The rational for rental restrictions is generally that owner occupants may be more likely to be personally invested in the building compared to owners that lives elsewhere. This can lead to a more proactive and engaged strata community.
The drawback of rental restrictions for some owners is that they lose the ability to rent their condo when they move out and for whatever reason, are unable or unwilling to sell their unit. This can be financially burdensome for owners and may lead to conflict with the strata corporation.
Penalties for violating a rental restriction bylaw can be severe. Depending on the bylaws, a strata corporation may fine an owner up to $500 a week for breach of a rental restriction bylaw.
This article will discuss how strata corporations and owners can deal with the issue of rental restrictions, and particularly how to deal with a hardship exemption application.
There are generally four ways to get around a rental restriction bylaw:
- Rent to family. A strata corporation cannot restrict an owner from renting to their spouse, their parents, their children, or their spouse’s parents or children. If you are unsure of whether a particular family member qualifies under this family exception, we recommend you seek legal advice.
- If the owner bought from the developer, they should check the Form J: Rental Disclosure Statement. The Rental Disclosure Statement may designate the unit as a rental lot and thereby exempt the unit from any rental restrictions. If you are unsure of whether a Rental Disclosure Statement permits you to rent your condo, we recommend you seek legal advice.
- Challenge the rental restriction bylaw. Challenging the validity of a strata corporation’s bylaws through litigation is a complex legal process. We recommend you seek legal advice if you are considering this option.
- Apply to the strata corporation for a Hardship Exemption. If the owner can show that the rental restriction causes hardship, the strata corporation may grant an exemption pursuant to s. 144 of the Strata Property Act (SPA).
The focus of the rest of this article is on how owners and strata corporations can navigate the hardship application process.
What is Hardship?
The test for hardship is set out in the leading case of Als v. Strata Corporation NW 1067, 2002 BCSC 134. The Als case determined that to qualify for a hardship exemption, the owner applying must demonstrate actual “hardness of fate or circumstance; severe toil; suffering; or extreme privation” as a result of the rental restriction bylaws. This standard is high and may be very difficult for the owner to meet.
Strata corporations are also given discretion in considering applications for a hardship exemption in the sense that their decision just needs to be reasonable. Under s. 144(6) of the Act, a strata corporation may not reasonably deny an application.
How To Make or Respond to a Hardship Application
Hardship applications must be made in writing to the strata corporation and set out the reasons for why they believe the exemption should be made and whether the owner wants a hearing.
If the owner requests a hearing, the strata corporation must hear the owner within 4 weeks after the written application is given to the strata corporation and give the owner a written decision within 1 week of the hearing.
If the owner does not request a hearing, the strata corporation must provide the owner with a written decision within 2 weeks.
Delivery of an application to the strata corporation must be made pursuant to s. 63 of the SPA by:
- leaving it with a council member;
- mailing it to the strata corporation at its most recent mailing address on file in the land title office;
- faxing it or emailing it to:
- the strata corporation using the strata corporation’s fax number or email address; or
- a fax number or email address provided by a council member for the purpose of receiving the notice, record or document; or
- putting it through the mail slot, or in the mail box, used by the strata corporation for receiving notices, records and documents.
The application is deemed to have been received when handed to the council member in person or four days after it is mailed, faxed, emailed or put through the mail slot as set out above.
If the strata corporation fails to hold a hearing or give the owner a written decision on time as set out above, the hardship exemption will get granted automatically. Thus, strata corporations should ensure that they respond promptly within the applicable time limits. Conversely, owners may want to be strategic in how they choose to deliver their applications.
How Does an Owner Prove Hardship?
The owner must show that the rental restriction causes them hardship as described in the Als case.
A strata corporation does not have to consider any hardship that could have been avoided or is affordable to the owner seeking the exemption. The court in Als was clear that having extra costs is the natural result of owning a condo but living somewhere else. The strata corporation hearing a hardship application does not need to factor in those those costs unless they were unavoidable and the owner cannot afford them.
Unless the owner was somehow forced to move out of their condo, it may be difficult to prove that the hardship was unavoidable. Therefore, most hardship applications will likely come down to whether the owner making the application is suffering an unaffordable hardship as a result of the restriction.
It will not be enough for an owner to say that they will suffer financial losses because of the restriction. The Als case tells us that the owner must also show that they cannot afford the loss. For example, a rich owner may be perfectly able to cut their losses and sell their property at a loss without any hardship at all, while a poorer owner may not be able to handle the same financial burden without experiencing hardship. Thus, owners making a hardship application should prepared to provide personal information and documentation to the strata corporation regarding how much the rental restriction is costing them and how that impacts their overall financial situation.
It may also be advisable for the owner applying for the exemption to give a personal statement regarding why the restriction is causing them hardship.
In the interest of ensuring a fair decision, strata corporations responding should offer to take the owner’s financial information in confidence and inform the owner that without such information it will be impossible to determine if the rental restriction is causing them hardship and that their application will be denied. Conversely, owners applying for exemptions should be prepared to give as much information to the strata corporation as possible to demonstrate that they are experiencing hardship.
Protecting the Privacy of the Owner
Strata corporations and the strata agents that act for them must follow the privacy rules set out in BC’s Personal Information Protection Act.
As discussed, the owner that comes to their strata corporation to prove hardship is going to have to provide sensitive personal information. The strata corporation should keep information received from the owner in strict confidence.
BC’s privacy commissioner has advised that a strata council’s minutes should not identify the names of owners applying for the exemption. The owner’s unit number, whether the exemption was granted and, assuming the exemption is granted, how long the exemption is for may be recorded in the minutes.
If a hearing is requested by the owner, the number of observers should be limited. No other owners, aside from the members of the strata council should attend or observe the hearing are permitted to attend under standard bylaw 17(4).
WHAT WE DO: Lesperance Mendes has experience representing strata corporations that are seeking to enforce their rental restrictions as well as owners that are seeking to challenge them. We can assist by reviewing the enforceability of the bylaw, the strength of a hardship application and the reasonableness of the decision. For more information on our strata law practice, contact: Paul G. Mendes, partner at firstname.lastname@example.org phone 604-6685-4894.