Dealing With Rental Disclosure Statements

Many people don't even know what a Rental Disclosure Statement ("RDS") is, let alone understand the impact it can have (especially on a rental bylaw). An RDS, in the right circumstances, can grant an owner the right to rent a strata lot notwithstanding that a rental bylaw (even one prohibiting rentals) has been validly enacted. Determining when and how a RDS applies is important to both the owners and the strata council.

An RDS is a document filed by the owner-developer at the time the building is constructed and forms part of the general disclosure statement required under the Real Estate Act. It sets out the owner-developer's intention to rent some or all of the strata lots and sets out whether any lots are in fact rented. (In most cases the owner-developer declares its intention to rent all the strata lots indefinitely. This is done in case they have trouble selling the lots. It would then allow them to rent the strata lots and receive revenue until such time as they are sold). The wording of the RDS is also important as will be discussed below.

The RDS is important since under the Strata Property Act certain owners inherit the owner-developer's right to rent. (This was also the case under section 31(5) of the Condominium Act).

The first step in any analysis is to distinguish whether the RDS was filed under the Condominium Act or the Strata Property Act. This makes a difference as to when a rental bylaw applies. The next step is to determine whether the current owner is the "first purchaser". ("Purchaser" is defined in the Strata Property Act as "a person who enters into an agreement to purchase a strata lot"). Finally, was the rental bylaw passed under the Condominium Act or the Strata Property Act? After one is armed with this information, one can attempt to navigate the labyrinth of rules as they apply to the RDS.

For an RDS filed under the Condominium Act, the first purchaser is exempt from the provisions of a rental bylaw until that person sells or the RDS expires (whichever comes first) since Regulation 17.14 deems the RDS filed under the Condominium Act to have been filed under the Strata Property Act. If an owner is a subsequent purchaser (i.e. not the first purchaser) the rental bylaw will not apply until January 1, 2006 or the expiry date of the RDS (whichever is earlier) as per Regulation 17.15. This would appear to apply even if the bylaw was passed under the Condominium Act.

Section 143(1) adds an extra twist to the application of an RDS to subsequent purchasers. That section further delays the application of a rental bylaw until 1 year after the tenant residing in the strata lot at the time the bylaw was passed leaves. Thus the 2006 deadline can be extended further.

How the provisions of section 143(1) apply when a rental bylaw passed under the Condominium Act is revoked and a new one is passed under the Strata Property Act isn't clear. For example, if a bylaw passed under the Condominium Act allowing one rental is replaced by a bylaw not allowing any rentals do the provisions of that section which delay the application of the bylaw (as discussed above) now apply to all strata lots? Arguably they might, but the better view is that they do not. By amending the bylaws an owner should not be able to acquire more rights than they had prior to the revision. This issue, however, only really becomes relevant if there is no RDS.

An RDS filed under the Strata Property Act is much easier to deal with. The right to rent under the RDS gets passed to the first purchaser only (s.143 (2)). That owner can then rent their strata lot notwithstanding a no rental bylaw until they sell their strata lot or until the period set out in the RDS expires (whichever is earlier). (Typically owner-developer expresses an intention to rent indefinitely, thus the right will end when the strata lot is sold).

RDS's aren't always what they seem either. Careful attention must be paid to the wording of the RDS in order to determine whether or not it triggers the rights set out under the Strata Property Act. In the case of Abbas versus The Owners LMS1921 (2000)(BCSC) it was held that the owner-developer must state an intention to rent the strata lots not simply a reservation of the right to rent them, in order for an owner to take advantage of the provisions of an RDS. This is because both Acts use the word "intends". There is simply no provision in the legislation for an owner-developer to "reserve" a right to rent.

If an owner intends to rely on a RDS to rent a strata lot (as opposed to a right to rent pursuant to a bylaw or the hardship provisions of the Strata Property Act as set out in s.144) they must carefully review the situation and ensure that the RDS applies and is valid. Otherwise the rental is in contravention of the bylaws and fines will likely be imposed. This can be a tragic and costly mistake.

Shawn M. Smith is an associate lawyer with the law firm of Cleveland & Doan located in White Rock and may be reached at 604-536-5002. This article is intended for information purposes only and nothing contained in it should be viewed as the provision of legal advice.