In cases concerning enforceability of positive obligations assumed by a prior owner against successors in title, BC Court of Appeal quotes BCLI Report on Restrictive Covenants, says it makes “compelling case for reform” but the reform must come from the legislature

28 May 2019

By Maria Sokolova

BCLI’s 2012 Report on Restrictive Covenants was discussed with approval by the British Columbia Court of Appeal in two recent cases: The Owners, Strata Plan BCS 4006 v Jameson House Ventures Ltd, 2019 BCCA 144 and The Owners, Strata Plan LMS 3905 v Crystal Square Parking Corporation, 2019 BCCA 145. The cases were heard together and dealt with whether positive obligations purporting to be covenants that ran with title to the land could be enforceable against successors in title to the persons who had initially assumed the obligations. In both cases the Court of Appeal quoted from BCLI’s Report when analyzing the practical effect of the current judge-made law, the potential changes and how they would best be achieved.

In The Owners, Strata Plan BCS 4006 v Jameson House Ventures Ltd, the Court of Appeal was asked to decide whether a strata corporation, a successor in title to the owner-developer of a building on a lot in Vancouver, could be bound by an easement agreement which the developer had entered into with the City of Vancouver. The easement agreement provided that the developer, and subsequently the strata members, could use land belonging to the City of Vancouver to access the parkade of the building. In exchange, the agreement purported to impose positive obligations on the owner of the land to pay some of the maintenance costs of the parkade. The question in the case was whether the strata corporation, which did not exist at the time the easement agreement was entered into and was not a party to it, could be bound by the positive obligations taken on by the previous owner, the developer, because they ran with title to the land. The Supreme Court of British Columbia had previously found that the strata corporation was not so bound.

The Court of Appeal approved the analysis in the BCLI report of the law governing when obligations taken on by a prior owner will be enforceable against successors in title. In British Columbia the law continues to consist of English judge-made rules from the late 19th century, which provide that positive covenants do not run with title to the land. These rules have been amended or qualified through a number of exceptions in other jurisdictions, including the United Kingdom where the rules originate. However, those exceptions have not yet been recognized in British Columbia.

In its 2012 Report, the BCLI also reviewed the manner in which these rules operate and concluded that there are situations where the result is unfair. The BCLI recommended legislative change to permit some types of positive covenants to run with title to the land. Moreover, the BCLI argued that these changes should be made applicable only to covenants entered into after the changes come into effect. The BC Court of Appeal agreed with this analysis, noting that if the changes were to be made by courts, this could result in “springing liabilities” for owners who could suddenly become subject to obligations they did not previously have. Therefore, despite some scholarly opinion to the contrary, the BC Court of Appeal concluded that changes to the law should come from the legislature, as the BCLI report contemplates.  As a result, the court dismissed the appeal. The court noted:

[69]        Two significant aspects of the recommendation deserve our attention. First, the [BC Law] Institute observed there are some legislative provisions permitting positive covenants to run with the land and, second, the Institute concluded a change in the judge-made law may create “springing liabilities”….

[70]        Other problems might arise from wholesale abandonment of the rule in Austerberry. Some of these resulted in the BCLI Report recommendation that the nature of the positive covenants capable of running with land be carefully defined….

[73]        Insofar as the potential for adverse consequences retrospective change may entail, Professor Ziff argues there has been uncertainty in the law for some time and there ought not to have been “a true expectation” positive covenants can never run. He suggests the problem of retrospectively can be resolved in part by the election element of the benefit/burden exception…

[74]        These are not sufficient answers to the concerns identified by the Law Institute. It is certainly the case, in my view, judicial reform is likely to be far more problematic than legislative reform.

[80]        I am of the view there has been such consistent and long-standing reliance upon the rule and such incorporation of the rule in our legislation that, if it is to be modified or abandoned, it should be modified or amended by legislation.

The Court also found the BCLI’s Report helpful in The Owners, Strata Plan LMS 3905 v Crystal Square Parking Corporation, which dealt with many of the same legal issues as Jameson House Ventures Ltd. The facts were also similar. In Crystal Square Parking Corporation, an owner-developer entered into an easement agreement with the City of Burnaby, agreeing to pay some of the maintenance costs of a parkade in its building in exchange for an easement over City lands, so that the developer and, subsequently future strata members, could use the parkade. However, unlike in Jameson House Ventures Ltd, the easement agreement required the developer to sign an agreement with its successors in title to assume the positive obligations to pay fees in exchange for the use of the parkade. In the case itself, this meant that the contemplated strata corporations would sign assumption agreements, and in turn, the contemplated strata corporations would enter into assumption agreements with the owners of individual strata lots.

In Crystal Square Parking Corporation the BC Court of Appeal found that the positive obligations to pay fees were enforceable. Although the Court found, as in Jameson House Ventures Ltd, that these obligations did not run with title to the land, it found that the easement agreement with the City of Burnaby has been made conditional upon the owners assuming these obligations. The Court found there was nothing inherently wrong with creating a chain of contractual obligations that would circumvent the usually applicable judge-made rules. In reaching this conclusion, the Court referred to the description of this strategy BCLI Report, which explicitly discusses this strategy as a way of creating positive obligations enforceable against future owners.

Essentially, the British Columbia Court of Appeal has held that the legislature is best placed to undertake the kind of reform of the law relating to covenants running with land envisioned in the BCLI report.     

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