Blog by Andrew Peck

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"How and where I can help my client to appeal?"

"How and where I can help my client to appeal?"

"I assisted my client to purchase a house about 5 months ago and also have a listing to sell their townhouse. They have already moved into the house and the townhouse is now vacant.  Since the market is slowing down, the townhouse is still on the market which is causing my clients great financial difficulty. The complex has 9 units and is self-managed. There is a rental bylaw that prohibits any rentals. My client applied to the strata council for a short period rental on the grounds of hardship; however the application was declined after a hearing. The reason given is the council didn't think it was a hardship. It's been suggested by the council to either move back and rent his house, or reduce the price to sell the townhouse quickly.

My client is apparently not able to move back to his old townhouse because he has already set up everything for his new house. The question is how and where I can help my client to appeal this decision for the unreasonable refusal of this rental. The Strata Property Act does not define hardship clearly and only mentions that the strata council can not unreasonably refuse a rental under hardship. My client is able to supply income statement to support his appeal."

First, it is not for the REALTOR to provide legal advice on this type of question. Article 10 of The REALTOR Code says:

"The REALTOR® shall encourage parties to a transaction to seek the advice of outside professionals where such advice is beyond the expertise of the REALTOR®."

You are correct in your reading of the Strata Property Act (section 144). 

“An owner may apply to the Strata Corporation for an exemption from a rental restriction bylaw on the grounds that it causes hardship to the owner.  Though the Act does not define the term ‘hardship’ a strata corporation cannot unreasonably refuse the owner’s request.  However in granting an exemption, the strata corporation may impose a time limit on it.”

Excerpt from Condo 101-Strata Law for REALTORS published by BCREA Continuing Professional Education.

Other avenues to investigate:

Was this owner an original purchaser from the developer and if so was a rental disclosure filed by the owner developer? Usually a developer will reserve the right to rent any or all of the units in a development just in case they can’t be sold. This right to rent passes on to the first owner under section 143 of the Act. 

Also the owner may rent to a family member as defined by the regulations but generally siblings, children and parents are family members. In such cases, they are not restricted from rentals. (section 142).

Where can an owner appeal a decision of the strata council?

First, to all the members of the strata corporation. As this is a small complex it is likely that the ownership is tight and will reject rentals. However they are the ultimate authority and can instruct the strata council to make a certain decision.

Second, to the court. The Supreme Court of British Columbia are the ultimate authority to overturn a decision of the strata council. This is a very costly avenue for your client to pursue and if they are unsuccessful, they might have to compensate the strata corporation for their legal fees. I would highly recommend your client seek legal advice from a competent strata lawyer. The folks who teach the Condo 101 and Condo 202 course for REALTORS are excellent for providing advice in this regard.

It is my understanding that courts are very reluctant to overturn hardship on a purely economic basis. The owner presumably knew of the bylaw when they purchased their house and knew of the risks in purchasing without a subject to the sale clause. A court will be loath to overturn the wilful decision of the majority of owners unless it can be shown that the decision couldn’t be helped...for example the owner was transferred by his company and market conditions have prevented him from selling. Another example would be the need to relocate for emergency medical reasons (perhaps there is no hospital in the town where the property is located). These are true hardship cases.  Your client’s is an economic hardship case which does provide options for him as the council has indicated.

Mike Mangan, lawyer and author says the following about hardship in the Condominium Manual:

“Owners also continue to ask about the hardship exemption. They say: "If a bylaw prohibits me from renting my condo, can I still apply for permission to rent under a hardship exemption?”

I prepared the newly released second edition of The Condominium Manual to keep readers up to date with many of the most important court decisions since the Strata Property Act came into force on July 1, 2000.

Als vs. The Owners, Strata Corporation NW 1067 is, perhaps, the most important new hardship case. First, although the Strata Property Act fails to define the term hardship, the Als case says the definition in the Shorter Oxford English Dictionary may serve as a guideline. That work defines hardship as, "hardness of fate or circumstance, severe toil or suffering, extreme privation."

Second, an owner who applies for a hardship exemption must present sufficient evidence to show that the rental restriction causes hardship to that owner. Although the court did not address the extent of proof required, it is likely that an owner must show hardship on a balance of probabilities. That is, the owner must show that it is more likely than not that the rental restriction in question creates hardship to that owner.

Third, although it is relevant to show that the strata unit has decreased in market value such that the owner will suffer a loss if forced to sell the unit, this factor alone is not sufficient to prove hardship without evidence of the effect of the loss on the particular owner's financial position.

Excerpt from Legally Speaking 353 (available on REALTOR Link).

The following factors have been relevant for consideration by strata councils in decisions involving hardship claims:

  • sale value exceeded purchase price;
  • units were purchased for investment and tax shelter purposes, which would have been impeded if units could not be rented;
  • inability to sell at various prices and the devaluation of the Canadian dollar vis-à-vis the US dollar;
  • economic hardship in conjunction with a "leaky condo" issue;
  • units listed for 20 per cent less than purchase price; the financing for these units required the owners to put mortgages on their homes as collateral security, and the owners faced financial ruin if the rental income to service the debt ceased;
  • substantial decrease in sale value when a ban on rentals was put in place and the value of the unit is a substantial part of the owner's assets; and
  • duplication of monthly expenses arising from the maintenance of two homes; applies to all non-resident owners, but only becomes a consideration for a specific owner if the duplication creates hardship that cannot be avoided or afforded.

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