BC Supreme Court: Short-term occupancy of strata lots under licenses not entitled to protection of Strata Property Act’s rental restriction grace period
28 June 2017
By Kevin Zakreski
HighStreet Accommodations Ltd v The Owners, Strata Plan BCS2478, 2017 BCSC 1039, concerned the application of rental restrictions to a strata-lot that was being used for short-term accommodation. The case came before the court as a pre-trial determination of a point of law. The court was asked to determine whether a tenant that was providing short-term accommodation to corporate clients in a residential strata-lot had the benefit of the grace period provided for in section 143 (1) of the Strata Property Act. The court, emphasizing the distinction at law between a lease and a license, held that it did not.
The case involved a strata corporation that governed a 26-floor, primarily residential tower with modern amenities. The plaintiff was described as “a hospitality management and corporate housing company.” The court explained the nature of this business as follows:
HighStreet leases property and enters into contracts to provide furnished accommodation to its clients. Those contracts include bi-weekly housekeeping services, access to building amenities, and 24-hour a day on-call services. Currently, HighStreet has about 200 properties in its inventory. The average stay of its clients is between 60 and 80 days. HighStreet shares its profits from these contracts with the owners from whom it leases property. The parties agree that the arrangements between HighStreet and its clients are licenses, not leases.
In November 2012, the plaintiff entered into a tenancy agreement with a strata-lot owner in the defendant strata corporation. Shortly thereafter, the strata corporation amended its bylaws to add the following provision:
46.5 An owner, tenant or occupant shall not permit a residential lot (as such term is defined in the bylaws) to be occupied under a lease, sublease, contract, license or any other commercial arrangement for periods of less than 180 days.
The court defined the issue before it on this application as posing this question:
Can HighStreet claim the benefit of s. 143(1)(a) of the SPA, such that bylaw 46.5 does not restrict its ability to enter into contracts to license the Lot to its clients as accommodation for a period of less than 180 days?
Subject to subsection (4), a bylaw that prohibits or limits rentals does not apply to a strata lot until the later of
(a) one year after a tenant who is occupying the strata lot at the time the bylaw is passed ceases to occupy it as a tenant, and
(b) one year after the bylaw is passed.
So, as a practical matter, the plaintiff was seeking to establish that it should have the benefit of the grace period provided for in paragraph (a) before bylaw 46.5 would apply to it.
The court’s conclusions all followed from the characterization of the plaintiff and its clients as entering into a license, and not a lease. As a result of this legal characterization, in the court’s view, the plaintiff was not entitled to any protection under section 143 (1):
There is no dispute that HighStreet’s legal relationship with its clients is as licensor and licensee. The law has recognized for centuries that a license does not grant an interest in land. Nothing in the legislation alters that basic principle. Therefore, HighStreet is partially correct. Bylaw 46.5 cannot purport to invalidate HighStreet’s tenancy with Mr. Christman; but that relationship is not at issue in this case.
The case law discussed above indicates that the determinative factor is “legal possession” regardless of occupancy. HighStreet’s exclusive use and control of the Lot confirms it has an interest in land as a tenant. But the contracts it has with its clients, do not convey that interest, or any rights attached to it, including the right of exclusive possession. HighStreet can remove its clients and cancel their licenses at will.
Thus, HighStreet at all times retains legal possession of the premises. To accede to HighStreet’s interpretation would be to ignore the legal significance of it entering into licenses rather than leases or subleases.
Moreover, to the extent HighStreet is attempting to draw some kind of analogy between its licenses and “rentals,” bylaws 46.3 and 46.4 make it abundantly clear that rentals cannot be for a period less than one year, and owners cannot sublease.
Taking into account all the arguments based on statutory interpretation and the case law, I conclude there is nothing in the legislation suggesting that occupancy of units arising outside of a tenancy agreement are protected in any way. In my view, that is the very reason why s. 143(1)(a) is phrased to apply to strata lots where the tenant occupies the strata lot when the bylaw is passed. The legislature could have said a rental restrictive bylaw does not apply until one year after a rental in place at the time the bylaw is passed expires. In my view, the phrasing chosen was to clarify that only tenants occupying the lot can benefit from the non-applicability of rental restrictions.
In the result, the court answered the question posed as a point of law by holding:
Section 143 of the Strata Property Act is not applicable to the licenses entered into by HighStreet, and thus, those licenses can be restricted by the Strata Corporation, and section 46.5 of the strata bylaws does therefore restrict HighStreet’s business.
The case remains “set for trial commencing October 30, 2017.”