Strata Alert: Tenancies, Rentals, and Licenses – What’s In a Name?
By Alex Chang, Associate
When enforcing restrictions on tenancies or licenses (often called short-term rentals) the term used in a strata corporation’s bylaws is paramount. This is the lesson to be taken from the recent case of Semmler v. Strata Plan NES3039, 2018 BCSC 2064.
In Semmler, the strata corporation was a 201 unit recreational complex in the BC interior. The petitioner was an owner of three lots. She and her husband were directors of a company that managed the three lots as vacation properties. Through the company, the petitioner licensed the use of her properties to guests on a short-term basis.
The strata corporation sought to enforce the following bylaws which precluded using a strata lot for business purposes or renting a strata lot for less than 30 days. Those bylaws read as follows:
“No strata lot shall be used for any business purpose whatsoever without prior approval by the Council. No inventory for the purpose of a business shall be visibly stored upon any strata lot.”
“No strata lot may be rented for term of less than thirty (30) consecutive days.”
The strata fined the owner for breaching this bylaw and the owner sued the strata to return the fines and sought a declaration from the court allowing her to continue her short-term rental activities.
The strata’s argument hinged on the meaning of the term “rented” in its bylaw. The owner argued that she was offering “short-term licenses”, not rentals.
The court agreed finding that the agreements the owner had entered into were “licences” for short-term occupancies and did not create “tenancies” or constitute “rentals” for purposes of the bylaw.
Unfortunately, this nomenclature can be confusing because a person may occupy a strata lot under a tenancy agreement or a license agreement. The court explained that a “tenancy” arises where the tenant is given a grant of exclusive possession, and a “license” is created where person is granted the right to use the premises without an entitlement to exclusive possession. A classic example of a license agreement occurring is when people stay at hotels. The courts look to the intention of the parties to determine which it is. If the parties intended to create an interest in the land, a tenancy is created. If not, the arrangement is a license.
The court also clarified the nomenclature of the parties involved:
- A tenant is a person who rents all or part of a strata lot and who, through that arrangement, receives an interest in the property including exclusive possession of the premises.
- An occupant is a person other than an owner or tenant who occupies a strata lot.
- A licensee is an occupant but not a tenant.
The court then followed previous decisions and concluded that the provisions of the Strata Property Act which relate to “tenants”, “tenancies”, “rent” and “rentals” do not apply to licences. Because the owner entered into license agreement and not tenancy agreements, the bylaw prohibiting rentals of less than 30 days did not apply.
The court also found that the owner was not breaching the bylaw prohibiting the use of strata lots for business purposes. The judge held that the operation was not a business as contemplated in the bylaws, noting that he did not agree with the strata that “31 day rental equates to passive investment income, whereas a 30 day rental equates to business income.” The court also held that using a rental management company did not mean that the owner was operating a business either.
As a result, the strata could not enforce its bylaw and was forced to return all the fines paid by the owner.
Strata’s wanting to restrict the use of strata lots for vacation, travel or temporary accommodation purposes should have their bylaw restriction drafted or reviewed by a lawyer to ensure that it is enforceable. This is particularly important with respect to the new Strata Property Regulation that allows daily fines of up to $1,000/day where prohibited or limited in the bylaws.
WHAT WE DO: Lesperance Mendes has been advising strata corporation and strata owners on bylaw enforcement issues since 1997 for more information on how we can assist you in a bylaw enforcement matter, contact Paul G Mendes, Partner at 604-685-4894 or by email at pgm@lmlaw.ca.
THIS ARTICLE IS NOT LEGAL ADVICE: This article provides general information and should not be relied on without independent legal advice with respect to the specific facts of your case.