision included the following:
It is true that the Strata Property Act required the Owner Developer to place before the first Annual General Meeting of the Strata Corporation all contracts entered into or on behalf of the latter…
However, there is nothing in the Act which stipulates that non-compliance with Section 20 of the Act renders such contracts unenforceable as a matter of law. To the contrary, the Act expressly authorizes the Owner Developer to enter into such contracts on behalf of the Strata Corporation. Here, the contract was properly executed and was formally ratified by a resolution of the Strata Corporation. Under basic principles of contract law, the contract is clearly enforceable in accordance with its terms.