Spotlight on phases: Should the Strata Property Regulation restrict a phased strata’s ability to amend bylaws relating to pets, rentals, age, and marketing?
25 November 2016
By Kevin Zakreski
BCLI is running a public consultation on complex stratas. It is asking for public input into proposed changes to the law governing sections, types, and phases. For information on how to participate in the consultation please visit the Strata Property Law Project—Phase Two webpage.
This post is part of a series that spotlights issues on sections, types, and phases discussed in the Consultation Paper on Complex Stratas. To read other posts in the series please click here.
Brief description of the issue
Section 13.3 (2) of the Strata Property Regulation restricts the ability of a strata corporation that is being developed in phases to amend bylaws relating to certain listed subjects. These subjects are the following:
- the keeping or securing of pets;
- the restriction of rentals;
- the age of occupants;
- the marketing activities of the owner developer which relate to the sale of strata lots in the strata plan.
So long as the owner-developer remains “in compliance with the dates for the beginning of construction of each phase,” the strata corporation can’t “create, change, repeal, replace, add to or otherwise amend” bylaws dealing with these four subjects. This restriction stays in effect until
- the strata corporation holds “the annual general meeting held following the deposit of the final phase,”
- the owner-developer makes an election not to proceed, or
- the strata corporation “obtains the written consent of the owner developer.”
These restrictions override the general rule, which gives strata corporations a liberal hand to amend their bylaws, in order to facilitate the phasing process. Should the regulation continue to limit the power of strata corporations to make their own decisions on these topics?
Discussion of options for reform
The committee considered three broad options to address this issue for reform: retaining the current regulation, repealing it, and amending its timing rules on when the restriction is lifted from a phased strata corporation.
The main benefit of the current provision is that it supports the owner-developer’s interest in marketing strata lots in the phased strata. All four subjects embraced by this provision are likely to be among the top-of-mind concerns for potential purchasers. For example, moving from an open-ended to a restrictive rental or pet bylaw would reduce the pool of potential purchasers of strata lots. In a similar vein, the marketing of a development to older adults could be upended if an age-restriction bylaw were repealed.
The downside of the current approach is that it achieves this result by bluntly restricting a phased strata corporation’s power to govern itself. It could be argued that this provision doesn’t strike the right balance between the interests of the owner-developer and strata-lot owners. The current rule gives the owner-developer a veto over these areas of the strata property’s governance. This policy choice, in effect, allows marketing to trump any concerns that strata-lot owners may have regarding these four subjects. Owners may feel that the ordinary rule for bylaw amendment (which generally calls for amendments to be approved by passage of a resolution by a 3/4 vote) may strike a better balance.
There are essentially two approaches to address these concerns about the current rule. One approach would be to repeal the regulation. As a result, these four topics would become subject to the general rule on bylaw amendments. This result would enhance the strata corporation’s control over its own governance. It would be consistent with what the court of appeal has recently described (in another context) as “the foundational democratic principles that pervade the [Strata Property] Act.”
But this approach would create difficulties for an owner-developer. The marketing of a phased strata property would be much more challenging if the strata-lot owners had the power to amend bylaws on these four subjects. Even if that power were never exercised, the uncertainty created by opening up this area of the law would complicate the owner-developer’s disclosure obligations. These challenges could erode the desire of owner-developers to create phased strata properties, leading to a decline in their use. This could limit the variety and sophistication of the strata-property market. It could also spur developments that attempt to create approximations of the phased-strata form outside the legal framework provided by the Strata Property Act.
The other option for reform that the committee considered would be to retain the broad features of the current rule but amend it in such a way as to strike a more equitable balance between the owner-developer’s and the owners’ interests. The actual amendment could take on a wide variety of details. The point would be to find a compromise that preserves the owner-developer’s ability to effectively market strata lots while giving the strata corporation more control over its governance. Such an approach does carry the risk, of course, of pleasing neither group.
The committee’s tentative recommendation for reform
The committee decided that the third option was the best option for this issue. It favoured a compromise approach to the problems posed by the regulation.
The committee noted that this provision works reasonably well in most cases. But it could be a sticking point when the phased strata plan is taking a longer-than-usual time to unfold. The committee considered adding a hard deadline to this provision, providing, for example, that it lapses five years from the date the first phase of the phased strata plan is deposited in the land title office. In the end, the committee decided not to follow this approach. Although it had the benefit of certainty, that benefit was achieved by its arbitrariness.
The better approach would be to tie the sunset date for this provision into the Phased Strata Plan Declaration. The declaration calls for “a schedule setting out the estimated date for the . . . completion of construction of each phase.” In the committee’s view, it would be acceptable to end this provision’s sway over a strata corporation six months after this estimated date.
The committee tentatively recommends:
Section 13.3 (2) of the Strata Property Regulation should restrict the ability of a phased strata property to amend bylaws dealing with the keeping or securing of pets, the restriction of rentals, the age of occupants, or the marketing activities of the owner-developer which relate to the sale of strata lots in the strata plan until the earliest of the following: (a) the annual general meeting held following the deposit of the final phase; (b) an election not to proceed is made under section 235 or 236 (2) of the act; (c) the strata corporation obtains the written consent of the owner-developer; (d) the owner-developer is not in compliance with the dates for the beginning of construction of each phase as set out in the Phased Strata Plan Declaration or amended Phased Strata Plan Declaration; (e) the date that is six months after the date of completion of construction disclosed in section 2 (c) of the original Phased Strata Plan Declaration.