JANUARY 1, 2006—WHAT DOES IT MEAN FOR STRATA RENTALS?

On January 1, 2006, some strata owners will no longer be able to rent their strata lots. This is due to Regulation 17.15 to the Strata Property Act.

When the Strata Property Act became law on July 1, 2000, Regulation 17.15 provided an exemption for second purchasers from the operation of a rental restriction bylaw until January 1, 2006. A first purchaser bought from the owner developer. A second purchaser is someone who bought a strata lot from a first purchaser.

Regulation 17.15 provides an exemption for second purchasers only if the Rental Disclosure Statement for the development was prepared under the Condominium Act. A Rental Disclosure Statement is a document attached to a Disclosure Statement. A Rental Disclosure Statement (under the Condominium Act) stated the number of strata lots the owner developer intended to lease and the period of time the owner developer intended to lease those strata lots. If a strata corporation passes a bylaw prohibiting rentals or limiting the number of strata lots that could be rented then, by virtue of the wording in the Rental Disclosure Statement, the owner developer could continue to lease the number of strata lots shown on the Rental Disclosure Statement; a first purchaser could rent his/her strata lot for the period of time that the owner developer intended to lease; and, as a result of Regulation 17.15, a second purchaser could lease his/her strata lot for the period of time that the owner developer intended to lease or until January 1, 2006, whichever came first.

If a strata lot, owned by a second purchaser, is designated as a rental strata lot on a Rental Disclosure Statement prepared under the Condominium Act, and the period of time the owner developer intended to lease the strata lot has not expired, a bylaw that prohibits or limits rentals will not apply to the second purchaser’s strata lot until January 1, 2006. However, there are a limited number of exceptions.

What if the strata corporation has a rental prohibition?

On January 1, 2006, if a strata corporation has a rental prohibition bylaw, some, but not all rentals will be in contravention of that bylaw. If the rental prohibition bylaw was passed within one year of January 1, 2006, the rental prohibition bylaw will not apply to any strata lot until one year after its date of passage. That may extend the time to rent past January 1, 2006 and the owner will not be in contravention of the rental prohibition bylaw.

If the tenant occupying the strata lot on January 1, 2006 is the same tenant that was in the strata lot on the date the rental restriction bylaw was passed, that tenant gets to stay beyond January 1, 2006 and the owner is not in contravention of the bylaw.

When the tenant, who was in the strata lot on the date of passage of the rental prohibition bylaw moves out, the rental prohibition will not apply to that strata lot until one year after the tenant who was in the strata lot on the date of passage of the rental restriction bylaw ceases to be a tenant of that strata lot. When the one year expires, the renting owner will be in contravention of the bylaw.

What if the strata corporation has a rental limit?

If there is a bylaw limiting the number of strata lots that may be rented, the same exceptions to the January 1, 2006 deadline will apply as those for a rental prohibition bylaw. For example, if the tenant on January 1, 2006 is the same tenant that was in the strata lot on the date of passage of the bylaw, then the owner may continue to rent the strata lot until one year after the tenant who occupied the strata lot on the date of passage of the rental limit, ceases to be a tenant of the strata lot, etc.

In the case of a rental limitation bylaw, the limit may not, in fact, be reached. Strata lots owned and rented by first purchasers do not count for the purposes of determining whether a rental limit has been reached. By not counting first purchasers, there may be room within a rental limit for second purchasers to rent despite the arrival of January 1, 2006 and the owner will not be in contravention of a rental limitation bylaw.

The Strata Property Act requires a strata corporation that limits rentals to adopt bylaws to administer that limit. If there are no bylaws for administering a rental limit, then the limit may be unenforceable, even though the strata corporation has a bylaw stating a rental limit.

In conclusion, January 1, 2006 may end the right of a second purchaser to rent, but that determination should be made only after consideration of the wording in the Rental Disclosure Statement; the date of passage and wording of any rental restriction bylaw; the number of strata lots that are rented; whether the tenant on January 1, 2006 is the same tenant that occupied the strata lot on the date of passage of a rental restriction bylaw; or whether a rental limit has been reached.

Bonnie Elster

Clark Wilson LLP