BC COURT OF APPEAL CONFIRMS THAT CORPORATE FURNISHED RENTAL BUSINESSES ARE NOT GRANDFATHERED FROM RENTAL RESTRICTION BYLAWS

HighStreet Accommodations Ltd. v. The Owners, Strata Plan BCS2478, 2017 BCSC 1039

There has been some confusion about whether rental restriction bylaws apply to corporate furnished rentals, typically known as “executive stay” businesses.  This confusion arises in part from the BC Provincial Court’s decision in The Owners, Strata Plan VR 2213 v. Duncan & Owen, 2010 BCPC 123, which held that an executive stay company was not required to complete a Form K or pay a move in fee each time the company rented out a unit to one of its clients. The Court reached this conclusion based on the peculiar wording of that strata’s bylaws, and its decision that the company’s clients were “occupants” and not tenants.

HighStreet Accommodations is a high profile executive stay company that leases strata lots from owners and then uses them as short-term furnished accommodation for executives. Although HighStreet’s operation is a short-term rental business, HighStreet’s contracts usually form a minimum of one month. In that respect, HighStreet’s business differs from Airbnb and other typical short-term rentals.

The strata corporation, in this case, had amended its bylaws to prohibit any strata lot from being occupied under a “lease, sublease, contract, license or any other commercial arrangement for periods of less than 180 days”.

HighStreet argued that it was grandfathered from the new bylaw because it was an existing tenant and had occupied the strata lot at the time the bylaw was passed. Existing tenants are grandfathered and exempt from new rental restriction bylaws under s. 143 of the Strata Property Act, which says that when a strata corporation passes a bylaw that prohibits or limits rentals, the bylaw does not apply to a strata lot until the later of:

• one year after the tenant who is occupying the strata lot at the time the bylaw is passed ceases to occupy it as a tenant; and
• one year after the bylaw is passed.

The purpose of this exemption is to allow owners a grace period to get their affairs in order after a rental restriction is passed.

The strata and its property management company disagreed with HighStreet’s interpretation of s. 143 and ultimately applied to the Supreme Court for a determination on the issue. The Court found that s. 143 of the Act only exempted existing tenants at the time a new rental restriction was passed and did not exempt the occupancy of strata lots through licensing arrangements like HighStreet’s executive stay business. The Court also found that only tenants who actually occupy a strata lot at the time the bylaw is passed can benefit from the exemption in s.143 and that HighStreet had never occupied the strata lot.

On appeal, HighStreet argued that to legally “occupy” a strata lot does not necessarily require the tenant to physically occupy the strata lot. The Court of Appeal looked at the legislative intent behind the exemption in s.143 and the ordinary meaning interpretation of the word “occupy” in the context of that provision in the Act.  It concluded that the grace period exemption in s.143 only applies to a tenant who physically occupies the strata lot when the new bylaw is passed, whether that tenant is an individual or a corporation. If it were otherwise, then an individual owner could defeat the collective will of the strata ownership by renting a residential unit to a company like HighStreet who would then be free to run an executive stay business from the unit for years to come. In the Court’s view, that interpretation of s. 143 would undermine the true purpose of the exemption.

This decision is a good reminder that bylaws restricting rentals do not work to prohibit Airbnb and other similar uses which are licenses of a unit and not true rentals. The decision will also likely have an impact on executive stay businesses like HighStreet’s moving forward since it’s now clear that any strata corporation will be able to shut down those operations with a properly drafted bylaw.

 

Content curated from lmlaw.ca / April 12, 2019, By Paul G. Mendes and Amanda Magee