Back to the Rental Pool: Restrictive Covenant Requiring Owners to Rent through Rental Management System Upheld

In Kent v. Panorama Mountain Village Inc., 2021 BCCA 332, the BC Court of Appeal overturned a lower court decision and found that a restrictive covenant requiring owners of a strata unit to rent to the public only through a centralized rental management system was in fact enforceable.

The petitioners own a strata unit in a complex at the Panorama Resort. A restrictive covenant (the “Covenant”) registered on title to each strata unit prohibited owners from renting their units except through a centralized rental management system (“RMS”) run by the respondents, the owners of the strata lobby unit. The petitioners had signed a rental pool management agreement and joined the RMS, but subsequently terminated the agreement because they wanted to rent their unit privately. When the respondent sent a notice confirming that owners were not permitted to rent their units other than through the RMS, the petitioners brought a Petition under s. 35 of the Property Law Act, R.S.B.C. 1996, c. 377, seeking to have the Covenant cancelled on the basis that it was uncertain.

The chambers judge held that the Covenant was impermissibly uncertain because the terms of the rental management agreement were not set out in the Covenant. He also found that even if it was permissible to “go outside the covenant” and review the draft rental management agreement appended to the pre-purchase disclosure, the draft was only an “agreement to agree.”

The Court of Appeal allowed the respondent’s appeal on the basis that the chambers judge erred in his interpretation of the relevant authorities and therefore erred in his interpretation of the Covenant.

Restrictive covenants registered against land must be “sufficiently clear” so that owners can know the obligations imposed on them. To interpret a covenant, the court must look to the specific language and the whole of the document. Here, the Covenant simply required owners wishing to rent their units to place them in a rental pool. The Court found that this requirement (and therefore the Covenant) was unambiguous.

The chambers judge had interpreted the relevant authorities as standing for the proposition that unless a restrictive covenant sets out all the terms of a rental pool arrangement it is uncertain. The Court confirmed that a covenant will be unenforceable if it requires owners to first enter an agreement with a third party where the terms are unknown and there is no mechanism for resolving uncertainty, but clarified that it does not necessarily have to contain all the commercial terms of the rental pool system.

The Court also noted that there was no suggestion that the Covenant was so uncertain or vague that the parties were unable to come to agreements over the years. In fact, the petitioners had signed rental pool management agreements in 2004 and 2010 without any apparent confusion. In addition, the Court found that since the petitioners had received the draft rental management agreement in the pre-purchase disclosure, they had a sufficient degree of commercial certainty as to what the terms and conditions of the rental management agreement would be.


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