Saturday, July 09, 2005
The Strata Property Act - Hardship Exemption from Rental Restriction By-law
My readers will remember that back in April I have posted an essay entitled "The Strata Property Act and the Rental of Strata Units in British Columbia". In this article it was discussed how the Strata Property Act affects by-laws dealing with rental restrictions in an apartment complex. More specifically, the article outlined Section 144 which permits an owner who wishes to rent to apply to the strata corporation for an exemption from the rental restriction on the ground of hardship. It is my experience as a real estate practitioner that more and more Sellers are relying upon the 'hardship exemption' from rental restriction by-laws during the course of negotiations concerning the sale of a residential strata lot. This, however, may not always be appropriate as explained in details down below.
The Strata Property Act allows strata corporations to prohibit the rental of residential strata lots or to otherwise limit the number of residential strata lots that can be rented out at any given time. The rationale behind such limitation is that owners, as a rule of thumb, take better care of common areas and general appearance, tend to be more respectful of rules, regulations and by-laws and as well as of one another more than tenants normally do. Whether this is in fact true is hard to say and, personally, I am more convinced that it varies from person to person.
Section 144 permits an owner who wishes to rent to apply to the strata corporation for an exemption from the rental restriction on the ground of hardship. Section 144, furthermore, spells out the procedure to apply for such exemption. The application must be in writing and must set out the reason why the exemption is needed. If the owner wishes a hearing, the Strata Council must give the owner the hearing within three weeks from the date of receipt the application. Once the hearing is held, the strata corporation must render a decision within a week. Failure to give a decision within the allotted time results in the exemption being automatically granted. If a hearing is not requested, the strata corporation must give its decision within two weeks. Exemptions from rental restriction by-laws may be granted on the basis of 'hardship' for a limited time and must not be unreasonably refused.
The Courts have endeavoured to define 'hardship' as contemplated under the Condominium Act which was replaced by the Strata Property Act on July 1, 2000. While there is legal authority to the effect that economic hardship alone is insufficient to establish the type of 'hardship' necessary for Section 144, it now seems to have been accepted by the Courts that economic hardship in conjunction with a leaky condo issue is probably the type of hardship contemplated by the legislation. In such a situation, the strata corporation would be bound not to unreasonably refuse to grant the exemption.
There is now also case authority which establishes that if a residential strata lot has fallen in value below the original purchase price because of the devaluation of the Canadian Dollar relative to the U.S. Dollar, this is not the type of 'hardship' which the legislators intended to point out to in Section 144. Moreover, if an owner is unable to sell a residential strata lot but, at the same time, decides to purchase a new home with mortgage financing and then applies to the strata corporation to have the strata lot exempted from rental restriction on the basis that the rental income will alleviate the 'hardship' by offsetting the mortgage payments, that too will not meet the sympathy of the Court. In other words, the Courts have held that it is reasonable for a strata corporation to refuse an exemption if the hardship was caused by a decision of the owner to improve his lifestyle, and not by circumstances outside the owner's control.
The qualification of hardship being caused by circumstances 'outside the owner's control' is diriment to the establishment of hardship under Section 144. If, for example, the residential strata lot is inadequate to meet the needs of an owner because of the arrival of a new child and the owner must then relocate, this would fall within the category of hardship contemplated in Section 144.
In a nutshell, it is important for owners contemplating an application to a strata corporation for relief of restriction under Section 144 to first carefully consider the circumstances to ensure that the application is cast in the best possible light.
Luigi Frascati
Real Estate Chronicle
