Thinking of purchasing a strata lot to rent out on the short-term market? If so, you may wish to familiarize yourself with the applicable rental restrictions.
The popularity of short-term rentals such as Airbnb continues to soar, making them an increasingly attractive revenue stream for potential property investors.
In HighStreet Accommodations Ltd. v. The Owners, Strata Plan BCS2478, 2017 BCSC 1039, the B.C. Supreme Court tackled the application of rental restriction bylaws to strata lots being used for short-term accommodation.
In 2012, HighStreet entered into a tenancy agreement with the owner of a strata lot in the defendant strata corporation (the “Strata”). Soon after, the Strata passed a bylaw prohibiting owners and tenants from allowing a unit to be occupied under a lease, sublease, contract, licence or any commercial arrangement for periods of less than 180 days. HighStreet, being a “hospitality and corporate housing company” that leases properties from residential strata lot owners in order to rent them out as furnished accommodation to its clients, sued the Strata and its property manager to challenge the application of the bylaw to its corporate rental arrangements.
HighStreet attempted to rely on section 143(1)(a) of the Strata Property Act (“SPA”) which grandfathers pre-existing tenancy agreements from new rental restrictions until the end of their tenancy term. Specifically, HighStreet argued that the grandfathering provision of the SPA only had two (2) requirements: (i) there be a rental restriction bylaw, and (ii) there existed a continuing tenancy relationship that pre-dated the rental restriction bylaw.
The Strata countered that the provision did not apply because HighStreet was not a tenant “occupying” the strata lot; its clients occupied the strata lot by virtue of a license with Highstreet which was terminable by HighStreet at any time. The Court agreed with the Strata’s interpretation of the SPA, and concluded that the grandfathering language of the SPA was intentionally phrased to apply to strata lots where the tenant occupied the strata lot when the bylaw was passed (and did not extend to occupancy of units arising outside of a lease or sublease).
It’s worth noting that the SPA contemplates additional exemptions to rental restriction bylaws for certain stratified buildings which were marketed for sale after December 31, 2009, but those exemptions did not apply in the HighStreet decision.
Most Metro-Vancouver municipalities are still in the process of developing regulations for short-term rentals, such as Airbnb (see links here and here). Once enacted, strata owners and purchasers will need to comply with the municipal regulations as well as the strata bylaws applicable to their building. The HighStreet decision demonstrates that under the SPA short-term rentals are not afforded the same level of protection as tenancy agreements, and in some circumstances will be subject to prohibition by newly-enacted strata bylaws.
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