Strata Alert: The Potential Risks of Short-Term Accommodations and Strata Property Insurance

Portrait of Lucas Johnson - Strata Dispute Resolution Lawyer at Lesperance Mendes

 

Lucas M. Johnson, Associate
Phone:  604-674-9943
Email:  lmj@lmlaw.ca

 

A strata corporation’s decision to allow short-term accommodations like Airbnb or VRBO could impact the cost of property insurance.

In Strata Plan VR 2213 v. Schappert, 2023 BCSC 2080 the court held short-term renters were “insureds” under the strata corporation’s property insurance policy. As a result, the property insurer could not sue an AirBnB guest for property damage.

Background Facts

In April 2019, the defendant, spent a few nights at Strata Plan VR 2212 (the “Strata”) pursuant to an Airbnb service agreement with the unit owner.

The Strata bylaws specifically authorized short-term accommodations.

During his stay, the defendant unintentionally started a kitchen fire that set off the building’s sprinkler system.

The Strata submitted a claim to their property insurer for damages sustained to the common property from the discharge of water from the sprinkler system.

The insurer covered the claim and sued to recover the amounts paid out under the claim. This type of lawsuit is called a “subrogation” action.

BC Supreme Court Ruling

The defendant argued that the Strata’s property insurance policy covered him, and therefore the insurer could not subrogate against him.

Section 155 of the Strata Property Act considers persons who “normally occupy” strata lots as “named insureds” in a strata corporation’s property insurance policy:

155 Despite the terms of the insurance policy, named insureds in a strata corporation’s insurance policy include
(a) the strata corporation,
(b) the owners and tenants from time to time of the strata lots shown on the strata plan, and
(c) the persons who normally occupy the strata lots.

The court agreed with the defendant — because the Strata authorized certain units to be occupied by short-term renters, AirBnB guests like the defendant would “normally occupy” the strata lots at the condominium. The defendant was therefore a “named insured” under the policy, barring the strata’s insurer from recovering its losses.

Takeaways

Although the strata corporation was covered by its insurance and did not incur any direct costs this case could have impacts on the cost of strata property insurance premiums.

Had the Strata banned short-term accommodations, the Strata’s insurer could have pursued a claim against the person responsible for the damage and thereby mitigated their loss.

Property insurers might consider this ruling when determining a strata corporation’s annual insurance premiums and deductibles. For example, underwriters may increase the premiums for a strata corporation that allows short-term accommodations, because they would have to add all the short-term occupants as additional insureds.

To guard against this risk, strata corporations should consider amending their bylaws to prohibit short-term rental accommodations.

Lesperance Mendes has been representing and advising British Columbia strata corporations, strata owners, and strata managers since 1997. To find out more about our strata property law practice, please contact any member of our strata property law practice group: Paul G. Mendes, Sat Harwood, or Alex Chang.