Ownership Types

There are several options for the ownership structure of your small water system in British Columbia. This choice is important to make early in your planning as the business structure of your system will establish several things: what laws and rules must be followed, how decisions will be made for future upgrades, and how funds can be collected. The ownership type will also determine the governance structure, and may also include other regulatory obligations beyond those outlined under the Drinking Water Protection Act and the Water Sustainability Act. The Drinking Water Protection Act defines the "owner" as the person or persons that are "(i) responsible for the ongoing operation of the water supply system, or (ii) in charge of managing that operation".

According to the BC Ministry of Health's Small Water System Guidebook, water systems with less than 50 connections have higher financial and operational risk over time. It’s clear that careful oversight is as important in small systems as it is in large ones.

Choosing the correct ownership type for your needs will help strengthen the sustainability of your water system and improve risk management, which helps to ensure good water quality. It should also help make business planning and change easier.

Private ownership may include ownership by a:

  • Sole Proprietorship - A sole proprietorship is a business with a single owner/individual. This person is solely responsible for all decisions and all liabilities. It is the simplest kind of business structure. A sole proprietor works for themselves rather than being employed by a company, and takes on all legal and financial responsibilities for the business.

  • Partnership - A partnership is an association or relationship between two or more individuals, corporations, or trusts that join together to carry on a trade or business. Each partner contributes money, labour, property, or skills to the partnership. In return, each partner is entitled to a share of the profits or losses of the business. The business profits (or losses) are usually divided among the partners based on the partnership agreement. Like a sole proprietorship, a partnership is easy to form; a simple verbal agreement is enough to form a partnership. However, most partnerships are governed by a written agreement that sets out rules for partners entering or leaving the partnership, the division of partnership income, as well as other matters.

A corporation is a legally established entity that can enter into contracts, own assets and incur debt, as well as sue and be sued—all separately from its owner(s). Choosing to incorporate impacts your business's operational, accounting, tax and legal requirements. Because it is defined by law, a corporation can technically exist forever. This means that if the owner or owners die, the company can continue as an operating entity—unlike in partnerships or sole proprietorships where company assets may be tied up in estate and taxation issues.

strata corporation is an incorporated structure that is a legal entity with all of the powers of a natural person who has full capacity. This means that it can sue or be sued, enter into contracts and hire employees. The owners of the strata lots are the members of the strata corporation. The strata council is the elected executive body for the strata corporation. The strata council’s role is to: i) act as the managing body for the strata corporation, ii) make daily decisions that enable the strata corporation to operate smoothly and iii) operate according to the Strata Property Act, regulations, bylaws and rules, or a majority vote of the owners.

When a strata corporation is responsible for paying a judgment, the owners are personally liable to pay a portion of the judgment in proportion to their unit entitlement. A strata corporation does not have limited liability like a company. A strata corporation is created to divide a building(s) and/or a parcel of land into separate components that are individually owned as well as common components which are owned by all of the owners. A strata corporation is a legal entity that is created by the deposit of a strata plan in the Land Title Office. The strata plan will show the separately and commonly owned components of the building(s) and/or land; separately owned components are referred to as strata lots and commonly owned components are referred to as common property.

cooperative association (co-op) is a legal entity. It is independent of its members, which makes it easier to enter into contracts, incur debt or get funding. Cooperatives do not have to incorporate, but incorporating has advantages as mentioned above. Co-op members will have specific responsibilities geared towards a common goal, and often share equally in profits and decision making.

Public ownership includes the following types of local governments:

  • Regional Districts and Municipalities - Local governments include municipalities and regional districts.  Regional districts are generally considered the most effective way of providing broad and expanded rural area services. To learn more, visit the BC Government website.

  • Improvement DistrictsImprovement Districts are incorporated public local bodies, usually in rural areas, governed by a board of elected trustees. In areas where a regional district is unable or unwilling to establish a service area, Improvement districts provide services such as water and fire protection services for the benefit of landowners within their boundary. Part 17 of the Local Government Act outlines the specific legislation regarding the creation, dissolution and operation of an improvement district.

They are similar in structure to a municipality or regional district but are more informal and may only provide the services authorized in their letters patent.

The Improvement District Manual was prepared by the province as a guide for improvement district trustees and staff on matters of policy, governance, financial planning and engineering, but has information of interest to anyone within such a district.

Visit the BC Government's Improvement Districts page for more information.

Irrigation Districts are autonomous local government bodies usually located in rural areas that were mainly created to serve the farming community. They are very similar in structure to improvement districts as they are governed by a board of elected trustees. To publicly manage large irrigation systems, in the 1920s, several irrigation districts were created in the Okanagan Valley and, around the same time, many others were created throughout BC. While some of the many irrigation districts that exist in BC have permits to act as large water suppliers (serving > 500 people per day), there are a number of these public water systems that are small water systems.

A private water utility under the Water Utility Act is a person or business who owns or operates equipment or facilities for the delivery of domestic water service to five (5) or more persons (normally 5 or more connections) or to a corporation for compensation (fee for service). As with all water suppliers, water utilities are responsible for supplying safe drinking water to their water users.

Private water utilities are usually created by developers to serve rural land development where community water service is required for subdivision approval, and where there is no other water purveyor in the area that can provide service. The Private Water Utilities in BC - Guide to Applying for a Certificate of Public Convenience and Necessity (CPCN) provides guidance on how to apply for a CPCN.  The process of granting a CPCN is designed to coordinate with the subdivision approval.

In addition to the regulations related to your Permit to Operate issued by the regional health authority and your water licence issued under the Water Sustainability Act, utilities are also regulated under the Utilities Commission Act. This Act ensures that water systems are designed and operated in a safe and sustainable manner.

Visit the BC Government’s Private Water Utilities webpage for more information on utilities.

In B.C., not-for-profit/non-profit organizations are known as societies. Societies are independent, democratic organizations that are required to comply with the Societies Act and their own constitution and bylaws. The Societies Act provides requirements for the creation and operation of a registered society. Societies do not have to incorporate, but it can make it easier to get funding available only to incorporated (or registered) societies. It also gives a society the rights of an individual, an independent existence separate and distinct from its members and an unlimited life expectancy. A society may be incorporated for any lawful purpose. The society's assets and income must be used to fulfil its purposes. A society may have directors, but sharing capital is prohibited.

A Water Users’ Community is a group of water users that has been incorporated under Section 51 of the Water Users’ Communities Act. Typically, Water Users' Communities are formed for the purpose of delivering water from a water source, using a single distribution system.

The advantages to this type of incorporation are that you can acquire water licenses, water storage and water distribution systems. As with any water ownership type, there are economies of scale that apply: As the number of members in the water users’ community increases, operation costs are shared across a greater number of members. In theory, you should see a decrease in overall cost for daily operation as more users join the system.

However, as water systems become larger they can become more difficult to administer and operate. Water Users’ Communities that are struggling to operate or are looking at significant costs for upgrades should speak to their local government or regional government about being acquired (i.e., transfer ownership to the local or regional government).

The BC government’s Water Users’ Communities webpage provides links to many useful documents and tools.

These often represent very small water systems where one neighbour shares water with another. In most cases, one property owner owns a well or has a surface water license, and water is shared from one property to another.

If you have a good neighbour system and own the water source, you may be considered a water purveyor (provider). In this case, specific responsibilities under the Drinking Water Protection Act may apply to you. Meeting those requirements could be expensive. Beyond the requirements of the Act, a water system can be time-consuming or costly to maintain. As time goes on, neighbour relations can break down, or properties could change ownership, which may result in changes to neighbourly relations.

To avoid these types of problems, consider formalizing your agreement with your neighbour. By creating a written agreement that outlines utility costs, water allotment (how much water your neighbour can use or expect), contingency funding and dispute resolution, you can ensure that everyone has the same understanding, and there is a legal document you can refer to in case of disagreement or confusion. Any agreement should be reviewed by your lawyer. You may also consider a joint works agreement, which is an agreement that lays out how the costs and responsibilities will be shared among two or more entities. If you have questions about Joint Works Agreements, there is more information available in the resources section below or you may wish to talk to Front Counter BC.

Water System Acquisition Planning

Many local governments (regional districts and municipalities) have policies and bylaws that explain how a water system may be considered for acquisition. From our experience, the first place to start is to discuss acquisition with your regional district Area Director (an elected representative) or as a petition to the local municipality. In most cases, you will need the support of the water users before starting the acquisition process. Check ahead with your local government  to see what rules apply.

Mobile home parks, systems with only a few connections and leasehold buildings (commercial, industrial and residential) are often privately owned by either a sole proprietorship, partnership or corporation.

An incorporated structure has some advantages over non-incorporated water systems. An incorporated water system such as a strata corporation, cooperative association, society, utility or water users’ community comes with regulations. These require specific rules and processes be followed for the proper operation and administration of the water system. These rules help to guide finance, membership and administration. 

As with all business types , the affordability of maintenance and overall sustainability of the water system are impacted by size and scale. You should get advice from a chartered accountant and lawyer before setting up any privately owned water system, in particular, for a partnership, strata corporation, cooperative association or society. For more information on societies, cooperatives and incorporated companies and organizations, visit the BC Government’s BC Registries and Online Services webpage.

Acquisition can take time, sometimes many years. But there are advantages to acquisition; local governments can apply for senior government funding for water infrastructure improvements, have or can hire professional staff, and are more financially stable.

Other Ownership Types

We’ve outlined the most common ownership types above, but others may be more applicable to your situation. You can find out more on the Province of BC websites listed in the Resources section at the bottom of this page, and more details on business structures and ownership types can be found in the Small Water System Guidebook in Section 8.