Strata Property Rentals

The applicability of a bylaw restricting the rental of strata property is an area of law which requires the interpretation the Strata Property Act and the Strata Property Regulations.
Generally, a strata corporation may impose bylaws which limit the number of rentals which are permitted in the building. The enforceability of those bylaws (assuming they are properly enacted by the strata council) on owners who wish to rent is the subject of this blog entry.

A. Sometimes Rental Restrictions DO NOT apply to the FIRST BUYER. A owner who has purchased a strata lot from a developer will not be subject to rental restrictions if:
i) a "FORM J" has been filed which has permitted the developer to rent the strata unit purchased by the owner; and,
ii) the time period specified in the "FORM J" has not expired.

A common misconception in the industry is that all "first owners" have an exemption from Rental Restriction Bylaws, this is simply not true. Buyers and Realtors should ensure they obtain a copy of the filed Form J.

B. Rental Restriction Bylaws do not apply immediately if a unit is currently rented at the time the bylaw is passed. If the previously rented unit is VACANT when the bylaw comes into force then, the application of the bylaw to that unit is delayed for ONE YEAR. If the previously rented unit is OCCUPIED when the bylaw comes into force then, the bylaw applies ONE YEAR AFTER the occupying tenant moves out.

The key point here is that upon passage of the bylaw, the rental restriction WILL apply to the owner’s rented unit; it is simply a matter of time. This piece of legislation is simply a mechanism to ensure that tenants will not find themselves “on the street”, but it does little to protect the interest of owners. I strongly advise owners, who are facing a proposed bylaw restricting rentals to rally other owners to their cause prior to the meeting on the issue. Once the bylaw is enacted, you may have no choice but to eventually sell your property.

Execution of Real Estate Contracts

A. Contracts Must be In Writing

Real Estate Contracts, as contracts for the sale of land, are unique in British Columbia law as s.59 of the Law and Equity Act states that “A contract respecting land or a disposition of land is not enforceable unless there is, in a writing signed by the party to be charged or by that party's agent, both an indication that it has been made and a reasonable indication of the subject matter”

In the historical case of McKenzie v. Walsh, the Supreme Court of Canada made it clear that no particular form of contract for the sale of land was required, simply a contract “in writing” (email would likely qualify in 2009), which specifies all fundamental terms including: Parties, Property, and Price.

B. Real Estate Agents are Held to a Higher Standard

But, as the fictitious contract case of Wu points out, a suspension case brought by the Real Estate Council of British Columbia, a Real Estate Agent has a an obligation to ensure that the contracts they are presenting on behalf of their clients are legitimate and well intentioned. Therefore, real estate agents (and lawyers) are held to the standard of an expert vis a vis their clients when drafting and presenting contracts.

C. Witness of Documents is Important for Contracts, Essential for Land Title Documents

Having a real estate contract properly witnessed is a cornerstone of a good contract because it validates the contract with the written evidence of an independent third party who may refute later claims of identity, mistake, duress or undue influence during an action for breach.

On the Closing Date, when a transfer or mortgage is to be registered in the Land Title Office, the Land Title Act applies an higher standard stating there shall be no registration or charge registered in the land title registry unless that charge is witnessed properly by an “officer” (which includes lawyers in the Province of British Columbia). This is a key reason why lawyers are an integral part of every real estate transfer in British Columbia.

D. Special Consideration for Corporate Purchasers

Generally the law in British Columbia states that a corporation that does not exist (ie; because it has yet to be incorporated or it has been dissolved), cannot enter into a valid contract, unless that contract is specifically adopted by the corporation after incorporation. Therefore, if you are dealing with a corporate purchaser it is prudent to ensure (by calling your client’s lawyer) that that corporation is in good standing with the Corporate Registry.

E. Special Consideration for Execution by Power of Attorney

Often, elderly or non-resident clients wish another person (other than their agent) to function as their attorney for the execution of documents. Real Estate Agents should ensure that they have a copy of the valid power of attorney and this power of attorney should be registered in the land title office to ensure its validity on the Closing Date.

Native Land: Trust Completion Dates

In the province of British Columbia, leased lands on native reserve are now sold by a new RECBC contract which contemplate both a Trust Completion Date and a Final Completion Date.

The Trust Completion Date is the date where the Buyer deposits the Purchase Money with his or her lawyer. The Final Completion Date is the date following actual registration in the Indian Lands Registry.

Buyers should note that these days can often be as much as 90 days apart, and therefore it is important that appropriate escrow provisions be in place to ensure:
a) that the Buyer has occupancy of the home when desired;
b) that transfer and mortgage documents are appropriately registered; and,
c) the Seller is able to i) payout prior mortgages, and ii) receive the balance of the purchase price within a reasonable period of time. Title insurance may be helpful in this situation to provide "gap" coverage.

IMPORTANT: these consideration do not apply to Westbank First Nations Lands, for these property please consult the WFN Contract prepared by Peter Borszcz and Barry Porrelli.

Home Inspections

The home inspection industry in British Columbia has grown rapidly in the last 15 years, from fringe service, to mainstream acceptance. What is seldom explained to Buyers is that there a limits to what a home inspection can do.

Most home inspectors are "problem spotters" not "problem solvers or quantifiers". Usually a home inspection will say "I think you have a roof issue" or "you may want to get the deck checked out". Often new buyers will take this advice as something to look into AFTER purchase. This is often a mistake.

If a home inspector spots something, even if the home inspector does not think it is a critical issue, it is best to then look into it further by calling in a qualified expert. Therefore if there a roof issue, get a roofer in to look at the property, if there is a structural issue, get a structural engineer. A few dollars on spend investigating a home purchase is money well spent.

Buyers should also note that there are limits to the liability of home inspectors. Usually the contract you sign with the home inspector limits their liability to problems they can see without moving furniture, ceiling tiles ect....

Real Estate Agents: Dual Agency

A "dual agent" is an agent who acts for both the buyer and the seller in a single real estate transaction. Often this occurs on "sign calls" where a prospective buyers drives by (or "surfs by") a home they like and calls the agent associated with the property.

Dual Agency places the Real Estate Agent between both clients, and the Agent owes a duty to act in the bests interest of both parties, which naturally conflict. Therefore, dual agency is only allowed in very limited circumstances. As a Dual Agent, realtors must secure the consent of both parties, disclose all material facts to both parties, but must keep secret the buyers or sellers motivation or their own thoughts on pricing or negotiation strategy.

Strata Property: Special Levies

Where there is an outstanding or, contemplated special levy (as found in the minutes), Buyers and Sellers need to clearly state WHO is responsible for paying the levy. Ideally, a sharp realtor has considered the issue and stuck in a clause in the contract but, in the event it is forgotten:
1) ensure you get a copy of the resolution authorizing the special levy to see if it contains an acceleration clause; and,
2) look to s.109 of the Strata Property Act: the SELLER owes if the special levy is payable prior to the CLOSING DATE, whereas the BUYER owes if the special levy is payable on or after the CLOSING DATE.

Buyers Need to Get Insurance by 12:01am on Closing

Under the standard contract of purchase and sale, used by most Realtors, the RISK of the property passes to the Buyer at 12:01am on the CLOSING DATE. Therefore Buyers are well advised to ensure that their insurance policy is effective at 12:01 on the CLOSING DATE.

Often Buyers will obtain insurance to be effective the POSSESSION DATE (or moving date), this can leave the property uninsured for a period of time and, may, in the event of a fire/ flood/ or other insurable event happening at this time, cause great loss to an uninformed Buyer.