Real Estate Chronicle

Lawmakers in Victoria have confused things so much, that now not only nobody knows who's under a rental restriction bylaw - nobody even knows when the right to pass any such bylaw exists. So therefore, time has come to clear up things a little bit. Who knows, if I'm lucky perhaps they are going to offer me a job as the official interpreter of the legal mambo-jumbo lawmakers typically seem to be so fond of dishing out to the rest of us.

Under the old Condominium Act if a Strata Corporation passed a bylaw prohibiting rentals or restricting the number of strata lots that could be rented out, the developer could continue to rent the number of strata lots shown on the Rental Disclosure Statement. A First Buyer, that is someone who was buying the strata lot from the developer, could also rent for the period of time that the developer intended to rent. It was unclear, in the Condominium Act, whether second or subsequent 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 bylaw 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.

A change has taken place effective January 1, 2006 in that as of this date only First Purchasers from a developer are exempt from a ental restriction or prohibition bylaw. More specifically, s.17.15 of the Strata Property Regulations reads as follows:

The effect of s.17.15 is limited only to those circumstances where a Strata Corporation has passed a rental restriction or prohibition bylaw, and Buyers who have not purchased directly from the developer (second Buyers on) have been exempted from the bylaw. As of January 1, 2006 developers and first Buyers continue to be exempt from a rental restriction bylaw if a valid Rental Disclosure Statement has been filed with the Superintendent of Real Estate.

It is important to understand that under the Strata Property Act a Strata Corporation may restrict or prohibit rentals by passing a rental restriction or prohibition bylaw. It is also important to realize that if a Strata Corporation passes a bylaw that restricts or prohibits rentals, every strata lot in the development will eventually be subjected to the rental restriction or prohibition unless the strata lot is protected by a Rental Disclosure Statement (RDS).

If the RDS has been filed under the Strata Property Act , a rental restriction or prohibition bylaw does not apply to a strata lot that has been included in the RDS until the earlier of a conveyance by the First Purchaser or the expiry of the RDS. At the time the First Purchaser sells the strata lot, even though the RDS has not expired, the protection provided by the RDS terminates. This means that all subsequent Purchasers will be subjected to a rental restriction or rental prohibition bylaw.

If the RDS was filed under the former Condominium Act, the new Strata Property Act mandates that a bylaw restricting or prohibiting rentals does not apply until the earlier of the expiry of the RDS, a conveyance by the First Purchaser or January 1, 2006 if the strata lot has been conveyed by the First Purchaser. Essentially, this provision was intended to protect developers and First Purchasers until the expiry of the RDS, and subsequent purchasers until January 1, 2006.

To determine the expiry date of the RDS, one must first obtain it. The Rental Disclosure Statement for a development offered for sale is included as an exhibit to the developer's Disclosure Statement. Thus, when a Buyer is purchasing from the developer, the Buyer is entitled at law to receive a copy of the RDS as part of the Disclosure Statement package. In the extreme (and unlawful) case that no such exhibit is included in the package, a copy can be obtained from the Office Of The Superintendent of Real Estate.

Finally, a word of advice. Many Buyers look at the bylaws to determine whether there is a rental restriction or prohibition bylaw in place. If there are no such bylaws, the Buyer may be under the impression that the property he is setting about to purchase is appropriate as an investment property. Buyers must clearly understand, that restriction or prohibition bylaws can be passed by the Owners of the Strata Corporation (not by Strata Council) at the Annual General Meeting or any Special General Meeting. Bylaws of this nature need to be approved by a 75 percent majority (3/4 vote) of the people present at the Meeting and entitled to vote, or their proxies.

On occasion, Buyers take comfort from the fact that a number of strata lots are owned by investors, and as a result believe that there is little likelihood of a rental restriction or prohibition bylaw being approved. This provides fleeting comfort, at best. If a number of investors sell their strata lots, the make-up of the Owners could change very quickly so that a rental bylaw could be passed. In all cases where Buyers are not protected by the RDS, even though there is no bylaw that limits or eliminates rentals, Buyers must be aware of the possibility that such rental bylaw may be enacted in the future.

There it is. I can hardly imagine anything more transparent and crystal clear than this Article. Whoever said that Real Estate is rocket science?