Wednesday, December 14, 2005
January 1, 2006: Changes in the Applicability of Strata Rental Restriction By-laws.
The Strata Property Act provides that developers and Buyers who purchased from developers are exempt from a Rental Restriction By-law under certain circumstances if a Rental Disclosure Statement was filed by the developer with the Superintendent of Real Estate. Under a valid Rental Disclosure Statement developers and first Buyers are able to rent their strata lots even though a Strata Corporation has passed a Rental Restriction By-law. A change, however, is going to take place effective January 1, 2006 in that as of this date only first purchasers from a developer are exempt from a Rental Restriction By-law. More specifically, s. 17.15 of the Strata Property Regulations reades 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.”
The effect of s.17.15 which has been in place since January, 2000 is limited only to those circumstances where a Strata Corporation has passed a Rental Restriction By-law, and Buyers who have not purchased directly from the developer (second Buyers on) have been exempted from the By-law. As of January 1, 2006 developers and first Buyers continue to be exempt from a Rental Restriction By-law if a valid Rental Disclosure Statement has been filed with the Superintendent of Real Estate. Many people in real estate and the media have somehow incorrectly interpreted that this legislative change to the Strata Property Act will prevent all landlords of strata properties from renting their units. While it is true that some strata owners will no longer be able to rent, January 1, 2006 is not ‘The End’ for rentals of investment strata properties in British Columbia.
Under the old Condominium Act if a Strata Corporation passed a By-law prohibiting rentals or restricting the number of strata lots that could be rented, the developer could continue to rent the number of strata lots shown on the Rental Disclosure Statement. A first Buyer could also rent for the period of time that the developer intended to rent. It was unclear, in the Condominium Act, whether subsequent or second Buyers could also rely on the Rental Disclosure Statement. Transitional relief for this clarification brought forth in the new Strata Property Act which was legislated in 2000 provided that second purchasers had a reprieve from a Rental Restriction By-law until January 1, 2006. Therefore also a second purchaser could rent a strata lot for the period of time the developer intended to rent according to the Rental Disclosure Statement, or until January 1, 2006.
On January 1, 2006 if your Strata Corporation has a Rental Restriction By-law in effect, the practical applications of this change are as follows:
1. if the rental prohibition By-law was passed within one year prior to January 1, 2006 the By-law will not apply to any strata lot until one year after the date it was passed. This may very well extend the time beyond January 1, 2006 and the strata lot owner, in this case, will not be in contravention of the By-law – but only until the one-year anniversary;
1. if the rental prohibition By-law was passed within one year prior to January 1, 2006 the By-law will not apply to any strata lot until one year after the date it was passed. This may very well extend the time beyond January 1, 2006 and the strata lot owner, in this case, will not be in contravention of the By-law – but only until the one-year anniversary;
2. if the tenant occupying the strata lot is the same tenant that was in the strata lot the date that the Rental Restriction By-law came into effect, the tenant gets to stay beyond January 1, 2006 and the strata lot owner is not in contravention of the By-law;
3. when the tenant that occupied the strata lot at the time the By-law was passed moves out, the Rental Restriction By-law will not apply to that individual strata lot until one year after that tenant has moved out of the strata lot.
The same rule apply as of January 1, 2006 to by-laws limiting the number of units that can be rented out. For further information or clarifications feel free to e-mail me or post your questions on this blog.
Luigi Frascati
Real Estate Chronicle
