Strata corporation not bound by easement’s positive covenants for sharing of parkade expenses

6 November 2017

By Kevin Zakreski

For the third time this year, the Supreme Court of British Columbia has refused to enforce positive covenants found in an easement agreement against a strata corporation. The Owners, Strata Plan BCS 4006 v Jameson House Ventures Ltd, 2017 BCSC 1988, follows The Owners, Strata Plan LMS 3905 v Crystal Square Parking Corp, 2017 BCSC 71, and The Owners, Strata Plan NWS 3457 v The Owners, Strata Plan LMS 1425, 2017 BCSC 1346, in declining to recognize an exception to the rule laid down in Austerberry v Oldham Corporation (1885), 29 Ch D 750 (Eng CA), which holds that positive covenants don’t run with the land and therefore can’t be enforced against a subsequent owner. As the court noted in one of the authorities it cited: “This rule is founded on the principle that at common law, a person cannot be made liable upon a contract unless he or she was party to it.”

The case involved “a 37-storey office, retail and residential mixed-use concrete high-rise tower” located in downtown Vancouver, which had been “constructed on a single lot that is comprised of five air space parcels and a remainder parcel.” The petitioner was the strata corporation for “Air Space Parcel #1 [, which] contains 158 residential strata units and common property located on floors 14 through 37.” The respondent was the developer of the high-rise building.

The building’s parkade was located on its remainder parcel. “On October 1, 2010,” the court noted, “at a time before JHV [the respondent] subdivided ASP1 to create the Strata, JHV executed the Easement Agreement with itself and the City of Vancouver. JHV owned all of the parcels at the time.” The easement agreement set out how costs for maintaining the parkade were to be shared among owners in the building. It “was registered on title to each of the residential strata lots and common property of the Strata.” While the strata corporation “has been paying its share of the costs associated with maintaining the parkade since 2010,” it launched these proceedings seeking a declaration that, in effect, it wasn’t bound to continue to do so.

As the court noted, “[t]he parties agree that the parkade cost-sharing provisions in the Easement Agreement are positive covenants,” making the “central issue” to be decided a “narrow one”: “whether any of the positive covenants contained in the Easement Agreement bind the petitioner, particularly the parkade cost-sharing provisions.” The parties’ arguments on this issue were:

The petitioner submits it is not bound by the positive covenants in the Easement Agreement because in Canada the only exceptions to the Austerberry Rule exist in statute, not the common law. The petitioner contends that this prevails over any express intention to the contrary by the parties to an agreement.

The respondent submits the cost-sharing covenant is binding on the petitioner. Relying primarily upon English jurisprudence, the respondent contends that two common law exceptions to the Austerberry Rule exist and should apply in this case. Relying on Ontario jurisprudence, it also submits the covenant is binding because the grant of easement (the right to use the parkade) is conditional on the users assuming the positive obligation to pay to maintain it. In other words, the obligation to pay is binding because, as a matter of construction, it is part of and limits the scope of the grant.

While the decision in this case is noteworthy for its extensive review of general principles on judicial precedent, and of English and Ontarian cases, in the end it all came down to following the two BC Supreme Court decisions noted earlier. But the court also made some broader comments on this issue and its relation to strata-property law worthy of note:

In my view, the respondent is swimming against a strong current of precedent and policy. Though the courts in England recognize a benefit and burden principle and the Ontario Court of Appeal recognizes a conditional grant principle, trial courts in British Columbia have thus far refused to follow suit. Until our Court of Appeal holds otherwise, this is a compelling enough reason to decline to recognize some type of modification to the Austerberry Rule in this case, whether characterized as an exception or a principle.

As well, I think this is a poor case in which to argue for a major change to the common law in British Columbia. The petitioner correctly points out the surrounding context of the consumer protection provisions in the SPA. The respondent could have used the SPA’s separate sections model, but chose not to because it did not want the residential strata owners to overwhelm the others owners in a mixed-use building. The respondent made this choice, presumably with legal advice and knowledge that positive covenants are not enforceable against a successor in title. The respondent has now encountered difficulties as a result of its approach and asks this Court to intervene, not only on its behalf, but in a manner that could disrupt commercial relations in British Columbia more broadly.

Another important feature of this case is that it does not concern a positive covenant contained in an agreement originally entered into by two arms-length entities. Rather, JHV entered into an Easement Agreement with itself, created the successor in title to that agreement and now asks the Court to declare that the successor in title is bound by the agreement’s positive covenants. The cases the respondent cites to support its positions are distinguishable on this basis. The potential pointed to by the respondent that by not enforcing the positive covenant, the Court would be permitting the petitioner to use the parkade without paying for it is speculation and does not, in my view, form a sufficient basis to recognize some form of exception to the Austerberry Rule fundamentally changing the common law. As many other courts have held, if there is to be some reform to the Austerberry Rule, it must come from the legislature, not the courts.

In the result, the court held that “the petitioner is entitled to a declaration that it is not bound by any of the positive covenants of easement registered with the Land Titles Office on December 24, 2010 under registration numbers BB1301520 and BB1301701.”

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