1. Rental Restrictions in Strata Corporations
What is the latest in residential rentals?
March 11, 2015
Presented by: Veronica P. Franco
PAMA Luncheon Presentation

2. Introduction Agenda for Today: 1. Rental Restriction Bylaws
Elements of a well written bylaw
Recent caselaw affecting language and content of rental restriction bylaws
2. Hardship and its definition
Recent caselaw regarding timing to respond to hardship applications
Renewal applications

3. Rental restriction bylaws
Legislative Limitations on rental restriction bylaws
Required elements on rental restriction bylaws

4. Rental Bylaws – Legislative Limitations
Section 121(c)
Section 141(1)
A bylaw is not enforceable to the extent that it prohibits or restricts the right of an owner of a strata lot to freely sell, lease, mortgage or otherwise dispose of the strata lot or an interest in the strata lot.
The strata corporation must not screen tenants, establish screening criteria, require the approval of tenants, require the insertion of terms in tenancy agreements or otherwise restrict the rental of a strata lot except as provided in subsection (2)

5. Rental Bylaws – Legislative Limits
Section 141(2)
The strata corporation may only restrict the rental of a strata lot by a bylaw that
(a) prohibits the rental of residential strata lots, or
(b) limits one or more of the following:
(i)   the number or percentage of residential strata lots that may be rented;
(ii)   the period of time for which residential strata lots may be rented.
These are the only restrictions that can be imposed on rentals

6. Rental Bylaws – Wording (Examples)
Bylaw: Subject to the provisions of this bylaw, strata lots shall be owner-occupied only, zero (0) rentals, with the following considerations and exceptions:
Issue: Owner-occupied
Enforceable?
Grandmothers?
Spouse of owner?
Children of owner?
No other occupants?

7. Rental Bylaws – Wording (Examples)
Bylaw: An owner, in good standing, must make written application to the Strata Council for approval to lease. Permission to lease, pursuant to Section143 of the Act shall not be granted for a period longer than one year, except in the case of unusual hardship.
Issues:
Owner in good standing?
Section 143 – one year grace period and RDS?
Unusual hardship?

8. Rental Bylaws – Wording (Examples)
No strata lots may be rented.
An owner wishing to rent a strata lot must apply in writing to the council for permission to rent. The council will review each application and may withhold permission if an exemption of bylaw 1 is not valid.
Issues:
Prohibition or not?
On what basis can rental be denied?
Legislative limits?

9. Rental Bylaws – Wording (Examples)
The number of strata lots that may be rented at any one time is 2.
An owner renting in breach of this bylaw must immediately end the tenancy and shall be fined the sum of $ per month.
An owner who rents a strata lot shall provide to the council a completed Form K in accordance with Sections 46 and 47 of the Condominium Act.
Issues:
What is the Condominium Act?
How is the limit administered?

10. Rental Bylaws – Administering the limit
A bylaw under subsection (2) (b) (i) (limiting 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 limit.
Section 141(3)
MUST SET OUT

11. Rental Bylaws – Procedure to Administer Limit
Carnahan v. The Owners, Strata Plan LMS 522, The bylaw in question: 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.

12. Rental Bylaws – Procedure to Administer Limit
Carnahan v. The Owners, Strata Plan LMS 522 (cont’d), The bylaw in question: 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 Strata Property Act Form K, signed by the tenant, that the owner and the occupants of the strata lot will comply with the bylaws and rules of the Strata Corporation.

13. Rental Bylaws – Procedure to Administer Limit
Carnahan v. The Owners, Strata Plan LMS 522 (cont’d) [32] Section 141(3) creates two obligations for a strata corporation purporting to restrict the number of strata lots that may be rented: (1) the strata corporation must have a procedure for administering the limit; and (2) that procedure must be set out in the strata corporation’s bylaws.

14. Rental Bylaws – Procedure to Administer Limit
Carnahan v. The Owners, Strata Plan LMS 522 (cont’d) [33] The Strata Corporation submits that a plain reading of s. 141(3) shows that strata corporations must have a procedure for administering the rental limit, not that the procedure must have a specific form. I agree. Unlike s. 144, which sets out the procedure a strata corporation must follow when it considers a hardship exemption, s. 141(3) gives a strata corporation considerable discretion in devising a procedure for administering a rental limit.

15. Rental Bylaws – Procedure to Administer Limit
Carnahan v. The Owners, Strata Plan LMS 522 (cont’d) [34] However, merely because the legislature did not set a particular procedure to follow does not leave a strata corporation with unfettered discretion to decide the content and scope of that procedure. By obliging a strata corporation to set out the “procedure,” s. 141(3) requires it to establish a process for administering the rental limit that is clear and logical, not ambiguous or arbitrary. A strata corporation must do more than set out a single step in the process.

16. Rental Bylaws – Procedure to Administer Limit
Carnahan v. The Owners, Strata Plan LMS 522 (cont’d) Rather, the procedure must be detailed enough that a strata owner, or a prospective strata owner, who reads the bylaws can clearly see how the strata corporation decides which strata owner is entitled to lease their strata lot when the rental restriction limit is not reached, and how a strata owner can attain that right. Such a requirement protects strata owners from the application of an informal and arbitrary procedure. Moreover, the bylaw’s procedure must not itself allow the strata corporation to administer the rental limit arbitrarily.

17. Rental Bylaws – Procedure to Administer Limit
Carnahan v. The Owners, Strata Plan LMS 522 (cont’d)
Rental bylaw must set out procedure for setting limit
If not, entire bylaw in unenforceable
One single step (i.e. apply in writing) is not enough
Having a policy is not enough
Must show how the strata council decides which owner is entitled to rent and how a strata owner can attain that right

18. Rental Bylaws – Procedure to Administer Limit
Checklist:
Which strata lots count towards the limit?
Application in writing
Waiting list basis – first come first served?
Council turnaround for response to application
What happens if limit is reached? Or not reached?
How long can unit sit empty?
How long can an owner rent – duration of tenancy, duration of ownership, or maximum period of time?

19. Rental Bylaws – Procedure to Administer Limit
Checklist (cont’d):
How long can an owner rent –
duration of tenancy, duration of ownership or unit moves back into unit, or a maximum period of time?
Owner on waiting list doesn’t want to rent, what are the options?

20. Hardship The timelines and consequences.
Hardship definition and obligations

21. Hardship – Section 144 – Application Basics
(1) An owner may apply to the strata corporation for an exemption from a bylaw that prohibits or limits rentals on the grounds that the bylaw causes hardship to the owner. (5) An exemption granted by the strata corporation may be for a limited time. (6) The strata corporation must not unreasonably refuse to grant an exemption.

22. Hardship – Section 144 – The Application
(2) The application must be in writing and must state
(a) the reason the owner thinks an exemption should be made, and
(b) whether the owner wishes a hearing.

23. Hardship – Section 144 – The time limits
(4) An exemption is allowed if (a) the strata corporation does not give its decision in writing to the owner, (i) if a hearing is held, within one week after the hearing, or (ii) if no hearing is requested, within 2 weeks after the application is given to the strata corporation, or (b) the owner requests a hearing under subsection (2) (b) and the strata corporation does not hold a hearing within 4 weeks after the date the application is given to the strata corporation.

24. Hardship – Missed deadline – the Caselaw
Strata Plan LMS 3442 v. Storozuk
Timeline:
March 7 – strata sends s. 135 letter with 14 day limit to respond and advising owner can apply for hardship
March 7 – owner says consider February his application and requests hearing at council meeting being held March 11
March 11 – at the end of the hearing, council rejects application (orally)
March 19 – council denies application by to owner

25. Hardship – Missed Deadline – the Caselaw
Strata Plan LMS 3442 v. Storozuk One day late was enough to make this an automatic hardship!

26. Hardship – Missed Deadline – the Caselaw
Strata Plan LMS 3442 v. Storozuk
Lessons learned:
Immediately forward application to owner;
Diarize deadlines;
Council must decide even if no meeting scheduled;
Do not miss deadlines!

27. Hardship – What is it?
The Act does not tell us what constitutes hardship. When does hardship exist? Look at the caselaw for guidance

28. Hardship – What is it?
McEvill Holdings Inc. v. The Owners, Strata Plan VR 314. 
the question of hardship must be tested by the facts of each particular case.
The insertion of the word “undue” before “hardship” requires the council to consider something more than hardship, but the Act, requires only “hardship”. The Court found the bylaw to be unenforceable because it established a stricter test than hardship.

29. Hardship – What is it?
The Owners, Strata Plan VR 333 v. Carl James Nunns (C.A.)
Mr. Nunns bought two units as an investor with a rental restriction bylaw in place at the time of his purchase.
The Court decided that since Mr. Nunns knew of the rental restriction bylaw at the time of the purchase, he could not claim that the bylaw does not apply to him.
The Court also said that it is not hardship when an investor purchases a strata lot in the face of an existing rental restriction bylaw.

30. Hardship – What is it? Von Schottenstein v. Owners, Strata Plan 730
The owner said that she had listed her strata lot for one year and had reduced the selling price considerably.
She would lose money on the sale.
The Court said that the owner’s efforts to sell her strata lot at various prices is insufficient alone to ground a case of hardship.

31. Hardship – What is it? Willson V. Highlands Strata Corp.
the strata corporation was trying to enforce the rental restriction bylaw by fining the owner;
The Court commented that economic hardship (i.e. decrease in market value) in conjunction with a leaky condo is probably the type of hardship contemplated by the legislation.

32. Hardship – What is it? Als v. The Owners, Strata Corporation NW 1067.
Mr. Als purchased a strata lot in 1993.
In 1999, Mr. Als was told by his employer that he would be permanently transferred to San Francisco.
Mr. Als made a hardship request on the basis that the appraised value of the property was considerably less than the value that he purchased for.
The council rejected the application on the basis said that no figures were given to the council nor was anything provided that would suggest that Mr. Als is going to suffer hardship due to the move

33. Hardship – What is it? Als v. The Owners, Strata Corporation NW 1067.
Mr. Als then is sent to France temporarily. 
Mr. Als hires a lawyer who submits to the council that it was unreasonable for Mr. Als to sell the unit, he may be held in breach of his insurance by leaving the unit vacant (although it had already sat empty for 2 years by that time.
The lawyer also requested details of all other hardship applications received by the council.

34. Hardship – What is it? Als v. The Owners, Strata Corporation NW 1067.
The court agreed that the council was correct in refusing to provide details of other hardship applications as such information was confidential.
The Court also agreed that the council was entitled to ask for Mr. Als financial documents to support his claim. 
Mr. Als produced no financial information that showed that he could not afford the strata lot expenses.
There was no evidence presented to council to prove that there was a breach of the policy and that no optional coverage was available for a vacant strata lot.

35. Hardship – What is it?
Als v. The Owners, Strata Corporation NW 1067 The Court listed the factors in determining hardship: (1) the council must consider the particular facts before it when making a decision to deny an application for hardship (2) an inability to sell a strata lots is only one of the factors to be considered and is not sufficient alone to ground a claim for hardship

36. Hardship – What is it? Als v. The Owners, Strata Corporation NW 1067
(3) some other factors :
the inability to obtain insurance because a unit is vacant;
the potential prohibitive cost of property management;
a substantial decrease in sale value where a new ban on rentals is put in place and the value of a strata lot being all or substantially all of the owner’s assets.
The Court concluded:
What may be hardship to one owner may not be hardship to another. Without the ability to review the question of whether there is actual financial hardship present and without the information available about other grounds of hardship alleged, the council was correct in concluding that Mr. Als had not shown that the bylaw limited rentals caused him hardship.
A decision by council as to whether hardship exists is a difficult one. Here are some suggestions to guide the strata council in reviewing an application for exemption from a rental restriction bylaw based on hardship:
The strata council:
1. should be fair and reasonable.
2. must not prejudge the issue before the hearing or reviewing the application.
3. should not lay down hard and fast rules because, by doing so, it shows itself to be inflexible.
4. must give reasons for its decision in writing to ensure that if it refuses a rental, the owner knows why he or she has been refused.
5. should consider limiting the term of the rental to determine, at a later date, whether or not hardship exists.
6. must not unreasonably refuse to grant an exemption.

37. Hardship – What is it?
Als v. The Owners, Strata Corporation NW (4) the rental bylaw must cause hardship “to the owner”. It is not enough to show a type of hardship which might necessarily apply to all non-resident owners. (5) Finally the Court applied the dictionary definition of “hardship” - “hardness of fate of circumstances; severe toil or suffering, extreme privation”.

38. Hardship – What is it?
Summary: The strata council: 1. should be fair and reasonable. 2. must not prejudge the issue before the hearing or reviewing the application. 3. should not lay down hard and fast rules. 4. must give reasons for its decision in writing. 5. should consider limiting the term of the rental to determine, at a later date, whether or not hardship continues to exist. 6. must not unreasonably refuse to grant exemption.

39. Hardship Renewal Applications
Treat just like the original application;
Does the hardship still exist?
Set a new time limit
When can you say no more renewals?
Douglas v. Strata Plan LMS 1328

40. Veronica P. Franco