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› Can I rent my strata lot? Rental restrictions?

July 31, 2017
Summer's Here!

With the arrival of summer weather (finally!), Vancouverites turn their attention to….holidays! As a result, sales of detached homes in Vancouver East eased off in June 2017 vs. the month previously. According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, 157 houses sold in June.  This is down from the 199 Eastside detached properties which changed hands in May 2017.  The slower pace of sales is contributing to an increase in listing inventories for detached homes in Vancouver East.  

As we go to press, over 800 houses are listed for sale on the Eastside.  However, the MLS Home Price Index has stayed fairly steady,  with the Benchmark Price of an Eastside detached home at $1,534,100 as of June 30.  Much of the homebuyers’ attention has turned to the attached and apartment segments of the market. These 2 segments  are short of inventory and selling at rapidly rising prices.  

Meanwhile, in early July, the Bank of Canada raised it’s interest rate by 0.25%.  As a result, mortgage rates from most lenders are expected to rise by a corresponding amount.  We are sensing that our traditional summer slow down is upon us, as Buyers for detached homes (and their Realtors!) take advantage of the arrival of the sunshine.

July 31, 2017
Can I rent my strata lot? Rental restrictions?

STEP 1—Examine the Bylaws

The first place to look when determining if there are rental restrictions on a strata property is to examine the applicable bylaws.  The bylaws may be the Standard Bylaws contained in the Schedule of Standard Bylaws at the end of the Strata Property Act, or may be modified or changed completely.  A copy of the bylaws for a  particular building or complex may be obtained through the strata management company or the Land Title and Survey Authority (“LTSA”).  The Standard Bylaws are silent on rental restrictions; therefore, if a Strata property has not modified the Standard Bylaws, the first assumption is that there are no restrictions on rentals. 

However, it is rare for a strata corporation to adopt the Standard Bylaws without modifying them to some degree.  Most individuals who intend to reside in a strata building prefer a fewer number of rental units.  On the other hand, investors prefer rental units be allowed.  This creates a fine balance that the strata corporation must consider when developing their bylaws. 

New rental restriction bylaws

If you currently own a unit in a strata building with no rental restrictions, and a bylaw is passed that limits the number of rentals, there is a grace period provided under the Strata Property Act.  This grace period allows current owners a period of time where they are not required to comply.

The new bylaws will not apply until the later of:  one year after a tenant who is occupying the unit moves out, or one year after the bylaw is passed.

STEP 2—Determine if an exemption applies
 
If you review the applicable bylaws and there is a rental restriction, or one has been recently imposed, your unit may be exempt from complying.  Currently, there are three exemptions to the rental restriction bylaws: 
    1.  Family Rentals— a bylaw to restrict rentals does not apply to prevent the rental of a strata lot to a member of the owner’s family (spouse, parent, child; or parent or child of the spouse).
    2. Hardship Exemption Rental—an owner may make an application to the strata corporation for an exemption on the grounds that the bylaw causes hardship to the owner; and    
    3. Owner Developer Exemptions—created by the developer filing a Rental Disclosure Statement (“RDS”) prior to the first residential strata lot being offered for sale.
The first two exemptions are fairly self explanatory.  It is the third exemption that creates much confusion and therefore is the focus of discussion. 
When determining if your unit falls within the Owner Developer Exemption, you must find out whether the developer of your strata filed an RDS.  An RDS is a document that informs potential investors that the developer intends to hold a number of units and rent them.  The statement sets out a description of the units to be rented and the date that the rental period expires.  The developer may then decide to sell the units or rent them for a period and then sell them.  Regardless of whether the developer sells the units or keeps them, the RDS continues to govern the rental restrictions for the period set out.  In other words, these units can be rented according to the RDS.
 
If an RDS exists for your strata, you can obtain a copy from the Financial Institutions Commission (“FICOM”).  Once obtained, you can confirm whether your unit is listed as a rental unit.  If your unit is listed as one of the rental units. There are two sets of rules that apply as follows: 
     1.  Rental Disclosure Statements filed before January 1, 2010; and the date the unit is sold by the owner who originally purchased from the developer, or the date the unit is sold by the owner who originally purchased from the developer; of
     2.  Rental Disclosure Statements filed after December 31, 2009.
For an RDS filed before January 1, 2010, the units described as rental units are exempt from rental restriction bylaws until the earlier of:
          a.  the date the unit is sold by the owner who originally purchased from the developer; or 
          b.  the date the rental period expires as stated on the RDS

For an RDS filed after December 31, 2009, the units described as rental units are exempt from the rental restriction bylaws until the date that the rental period expires as stated on the RDS.  This means that even if the unit is sold to a number of different owners, the rental restriction bylaws do not apply until the rental period expires.  This distinguishes the statements filed after December 31, 2009 from the ones filed on or before that date.

The rental period as described on the RDS may be for a few years or may be for an indefinite period. A 2009 case from the British Columbia Supreme Court held that an RDS was valid even though it did not have an expiry date.

If your unit is listed on an RDS, and the rental period has not expired, then the RDS governs the rental restriction for your particular unit

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Call Norm Flockhart at 604-328-2111 Norm Flockhart Personal Real Estate Corporation