BCREA: THE SHORT-TERM RENTAL ACCOMMODATIONS ACT #572

By Jude Chow, B.A., J.D.

BRITISH COLUMBIA – It’s often said that the only constant in life is change, and change certainly appears to be the name of the game. Described as a real “game-changer”, the Short-Term Rental Accommodations Act (“STRAA”) aims to return short-term rental units to the long-term rental market. It comes as part of the Homes for People Action Plan to address low vacancies for long-term rentals, as well as other housing challenges. Beginning May 1, 2024, the STRAA brought the following important changes into effect:

1. short-term rentals of less than 90 days will be limited to a host’s principal residence¹ plus one secondary suite² or accessory dwelling³ in designated municipalities with a population of over 10,000 as well as some smaller adjacent communities (with some exemptions) (the “Principal Residence Requirement”); and
2. protections for legal non-conforming use will no longer apply to short-term rentals where updated local bylaws prohibit this type of use.

For a comprehensive overview of how the STRAA changes the way short-term rentals operate in British Columbia, REALTORS^® should review the British Columbia Financial Services Authority’s Advisory regarding the STRAA and Legally Speaking #571.

STRAA and Implications for REALTORS^®

REALTORS^® should be aware that the STRAA (and the Principal Residence Requirement in particular) may restrict the permitted uses for a property in which they are involved with. This can have important implications for disclosure obligations and the manner in which a property may be marketed. As such, Realtors should ascertain whether the Principal Residence Requirement applies to the municipalities/communities where they practice and be aware of areas exempt from this requirement.⁴ Similarly, Realtors should also understand that the Principal Residence Requirement does not apply to hotels, motels, certain strata-titled hotels, timeshare properties, certain fractional ownership properties, and strata guest suites.⁵

Duties on REALTORS^® to know basic land use bylaws (Davis v. Lasuta, 2023 BCSC 1060)

As articulated by Mr. Gerry Neely in Legally Speaking #187, a REALTOR^® is expected to be familiar with the basic requirements of municipal land use bylaws.⁶ Concurrently, REALTORS^® should be aware of the importance of Rule 30(d) of the Real Estate Services Rules,⁷ which requires them to advise their clients to obtain independent professional advice on matters that are outside of their expertise. These two obligations need to be balanced against each other.

The importance of recommending independent advice was aptly demonstrated in the case of Davis v. Lasuta. In Davis, the buyers purchased property located on the Agricultural Land Reserve (“ALR”) for the purpose of operating a campground with permanent tenants. Following completion, the buyers alleged that the licensees, who acted as limited dual agents, failed to disclose that the regulations under the Agricultural Land Commission Act (“ALCA”) only permitted a seasonal/temporary campground.

The Court found that the buyers were given a copy of the ALCA Regulations and the applicable zoning bylaw and were also told by the licensees to seek professional advice, which they chose not to do. The Court held that it was the buyers’ responsibility to conduct their own investigations, and they failed to seek the necessary advice. Moreover, the Court found that the licensees’ obligations in this case only extended to disclosing the information that they were given, advising of the zoning bylaws that were in place, and recommending that the buyers seek appropriate professional advice.⁸ In the end, the Court stated that the buyers asserted an “unreasonable reliance” on the licensees for legal advice on the interpretation and implications of the zoning bylaws.

Potential pitfalls with the STRAA

The Davis case serves as an important reminder for Realtors to exercise caution when they are making representations or giving advice about a property’s permitted uses. In light of the STRAA, Realtors should bear the following tips in mind when dealing with short-term rentals:

1. Take time to learn about the STRAA and its effect. Educate yourself on the applicability of the Principal Residence Requirement within the municipalities/communities where you practice, including the potential situations where it may not apply.
2. Stay current and stay tuned. Municipalities with a rental vacancy rate of 3 per cent or more for each of the two previous years have an annual opportunity to opt out of the Principal Residence Requirement. Some communities, including Dawson Creek, West Kelowna, and Fort St. John, have opted out of the Principal Residence Requirement, but the Principal Residence Requirement will not take effect until November 1, 2024 for these communities, subject to government approvals.⁹ Similarly, some initially exempt communities including Tofino, Osoyoos, and Pemberton have opted in to the Principal Residence Requirement. Accordingly, Realtors should remain apprised of any developments regarding the applicability of the Principal Residence requirement in the areas that they practice.
3. Be mindful that the STRAA imposes a “minimum standard” for short-term rentals. That is, local bylaws may impose additional restrictions/criteria over and above the STRAA. Hence, it is still important for REALTORS^® to remain apprised of local land use bylaws. According to the BC Ministry of Housing, provisions in local bylaws that are inconsistent with the STRAA would no longer be in effect.¹⁰ If you are unsure about the effect of the interaction between the STRAA and local bylaws, advise your clients to seek independent professional advice.
4. Do not make assumptions. Operators of short-term rentals will lose the ability to rely upon legal non-conforming use protections and will need to comply with both local and provincial regulations, including the Principal Residence Requirement, where applicable. Hence, REALTORS^® should not expect that previous lawful non-conforming usage will continue after May 1^st, 2024. ¹¹
5. Know your limits and advise your clients to seek independent legal advice regarding municipal land use bylaws and other relevant provincial legislation. In line with Rule 30(d) of the Real Estate Services Rules, REALTORS^® should advise their clients to seek professional advice on matters outside of their expertise. REALTORS^® should also consider whether the contract of purchase and sale contains appropriate subject conditions that allow their clients to conduct necessary investigations.
6. Be mindful of disclosure obligations. Rule 59 of the Real Estate Services Rules states that a Material Latent Defect includes a latent defect that renders the real estate“…unfit for the purpose for which a party is acquiring it…”. Should such a defect become known to a REALTOR^®, it must be disclosed to a potential purchaser. While the Court in Davis rejected the argument that zoning bylaws and associated limitations were Material Latent Defects, REALTORS^® should nevertheless be mindful of their duty to disclose known Material Latent Defects. They also need to use their judgment in determining whether additional disclosure is necessary under specific circumstances.
7. Be aware of potential misrepresentation. With a more complex regulatory environment for short-term rentals, REALTORS^® should recognize that they may be at greater risk of inadvertent misrepresentations. Exercise extra caution when discussing a property’s permitted uses, including its suitability for short-term rentals. Do not make representations that you do not know to be true.

A strata’s perspective: short-term rentals and municipal zoning bylaws

In 2022, amendments were made to the Strata Property Act, removing a strata corporation’s ability to restrict rentals (“Bill 44”). Section 141 of the Strata Property Act¹² now provides for a blanket prohibition on rental restrictions:

“No restriction of rentals by strata corporation

141  The strata corporation must not screen tenants, establish screening criteria, require the approval of tenants, require the insertion of terms in tenancy agreements or otherwise restrict the rental of a strata lot.”

Strata bylaws prohibiting or limiting what is known as short-term accommodations are not impacted by Bill 44, as short-term accommodations are not technically considered “rentals” but are instead licenses to occupy, which do not confer an exclusive right of possession (e.g. similar to how hotels operate). Notably, the terms “rent” or “rental” are not defined within the Strata Property Act, and the length of stay is not necessarily determinative of whether a strata lot is being used as “short-term accommodation” or as a “rental”. In Semmler v. The Owners, the Court held that the words “rent,” “rental,” “tenants,” and “tenancies” in the Strata Property Act do not apply to licenses to occupy. Rather, the Court stated that the word “rental” in the Strata Property Act must be read as describing an intention to create a tenancy, and a licensee is an occupant but not a tenant.

The British Columbia Civil Resolution Tribunal (the “BCCRT”) has held that a strata corporation has a duty to enforce its bylaws, including a bylaw prohibiting illegal uses.¹³ In this regard,  a breach of municipal bylaws regarding zoning or licensing have amounted to an illegal use of a strata lot. As such, and in the wake of the STRAA, it seems likely that a strata corporation would be able to enforce contraventions of municipal bylaws and/or provincial legislation (such as the STRAA) by way of its illegal use bylaw and/or other applicable strata bylaws.¹⁴ Due to the nuanced and often complex nature of enforcing strata bylaws, strata managers are encouraged to advise their clients to seek independent legal advice from a strata lawyer before proceeding.

Conclusion

While the STRAA creates a more complex environment in which REALTORS^® conduct business, THEY will inevitably need to adapt to the changes imposed by the STRAA. Being mindful of the potential implications that the STRAA can have will help you avoid costly legal or disciplinary battles. After all, the name of the game is and seemingly will be—change.

Source: bcrea.bc.ca