WHAT’S NEW- 2006 and Rental Bylaws; Council Member Liability; Expense Allocation.
Although significant changes in the law don’t occur
very often, there have been two recent decisions of the British Columbia
Supreme Court that will be of interest to strata councilors and owners alike.
As well, there has been a recent flurry of discussion surrounding January 1,
2006 and rental restriction bylaws. In this installment of Legally Speaking
I will review all three of these current topics.
This is a topic which has received much attention
as of late and caused many owners who rent their strata lots a great deal of
concern. It has also caused a good deal of confusion. All of this arises out
Regulation 17.15 of the Strata Property Act, which delays the
application of rental restriction bylaws (by this I mean a bylaw which either
limits the number of strata lots which can rented or prohibits rentals
entirely) in certain circumstances.
Regulation 17.15 of the Strata Property Act
reads as follows:
Despite
section 143 (2) of the Act, but subject to section 143 (1) of the Act, if a
strata lot is conveyed by the first purchaser of the strata lot, and the strata
lot was designated as a rental strata lot on a rental disclosure statement in
the prescribed form under section 31 of the Condominium Act and all the
requirements of section 31 of the Condominium Act were met, a bylaw that
prohibits or limits rentals does not apply to that strata lot until the earlier
of:
(a)
the date the rental period expires, as disclosed in the statement;
(b)
January 1, 2006.
A careful reading of this
regulation is required to determine if and when it applies to a
strata corporation.
First of all, it applies
only to strata corporations created under the Condominium Act; in other
words prior to July 1, 2000. For strata
corporations created after July 1, 2000, the application of a rental
restriction bylaw is governed by Section 143 of the Strata Property Act.
Secondly, it applies to
an owner of strata lot who is not the first purchaser (i.e. the person who
bought directly from the developer). All first purchasers inherit the rental
rights that the owner-developer reserved in the Rental Disclosure Statement.
Thirdly, it arguably
applies only to rental restriction bylaws passed after July 1, 2000. That is
because the regulation was not in place until that date. To hold otherwise
would invalidate the rental restriction bylaws of every strata corporation in
the province that has passed such a bylaw. Certainly this was not the intention
of the Legislature.
Fourthly,
there must be a valid Rental Disclosure Statement filed by the owner-developer.
This is the most technical aspect of Regulation 17.15. Section 31 of the Condominium
Act required the owner-developer, if they were filing a Rental Disclosure
Statement, to state an intention to rent some or all of the strata lots (if
less than all of them then the strata lots in question had to be identified)
and the length of time that the strata lots were intended to be rented.
In Abbas v. The
Owners, Strata Plan LMS1921 (2000)(BCSC) the court held that where an
owner-developer in a Rental Disclosure Statement merely “reserved” the right to
rent strata lots that invalidated the Rental Disclosure Statement. This is
because s.31 of the Condominium Act required the owner-developer to
state their “intention” to rent.
A “length of time” must
be set out in the Rental Disclosure Statement as well. While there has been no
direct judicial consideration of what constitutes a “length of time”, in Hill
v. Strata Plan NW2477 (1995)(BCSC) the court appeared to consider a
Rental Disclosure Statement which referred to “an indefinite period of time” as
not giving the owner any protection from a rental restriction bylaw. However,
the case dealt primarily with the issue of legal costs and as such that comment
carries minimal weight. It is the writer’s opinion that the use of the term
“indefinite” is sufficient to satisfy the requirements of s.31.
If all four of these
factors are present then a rental restriction bylaw passed after July 1, 2000
does not apply until January 1, 2006
(assuming the date set out in the Rental Disclosure Statement is after
that date). There is one exception to this. If a particular strata lot was
being rented at the time the rental restriction bylaw was passed and that same
tenant is still renting it on January 1, 2006, then the bylaw applies to that
strata lot one year after that tenant vacates. Strata corporations that have
passed a new bylaw package as a result of the introduction of the Strata
Property Act need not worry if all they did was re-enact their existing
rental restriction bylaw. By doing so they have not opened their building up to
rentals.
Once the rental
restriction bylaw becomes applicable, an owner who is in contravention of the
bylaw becomes subject to fines by the strata corporation.
Although Standard Bylaw
22 exempts council members from liability where they have acted in good faith,
where they have failed to do so council members can find themselves in a lot of
trouble. In the recent case of Dockside Brewing Co. Ltd. et al. v. The
Owners, Strata Plan LMS 3837 et al., (2005)(BCSC) the court held the
council members personally liable for monies which they had spent pursing a
legal action which the owners expressly told the council not to pursue and
which was not in the best interests of all the owners, but rather the council
members and a small group within the strata corporation. The court held that
the “Strata Council Members subverted the interests of the Strata Corporation
to their own interests” and that they “acted in a reprehensible manner
deserving of rebuke by the court”. They were rebuked with a judgment against
them personally for $190,338.99!
Council members should
not become fearful because of this case. The court will still judge the actions
of the council in light of whether or not they have acted in good faith (which
has been defined as “a term used to describe a
state of mind denoting honesty of purpose, freedom from intention to defraud,
and being faithful in one’s duty or obligation.”) It is only in extreme
situations such as that in Dockside that the court will find council
members personally liable. This case should, however, encourage council members
to seek professional advice where appropriate.
Another recent decision
of interest is Large,
McCall et al v.
The Owners, Strata Plan No. 60 (2005)(BCSC). This case involved a dispute
between townhouse owners and apartments owners over the allocation of certain
expenses. The strata corporation had neither a “types” bylaw nor was it divided
into sections, thus all expenses were borne by all the owners in proportion to
their relative unit entitlement. Some of the townhouse owners were unhappy
about this and took the matter to court. The court held that:
“it is significantly unfair
[under s.164 of the Strata Property Act] that the respondent corporation
includes within its operating expenses the costs associated with the provision
of benefits and services that are of practical use only to the apartment owners
and that it does not provide the same benefits and services to the townhouse
owners”.
The court ordered that:
“[the
strata corporation] discontinue its inclusion of the expenses… within its
operating expenses unless those expenses are thereafter covered by the
apartment units, either pursuant to section 100 of the Act, or unless
appropriate user fees are imposed under the Regulation, or unless the costs are
covered other than by charging any portion of them to the townhouse units”
This
decision is significant in that a single owner can now make an application to
the court to force the allocation of expenses where the owners as a whole have
refused to pass a bylaw doing the same. It will be very interesting to see the
long-term impact of this decision.
Shawn M. Smith is an
associate lawyer with the law firm of Cleveland & Doan located in White
Rock and may be reached at 536-5002. He practices primarily in the area of
strata property law. He is Honourary Legal Counsel for the Pacific Condominium
Association and frequently lectures to its members. This article is intended
for information purposes only and nothing contained in it should be viewed as
the provision of legal advice.