CAVEATS AND COVENANTS I It’s not just a condominium you’re getting — you’re buying into a community

Gillian Shaw
Sun

Catherine Hall first downsized from a house to a condo four years ago.

This week she has just sold her second condo and had an offer accepted for a townhouse.

In her four years as a strata owner, three of them spent as president of a strata corporation, Hall has learned a lot about British Columbia‘s Strata Property Act, the legislation that governs strata title properties in the province.

One of the key points she has learned is that strata purchasers must know what they are buying into. She put a subject on her latest offer giving her time to study the bylaws, meeting minutes, financial status and other information related to the strata corporation of the townhouse she is buying.

“I am very vigilant about what are the bylaws, what’s the financial situation, what is the reserve situation like and do they spend money on maintenance proactively or are they pinching pennies and not doing the maintenance,” said Hall, an Anglican priest at St. John the Apostle Church in Port Moody.

When it comes to buying strata-titled property, much of it comes down to buyer beware. The first advice strata law experts will give you is to take the time to familiarize yourself with everything about the building in which you propose to buy — looking back years into the annual general meeting notes, reviewing the minutes of strata council meetings, checking the financial status of the strata corporation and a host of other issues that require due diligence.

“The most important thing for potential strata owners is to understand what they are buying into,” said Shawn Smith, a lawyer who practises in the area of strata law with the firm Cleveland & Doan. “It’s community living.

“One of the problems is that people don’t understand they are getting into community living and they are along for the ride on some matters.

“You surrender some freedom and control of your own affairs just by the nature of strata living. When people purchase a strata they have to be able to accept that to successfully live in a strata.”

It sounds easy to exercise due diligence. In fact, when you are standing in a lineup hoping your offer will be chosen from a dozen others, caution may be thrown aside.

“The problem is in such a hot real estate market people don’t have time to read things to make a decision,” said Tony Gioventu, executive director of the Condominium Homeowners’ Association of BC. “If there are several buyers lined up, the person with the least restrictions is the winner.

“That’s the danger of this kind of market.”

“I think what happens is people get all wrapped up with the decorating and they forget other things that are more important, the business aspects of the building,” said Gioventu. “Has this strata been sued, why has it been sued, what is going on in this community?

“If they read the minutes of the council meeting they think they know everything about the strata. But they need to read several years of this stuff, not just the last meeting.”

Gioventu understands that in a hot real estate market, people may feel they have to forgo such protections as subject clauses that allow them time to investigate the building they are buying into. However, that won’t help them if unexpected pratfalls arise after they buy.

“You’ll have to decide if it’s a risk worth taking,” he said of the buyer who blunders in with little regard for the workings of the strata.

The B.C. Strata Property Act basically provides for the basis for an entire layer of governance — a mini municipality steered by democratic rule in which the good of the majority is a guiding principle. Like other levels of government, a strata council has the right to create bylaws and rules, the right to impose fines on offenders and to collect fees and special levies to carry out the work it is required to do in maintaining the property and its buildings.

Bylaws can range from whether or not rentals are allowed in the building to the date Christmas tree lights must be taken down outside a strata lot’s front door.

“The big bylaw issues are age, pets and rentals,” said Smith. “It’s important to understand the bylaws because owners, occupiers and tenants are obliged to abide by them whether they like it or not.

“If people don’t comply with the bylaws, the strata corp has a handful of remedies, the most common is a fine of $200 per incident or $200 every seven days if the infraction is continuing.”

That means if your strata’s bylaws say no bicycles are allowed on balconies, it could cost you more than $800 a month if you insist on ignoring the strata corporation’s attempts to enforce the bylaws.

A strata corporation’s ultimate remedy when warnings and fines don’t work is to seek an injunction in court, said Smith.

While bylaws must not run afoul of other legislation, such as human rights, strata corporations can choose to limit occupiers of their buildings to those aged 55 and above or to keep out children in certain circumstances under the age of 19.

Some buildings have the 55-plus-age restriction attached as a covenant to the property title and in that case, the covenant stays with the property.

The covenant overrides any changes the strata corporation chooses to make to age restrictions in its bylaws.

Carla Pereira and her husband Goncalo Pereira thought they had mitigated the risks by asking all the right questions when they bought their two-bedroom condo in Burnaby more than a year ago.

Their dream home lasted only until a neighbouring condo owner complained to the city of Burnaby that some folks in the building were under the age of 55. Burnaby, mindful of a covenant imposed when the building was proposed, moved to enforce a 55-plus-age restriction on people occupying suites in the building.

Since the strata’s bylaws don’t allow rentals, the couple, who are among a number of condo owners in the building who have been told they can no longer occupy their suites because they are under the age of 55, have put their suite on the market.

“It has been pretty difficult,” said Pereira, a teacher. “Now we have nine apartments up for sale and a limited pool of who we can sell our apartment to.

“None of us know what to do if we can’t sell. It’s pretty awful.”

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Lawyer Bonnie Elster is a partner with Clark Wilson LLP in the firm’s strata property practice group. She said the Strata Property Act, which came into force on July 1, 2000, carries forward many of the same concepts that were permitted under the Condominium Act that it replaced.

“A strata corporation must have bylaws, that is mandatory and the bylaws specifically deal with the administration and the governance of the strata council, how many people are on council, how often are they going to meet, who gets to vote and the bylaws also provide for the control, management, maintenance, use and enjoyment of strata lots’ common property and common assets,” she said.

Strata lots are where people live and common property is everything not inside the strata lot, including the balcony or patio.

Elster says every strata corporation has bylaws that are the scheduled standard bylaws found in the act, unless they have filed different bylaws with the Land Title Office.

“The only way they can file different bylaws is to bring them before the owners and pass those bylaws by what is called a three quarters vote,” she said. “That is a vote cast by 75 per cent of those present at the meeting and eligible to vote.”

Elster said each strata lot is only entitled to one vote, regardless of the number of people on title. Owners can be prohibited from voting if they are in arrears of their strata fees and they have been served appropriate notice of that.

Elster said the three-quarters vote could in some cases mean a fairly small number of people. The default for a quorum under the act is one third of a strata corporation’s votes.

Using the example of 90 strata lots, Elster pointed out you would need only 30 people at the meeting eligible to vote.

“If you have 31 people eligible to vote and you only need three quarters of them to vote for a bylaw, you could have 24 people bringing in a bylaw that affects everybody,” she said.

The act doesn’t allow bylaws to be made retroactive or retrospective, said Elster. That means if you move into a pets-permitted building with your dog, only to find the bylaws change to prohibit pets, you will be allowed to keep your dog but not to get another one, even if the first dies.

A rental restriction bylaw takes effect one year from the date of passage. All other bylaws take effect from the date of filing in the land title office.

On the 55-plus-age limitation, which was upheld by the courts as a strata council’s lifestyle choice, Elster said anyone residing in a strata lot on the date the bylaw is passed would be grandfathered in and not forced to leave. The age restriction, which only allows for a seniors’ lifestyle starting at the age of 55, applies to occupiers of a strata lot. Owners can’t be limited by that provision, meaning you could own a strata lot in a complex reserved for people 55 and up and be under that age. You wouldn’t be able to reside there.

“The thing about that is you are not forcing people to sell,” said Elster. “But if they buy in the face of an enforceable age restriction bylaw, then they can’t live there.”

Elster said a covenant can only be removed from the title if all the parties to it consent to its removal by signing a release.

Although B.C.’s rental laws don’t allow landlords to discriminate against people under the age of 19, Elster said strata corporations can have a bylaw saying that all occupiers of its strata lots must be 19 and over, except when it comes to a rental of a strata lot.

“That an enforceable bylaw,” she said. “If I want to buy a strata lot with that age restriction and I have a 16-year-old, my 16-year-old — who is the child of an owner cannot live there.

“If I wanted to rent the suite out and there was not a bylaw prohibiting rentals, I could rent it to someone who has a child under the age of 19.”

The fine for renting out a strata lot in contravention of a rental restriction bylaw is higher than the maximum fine of $200 every seven days allowed for other offences. For rental infractions, the maximum a strata corporation can impose under the act is $500 every seven days.

Elster said buyers should be aware that bylaws aren’t cast in stone and could change after they buy. That could be particularly costly for investors planning to rent a suite out.

“The biggest pitfall for buyers is they think that bylaws that come in after they are owners don’t apply to them,” said Elster. “That is the biggest pitfall I see.

“The only three areas grandfathered in the act are rentals, age and pets.”

Under available exemptions for rentals, Elster points out a provision that allows the first purchasers in a building to enjoy the rental rights stipulated by the developer, regardless of subsequent changes to bylaws.

She said developers of strata properties can stipulate their rental rights extend to some distant point in the future — a hundred years hence or more, as long as a date is put to it. Original owners in the development may enjoy that rental freedom, however it doesn’t pass along to subsequent owners.

Elster said while the strata act says you may not have a bylaw that contravenes the human rights code or restricts the rights of an owner to freely sell or dispose of their strata lot, the code has no provision that says you have the right to live in a certain building.

Condo conundrum

Strata councils are essentially “mini-municipalities” with the power to create bylaws and rules, impose fines, and collect maintenance fees and levies. Here are the biggest issues:

Pets: Strata corporations can impose bylaws limiting pets in the strata, although changes can’t be imposed retroactively, meaning if a strata switches from an open pets to no pets or a size restriction, the existing pets in the building are grandfathered in and are allowed to stay.

Age: Strata corporations can choose to limit occupiers in their buildings to those aged 55 and above or to keep out children under the age of 19 in certain circumstances. Anyone residing in a strata lot on the date an age restrictive bylaw is passed would be grandfathered in and not forced to leave.

Rentals: A strata corporation can impose rental restrictions with such bylaws taking effect one year from the date of passage, while other bylaws take effect from the date of filing in the land title office. With certain exemptions in the case of some first owners of newly developed condos, there is no rental guarantee for condo buyers, regardless of the bylaws that exist when they purchase their condo.

The penalties: Most common is a fine with a maximum of $200 an incident and that can be repeated once every seven days for an $800-a-month hit. The fine for rental violations is a maximum of $500 every seven days.

The exceptions: The age restriction applies to occupiers of a strata lot, not owners. B.C.’s rental laws don’t allow landlord to discriminate against people under the age of 19; however strata corporations can have a bylaw saying that all occupiers of strata lots must be 19 and over. That means an owner may not be able to live in an age-restricted condo with his or her child under the age of 19, but if the strata allows for rentals, a person renting the condo could live in it with a child under 19.

© The Vancouver Sun 2005

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