Rental Restriction Bylaws

The statutory bylaws 1 do not limit an owner’s right to rent his or her residential strata lot to a tenant. 2

 A strata corporation, however, may amend its bylaws to restrict rentals in residential strata lots.

 

Rental Disclosure Statement

If a developer intends to rent one or more residential strata lots, or to specifically designate strata lots for rental after purchasers acquire them from the developer, section 139(1) of the Strata Property Act requires the developer to file a Rental Disclosure Statement with the Superintendent of Real Estate before the first strata lot is offered for sale. The developer must also give a copy of the filed Rental Disclosure Statement to each prospective buyer before he or she purchases a strata lot. The prescribed form of Rental Disclosure Statement has changed over the years. Under the Strata Property Act, a Rental Disclosure Statement is known as Form J, which is found among the forms in the Regulations. As a result of changes to the Strata Property Act in December 2009, the government also amended the prescribed form of Rental Disclosure Statement (Form J). 3

In the Rental Disclosure Statement (Form J) the developer must specify:

  • the number of residential strata lots in the development,
  • as at the date of the statement, the number and identity of strata lots that are rented out by the developer and the date until which the developer intends to rent each of those strata lots,
  • in addition to the number of strata lots rented out by the developer at the date of the statement, the number and identity of strata lots that the developer reserves the right to rent, and the date the rental period expires for each of those strata lots,
  • whether there is a bylaw of the strata corporation which restricts rentals and, if so, the text of the bylaw.

The developer may change the number of strata lots intended for rental, the rental period for the strata lots or both in the Rental Disclosure Statement (Form J). 4 If the developer still owns all the strata lots, changing the Rental Disclosure Statement (Form J) is relatively easy. The developer does not need anyone’s permission.

However, if the developer does not own all the strata lots, he or she must first obtain the prior approval of the eligible voters by a 3/4 vote at a general meeting. The developer is not eligible to vote on the resolution. Nor may persons vote if they are voting in respect of a non-residential lot or a strata lot that is already rented. 5

If the developer changes the Rental Disclosure Statement (Form J), the developer must file an amended copy with the Superintendent of Real Estate. 6 In addition, the developer must give a copy to every purchaser who previously received a copy of the former Rental Disclosure Statement (Form J). The developer must also give a copy to each prospective buyer before he or she enters into an agreement to purchase a strata lot. 7

Failure to Comply

If the developer fails to follow any of these requirements, section 140 of the Strata Property Act allows the purchaser of a residential strata lot to cancel his or her agreement with the developer to purchase the strata lot, without penalty. In other words, a purchaser may anytime before completion cancel the contract of purchase and sale for a strata lot, all “without penalty”. 8 It likely follows that the purchaser is also entitled to the return of all deposit monies previously paid under the contract.

Before a purchaser cancels a contract to purchase a strata lot because the developer breached the requirements for a Rental Disclosure Statement, the purchaser should always consult a lawyer.

Previous Condominium Legislation

Developers also filed rental disclosure statements under previous condominium legislation, including the former Condominium Act, whose provisions in this regard were similar to those in the Strata Property Act. If a developer delivered a Rental Disclosure Statement to the Superintendent of Real Estate before July 1, 2000, when the Strata Property Act came into force, that document is deemed to be a Rental Disclosure Statement under the Strata Property Act. 9

Strata Corporation May Restrict Residential Rentals

A strata corporation may only restrict the rental of residential strata lots in the strata plan. Rental restrictions are typically found in a strata corporation’s bylaws. In the case of a leasehold strata plan, rental restrictions may also be found in a schedule of restrictions filed with the leasehold strata plan at the Land Title Office. 10

The former Condominium Act permitted a strata corporation to limit the number of residential strata lots that could be rented. 11 Generally speaking, the courts found that the power to limit was not the same as the power to prohibit. Though a strata corporation might limit the number of rentals to one, it could not pass a bylaw limiting rentals to zero because that amounted to a prohibition. 12

Section 141(2) of the Strata Property Act permits a strata corporation to pass a bylaw that either:

  • prohibits the rental of residential strata lots, or
  • limits one or more of the number or percentage of residential strata lots that may be rented, or the period of time for which they may be rented.

Any bylaw which limits the number or percentage of strata lots that may be rented must set out the procedure to be followed by the strata corporation in administering the bylaw. In addition, the bylaw must not require the screening of tenants, establish screening criteria, require the approval of tenants, or require the insertion of terms in a tenancy agreement. 13

[NEW] If a strata corporation limits the number or percentage of rentals, it’s bylaw for administering the limit must be clear and logical. The bylaw must not be arbitrary. The procedure must ensure that decisions concerning which owner may rent are not left to the unfettered discretion of strata council, whose members could have ulterior motives. 14

[NEW] In Carnahan v. Strata Plan LMS522 15, the court suggested that a bylaw for administering a rental limit should answer these questions: 16

  • Must an application to rent be in writing?
  • What information must be included in the application?
  • To whom must the application be delivered (e.g.; to a strata council member, to the strata corporation’s strata property manager, or to someone else) ?
  • Within what time frame will the strata corporation respond to an application? Must that response be in writing?
  • If the owner fails to find a tenant within a specified period, is the permission to rent revoked? If so, how long does the owner have to find a tenant before permission to rent is revoked and permission is given to another owner?
  • If the limit is reached, is there a waiting list? If so, how does the strata corporation administer the waiting list?
  • What is the penalty for renting a strata lot in violation of the rental limit bylaw? 17
  • If permission to rent is granted, is there a time limit on the rental period, or may the strata lot be rented for an indeterminate amount of time?
  • In what other circumstances might the strata corporation revoke a permission to rent a strata lot? For instance, what happens if, during the rental period, the tenant vacates the strata lot, or the owner occupies it. Or, what happens where the owner of a rented strata lot transfers all or part of that owner’s interest in the strata lot to someone else?
[NEW] These guidelines are not prescriptive. Rather, they reflect some of the more important concerns that a strata coporation might reasonably consider when creating a procedure to administer a rental limit.

[NEW] In the Carnahan case, the strata corporation’s rental restriction bylaw established a five-rental maximum. With regard to administering the rental limit, the bylaw said only this:

9. RENTAL PROHIBITION

9.1 The maximum number of strata units that may be rented at any one time is five (5).

9.2. An owner shall obtain the written permission of the strata council before renting or leasing the strata unit.

9.3 Where hardship results to the owner, he may appeal to the council for permission to lease his strata lot, and the council shall not unreasonably refuse the appeal, all pursuant to the Strata Property Act, section 144 and amendments thereto.

9.4 Owners who have rental units must accompany or have an appointed agent accompany prospective renters when showing their unit.

9.5 Before an owner rents his strata lot, the owner must give the Strata Corporation the undertaking in (sic, the) Strata Property Act Form K, signed by the tenant, that the owner and occupants of the strata lot will comply with the bylaws and rules of the Strata Corporation.

Elsewhere, the corporation’s bylaws effectively reproduced the hardship provisions in the Strata Property Act, and authorized the corporation to punish violations of its rental bylaw. 18 [NEW] In Carnahan, the court found the strata corporation’s rental restriction bylaw unenforceable. It did not establish a clear and logical procedure for administering the rental limit. The bylaw failed to adequately say how the strata corporation determined which strata lots may rented until the limit is reached. Plus, it did not prevent the strata corporation from administering its limit in an arbitrary fashion.

[NEW] Nor may a strata corporation adopt an informal procedure to make up for its failure to properly set out in the bylaws the corporation’s procedure for administering its rental limit. In Carnahan, the court said, 19

As stated above, the language of s. 141(3) [of the Strata Property Act] clearly requires that the procedure must be set out in the bylaws. There is no scope for a strata corporation to outline a deficient procedure in the bylaws and in practice to adopt a more expansive informal procedure. … If a strata corporation were entitled to to adopt an informal procedure for administering the rental limit not set out in the bylaws, a prospective strata owner would be at an informational disadvantage, left with no accurate understanding of how the strata corporation administers the rental limit. Without such information, when deciding whether to purchase a strata lot, they may overestimate their prospects for renting it and suffer financial loss.

[NEW] In summary, when there is a rental limit, a strata corporation’s bylaws must establish a procedure for administering the limit that is clear, predictable and non-arbitrary. The bylaw must plainly inform an owner, or prospective owner, how the strata corporation decides which owner may rent their strata lot until the limit is reached. 20

Specifically, so long as the developer in a phased development complies with the dates in the Phased Strata Plan Declaration, or in an amended Declaration, for the beginning of construction of each phase, the strata corporation may not create, change, or repeal any bylaws dealing with rental restrictions until one of the following occurs: 21

  • the annual general meeting is held following the deposit of the final phase, or
  • in accordance with the Strata Property Act, the developer elects not to proceed with the next phase, or
  • the Supreme Court of British Columbia declares that the developer is deemed to have elected not to proceed, or
  • the strata corporation obtains the written consent of the developer.

When Does a Rental Restriction Bylaw Apply?

If a strata corporation passes a bylaw restricting rentals of residential strata lots under the Strata Property Act, the date the rental restriction applies to each strata lot may vary from one strata lot to another. The application of the rental restriction bylaw may be affected if the developer filed a Rental Disclosure Statement that designates an owner’s strata lot for rental, or by a provision of the Act that delays the application of a rental restriction bylaw or otherwise exempts the owner from the bylaw. 22 Determining when a rental restriction bylaw applies to a strata lot can be a complicated process under the Strata Property Act.

Rental Disclosure Statements

If there is a Rental Disclosure Statement that designates an owner’s strata lot for rental, the statement may permit the owner to rent the strata lot, despite any bylaw restricting rentals.

To determine if a rental restriction bylaw applies to his or her strata lot, an owner must first check whether the developer filed a Rental Disclosure Statement. If the Rental Disclosure Statement designates the owner’s strata lot for rental, the owner must then determine if the scheme in the Strata Property Act permits the owner to rent that strata lot, despite the rental restriction bylaw. The scheme is described below.

Where To Find A Rental Disclosure Statement

If the strata development is one where the developer was initially required to give each purchaser a copy of a disclosure statement or, in some cases before 2005, a copy of a prospectus, an owner will typically find a copy of the developer’s Rental Disclosure Statement, if any, in that disclosure statement or prospectus. 23 If it is uncertain whether a Rental Disclosure Statement exists, an owner may check for a Rental Disclosure Statement on file at the office of the Superintendent of Real Estate. As at the time of this book’s publication, the fee payable to the Superintendent to obtain a copy of a Rental Disclosure Statement, or any amendment to it, is $38. 24

The Scheme For Determining If A Rental Disclosure Statement Permits Rental

Effective December 11, 2009, the provincial government simplified the scheme for determining if a Rental Disclosure Statement overrides a rental restriction bylaw so as to permit the rental of a strata lot. 25 In this scheme, the result depends when the developer filed the Rental Disclosure Statement, and if the statement was filed before 2010, whether the owner is a first or subsequent owner.

Rental Disclosure Statement Filed Before January 1, 2010

If the developer filed the Rental Disclosure Statement before January 1, 2010, the scheme also distinguishes between the first owner (other than the developer) versus a subsequent owner.

The term first owner describes a person who bought his or her freehold or leasehold interest in the strata lot from the developer. 26 The term subsequent owner describes a person who bought from the first or any later owner. For example, if a developer sold a strata lot to Person A, who later sold it to Person B, then Person B is a subsequent owner.

Owner Buys Under An Assigned Contract Of Purchase And Sale

In today’s real estate market, a buyer who enters a contract of purchase and sale to buy a strata lot from a developer may sometimes assign the contract to another buyer. In effect, this means the initial buyer sells her right to purchase the strata lot, on the terms and conditions in that contract, to another buyer. The sale of contractual rights from one buyer to another is called an assignment. When the second buyer, acting under the assignment, completes the purchase of the strata lot from the seller, title is usually transferred directly from the seller to the second buyer. If the seller is a developer, this means that title will most likely be transferred directly from the developer to the second buyer. This would make the person who, under the assignment, bought from the Seller a first owner, as described above.

For example, suppose that a developer enters a contract to sell a strata lot to Buyer A. Before the time in the contract for completing the purchase, Buyer A assigns her position under the contract, as purchaser, to Buyer B. On the date for completing the sale, Buyer B pays the purchase price to the developer, who then transfers title to the strata lot directly to Buyer B, who becomes the registered owner of the strata lot at the Land Title Office. In this example, Buyer B is the first owner because he bought his freehold interest in the strata lot from the developer. 27

In the author’s view, where a buyer, under an assignment of contract, purchases a strata lot from a developer, as seller, that buyer becomes a first owner if the effect of the assignment is such that the buyer receives his or her title, as registered owner at the Land Title Office, directly from the developer.

First Owner

Where the developer filed the Rental Disclosure Statement before January 1, 2010, and a strata lot is designated as a rental strata lot in the statement, a rental restriction bylaw does not apply to that strata lot until the earlier of: 28

  • the date on which the first owner (other than the developer) conveys the property to the next owner, or
  • the date the rental period expires, as disclosed in the Rental Disclosure Statement as it read on December 31, 2009.

The Rental Disclosure Statement preserves the right of the first owner to rent the strata lot for the rental period specified in the statement. So long as the rental period in the Rental Disclosure Statement continues to run (that is, the rental period has not expired), the first owner may rent the strata lot for the whole time that he or she remains the first owner, despite any rental restriction bylaw. This is so even though the rental restriction bylaw may apply to other residential strata lots.

If, however, the rental period has expired, the first owner is no longer able to rent the strata lot under the protection of the Rental Disclosure Statement. The owner must then consider whether one of the other delaying provisions, or one of the exemptions, in the Strata Property Act will postpone the application of the rental restriction bylaw, as described later in this chapter.

Where the Rental Period is Described as “Indefinite”

If a developer described the rental period in the Rental Disclosure Statement (Form J) as indefinite, the first owner should obtain legal advice about the effect of the statement on the owner’s ability to rent the strata lot.

In April 2000, in Abbas v. The Owners, Strata Plan LMS 1921, the Supreme Court of British Columbia held that a Rental Disclosure Statement was invalid because it described the length of time the strata lot could be rented as indefinite. 29.

In Abbas, the Rental Disclosure Statement was issued under the Condominium Act. The Rental Disclosure Statement stated that the developer reserved the right to lease all of the units in the building for an indefinite period. The court held that the owner could not rely on the Rental Disclosure Statement. Section 31(1) of the Condominium Act required the developer to disclose the following information in its Rental Disclosure Statement:

In Abbas, the court found that the developer failed to comply with at least two requirements created by the Condominium Act and the prescribed form of Rental Disclosure Statement then in use. 30 First, the developer failed to state its intention, and second, the length of time the developer planned to lease the strata lots. Although the court did not expressly say so, the ruling implies that describing a rental period as indefinite fails to state a length of time. The court held that the owner could not rely on the Rental Disclosure Statement to rent her strata lot because the Rental Disclosure Statement did not comply with the statutory requirements.

In 2009, in Spagnuolo v. Strata Plan BCS 879  31 the Supreme Court of British Columbia held that the earlier Abbas decision was wrongly decided and declined to follow it. In Spagnuolo, the prescribed form of Rental Disclosure Statement provided a blank space to identify all strata lots intended to be rented out by the owner developer and the date that the rental period expired according to “month, day, year.” In the Rental Disclosure Statement, the developer stated that the rental period was “unlimited – no expiry date.” Although the developer deviated from the requirement in that particular form of Rental Disclosure Statement to state the specific date when the rental period expired, the deviation was not fatal. In Spagnuolo, the evidence showed a clear intention that the rental rights of a first owner in the strata plan should not expire prior to conveyance to a subsequent owner. Applying a remedial provision in the Interpretation Act, 32 the court held that since the deviation was not meant to alter the substance of the form, or to mislead, it did not invalidate the Rental Disclosure Statement. The Rental Disclosure Statement in Spagnuolo was valid, even though it described the rental period as, “unlimited – no expiry date.”

Since each case depends significantly on its particular facts, including the wording of the particular Rental Disclosure Statement, a first owner whose Rental Disclosure Statement describes the rental period as indefinite should obtain legal advice before relying on it.

Subsequent Owner

Where the developer filed the Rental Disclosure Statement before January 1, 2010, and the statement designates the strata lot for rental, a subsequent owner cannot rely on the statement to rent that strata lot. The Rental Disclosure Statement does not give a subsequent owner authority to rent the strata lot, even if the rental period in the Rental Disclosure Statement continues to run (that is, where the rental period has not yet expired). The right to rely on the Rental Disclosure Statement to rent the strata lot ended when the first owner conveyed that strata lot to a subsequent owner.

The subsequent owner should then consider whether one of the other delaying provisions in the Strata Property Act, or one of the exemptions, will postpone the application of the rental restriction bylaw as described below.

Developer Changes The Rental Disclosure Statement

If a developer filed a Rental Disclosure Statement before January 1, 2010, but sometime after December 31, 2009 the developer changes the Rental Disclosure Statement, that statement is still treated as one filed before January 1, 2010 for the purpose of this scheme. In other words, no matter how the Rental Disclosure Statement is later changed, it is still treated as a statement filed before January 1, 2010 for the purpose of determining if the statement permits the rental of a strata lot. 33

Rental Disclosure Statement Filed After December 31, 2009

Where the developer filed the Rental Disclosure Statement after December 31, 2009, and the statement designates a strata lot as a rental strata lot, a rental restriction bylaw does not apply to that strata lot until the date the rental period expires, as disclosed in the Rental Disclosure Statement. So long as the rental period in the Rental Disclosure Statement continues to run, the owner may rent the strata lot, regardless whether that owner is a first or subsequent owner. Put another way, if the developer filed the Rental Disclosure Statement after December 31, 2009, it does not matter whether the owner who wishes to rent bought the strata lot from the developer or not. The rental restriction bylaw does not apply to that strata lot so long as the rental period described in the Rental Disclosure Statement continues to run.

Delaying Provisions

Where a strata corporation passes a rental restriction bylaw, the Strata Property Act gives each owner a grace period before the bylaw applies, with one exception described below.

For strata lots to which a rental restriction bylaw would apply (for example, where the right to rent is not preserved by a Rental Disclosure Statement), the general rule is that a bylaw that prohibits or limits rentals does not apply until the later of: 34

  • One year after a tenant who is occupying the strata lot at the time the bylaw is passed ceases to occupy it as a tenant, or
  • one year after the bylaw is passed,

whichever occurs last.

This means that where a rental restriction bylaw is passed, its application must be delayed for at least one year.

For a strata lot without a tenant in place when the rental restriction bylaw was passed, the bylaw will not apply for one year. This is the case even if the owner occupied the strata lot at the time the bylaw was passed. If, in the interim, pending the end of the one-year grace period, an owner wishes to rent his or her strata lot to a tenant, the owner should first obtain legal advice. The Residential Tenancy Act strictly limits the grounds upon which an owner, as landlord, can terminate a tenancy agreement. 35

If a rental restriction bylaw is passed while a tenant is occupying a strata lot, the bylaw will not apply until one year after that tenant has moved out. This provision may benefit a subsequent owner who is no longer protected by a Rental Disclosure Statement. For example, an owner who purchased the strata lot from the developer may have rented the strata lot to a tenant. The first owner may have then sold the strata lot to a subsequent owner while the tenant continued to occupy the strata lot. If the tenant occupying the strata lot was the tenant in place at the time the bylaw was passed, although the subsequent owner cannot take advantage of a Rental Disclosure Statement, the subsequent owner can take advantage of the delaying provision. The subsequent owner will have one year after the tenant leaves before the rental restriction bylaw applies to the strata lot.

During the one-year period after the tenant has moved out, and before the rental restriction bylaw applies, an owner may wish to rent the strata lot. Again, as indicated above, the owner should first obtain legal advice. The owner must ensure that he or she, as landlord, is not obligated to continue renting to the tenant once the rental restriction bylaw takes effect.

There is an exception to this one-year grace period scheme. If, in the early stages of the project before there are any other owners, the developer passes a rental restriction bylaw, that bylaw immediately applies to every strata lot. 36 Where this exception occurs, there is no one-year grace period from the time the bylaw is passed.

Exemptions to a Rental Restriction Bylaw

Under certain circumstances, even though a rental restriction bylaw would normally apply to a strata lot, an owner may be exempted from the application of the bylaw.

Family Members

A bylaw that prohibits or limits rentals cannot prevent an owner from renting a strata lot to a member of the owner’s family. 37

For the purposes of an exemption from a rental restriction bylaw, section 8.1 of the regulations define a family member as a:

  • spouse of the owner,
  • parent or child of the owner, or
  • parent or child of the spouse of the owner.

The term spouse includes an individual who has “lived and cohabited with the owner, for a period of at least 2 years at the relevant time, in a marriage-like relationship, including a marriage-like relationship between persons of the same gender.” 38 Neither the Strata Property Act nor the regulations define the term child, but the Law and Equity Act does. The term child refers to the tenant’s relationship to the owner, whether by blood or marriage, not the tenant’s age. 39 Consequently, the term child in this definition includes an adult child.

If a strata corporation has a bylaw that limits rentals (for example, a bylaw limits rentals to a maximum of six rentals at any time), then the corporation must not, for the purpose of that bylaw, consider a residential strata lot rented if the owner has rented the strata lot to a family member under this exemption. 40

Hardship

An owner may apply to the strata corporation for an exemption from a rental restriction bylaw on the grounds that it causes hardship to the owner. A strata corporation must not unreasonably refuse the owner’s request. In granting an exemption, the strata corporation may impose a time limit. 41

The owner must apply in writing. The application must state the reason the owner thinks an exemption should be made, and whether the owner wishes a hearing. The regulations define a hearing as an, “opportunity to be heard in person at a council meeting.” 42

If an owner wishes a hearing, Section 144 of the Strata Property Act requires the strata corporation to hear the owner, or the owner’s agent, within four weeks after the date the application is given to the corporation. 43 The Interpretation Act, however, requires that we calculate this four-week period by excluding the first day of the period of time, and including the last day. In effect, when Section 144 of the Strata Property Act and Section 25 of the Interpretation Act are read together, this means that the strata corporation must begin the hearing within 29 days from the date the application is received. For example, if on the first day of the month an ow