BC Court of Appeal clarifies interpretation of Strata Property Act’s rental-restriction rules
16 August 2016
By Kevin Zakreski
In Mathews v The Owners, Strata Plan VR 90, 2016 BCCA 345, the Court of Appeal for British Columbia clarified the requirements of the rental-restriction rules found in section 141 of the Strata Property Act. Previous decisions had agreed that section 141 (3) requires a strata corporation to have a procedure that must be followed in deciding whether an owner will be allowed to rent out a strata lot. But the cases had disagreed on whether a strata corporation must go further and spell out the criteria that the strata corporation will use in making that decision. The court of appeal concluded that the act doesn’t require strata corporations to take this additional step. In the court’s view, it actually discourages strata corporations from having such criteria.
The strata corporation had adopted a rental-restriction bylaw, which only allowed one strata lot to “be leased or rented in the building at any time.” “The bylaw,” the court noted, “sets out the process governing applications by owners for permission to rent strata lots, but does not specify the criteria the strata council will apply in determining whether to grant an owner permission to rent.”
The appellants challenged the validity of the bylaw. This set up for the court the “narrow issue” arising on the appeal, which the court framed in the following terms:
whether s. 141(3) requires a strata corporation to set out in the bylaw not only a process to be followed when a strata lot owner requests permission to rent, but also how it will decide whether a strata lot owner will be given permission to rent when the rent restriction limit is not reached.
Resolution of this issue turned on a “question of statutory interpretation” that has generated “conflicting decisions” in the BC Supreme Court. One decision was the first-instance decision on the petition in this case: Mathews v The Owners, Strata Plan VR 90, 2015 BCSC 1801. This decision dismissed the appellants’ petition, upholding the strata corporation’s rental-restriction bylaw “even though it was silent on how the strata corporation would decide whether to grant permission to rent.” In contrast, in Carnahan v The Owners Strata Plan LMS522, 2014 BCSC 2375, the supreme court struck down a rental-restriction bylaw, concluding that section 141 (3) of the Strata Property Act “requires a strata corporation to set out in a rent restriction bylaw the criteria that will be applied in deciding whether permission to rent will be given to an owner.”
The court of appeal decided it couldn’t endorse the approach in Carnahan, finding that the earlier supreme-court decision lacked a basis in the relevant provision of the act:
With great respect, I am unable to endorse the reasoning or result in Carnahan. In my view, the effect of Carnahan is to read into s. 141(3) language that is not there, and bring to the provision a meaning that is not required by its surrounding context or by the scheme of the Act as a whole.
Further, I cannot accept that what is described in Carnahan as the “minimum procedural requirements” contemplated by s. 141(3) include “how the strata corporation decides which strata owner is entitled to lease their strata lot when the rental restriction limit is not reached.”
In my view, in circumstances where s. 141(3) applies, the requirement that a strata corporation set out in the bylaw the procedure to be followed in administering the limit does not require the strata corporation to also detail in the bylaw the substantive decision-making criteria that will govern the determination of an owner’s request to rent. To hold otherwise unjustifiably imports into a procedural provision substantive decision-making criteria.
The court of appeal also provided these detailed comments on the proper interpretation and application of section 141:
In my view, protection against arbitrary and unfair decision-making in the administration of a rent restriction bylaw necessarily flows from the language of s. 141 and from the provisions of the Act as a whole.
Section 141(1) prohibits a strata corporation from screening tenants, establishing screening criteria, requiring the approval of tenants, or otherwise restricting the rental of a strata lot except as provided in s. 141(2). In my view, the proscription against “establishing screening criteria” must apply to both tenants and owners seeking to rent their units. If the proscription against “establishing screening criteria” was intended to apply only to prospective tenants, it would be redundant as the section also explicitly prohibits the screening of prospective tenants. In the result, it is my view that the prohibition against screening criteria is intended to apply equally to tenants and owners applying for permission to rent their units.
Against these provisions, it is my view that any bylaw setting out a procedure for administering a rent restriction cap that purports to screen prospective tenants or impose screening criteria on owners who wish to rent their strata lots would run afoul of s. 141(1). I should add that adoption of a wait list as a means of determining the entitlement of an owner to rent would not violate s. 141(1) as it does not involve the application of “screening” criteria—it is merely an extension of the “first come, first served” model.
So understood, it is difficult to imagine that an acceptable screening criteria for administering the rent restriction cap (such as the “needs-based” system proposed by the appellants) could be devised that would comply with s. 141(1). By default, adoption of a wait list is, practically speaking, the only permissible way of administering the limit that is open to a strata corporation. . . .
Given the constraints inherent in ss. 141(1) and (2), s. 141(3) must necessarily be read as mandating only a basic procedure governing administration of the rental limit. I say this because inclusion in a bylaw of substantive terms governing the screening of proposed tenants or applications made by owners to rent would offend s. 141(1). [The underlining is the court’s.]
In the result, the court dismissed the owners’ appeal.