NEW LICENSING FOR LEAKY CONDO REPAIRS

In 1999 the B.C. government implemented the Homeowner Protection Act, creating the Homeowner Protection Office, and requiring compulsory licensing for builders and mandatory warranty coverage on new homes (click here to see ourarticle about the Homeowner Protection Act).

Under new regulations that came into force on October 1, 2000, repair contractors who arrange, manage or perform building envelope repairs (mainly leaky condo repairs) must be licensed by the Homeowner Protection Office and must offer a warranty on the repairs from a third-party insurance company. A municipality will not issue a building permit for the repair job unless the contractor proves that it is licensed and that the proposed repairs are covered by a third-party warranty. (In areas where a building permit is not required the contractor must still meet these requirements).

The minimum warranty coverage is two years on labour and materials. If 60% or more of any wall is replaced, an additional 5-year warranty on water penetration is required.

These new regulations do not apply to buildings with less than three dwelling units, rental buildings, hotels and motels, dormitories, care facilities, buildings covered by warranty insurance, and buildings with repair costs less than the greater of $10,000 or $2,000 per unit in the building. As well, the regulations do not apply to repairs carried out by the original builder at no charge to the owners or when there is a cost-sharing agreement between the builder and the owners.

If you have any questions about the licensing and warranty requirements under the Homeowner Protection Act, please call us.

RENTALS, PETS AND AGE RESTRICTIONS – NEW STRATA BYLAWS COMING

All strata corporations have bylaws to deal with the management, maintenance and use of strata lots and common property. The new Strata Property Act, which came into force on July 1, 2000, contains a set of Standard Bylaws that apply to all new strata corporations. 

The Standard Bylaws are the “starting” bylaws for all new strata corporations formed after July 1, except to the extent that different bylaws are filed by the developer at the land title office. Strata corporations formed under the old Condominium Act (pre-existing strata corporations) are not yet affected by the new Standard Bylaws. However, on January 1, 2002, the new Standard Bylaws will become the “default” bylaws for all strata corporations, except to the extent that a strata corporation has filed different bylaws at the land title office.

Currently the “default” bylaws for pre-existing strata corporations are those contained in Part 5 of the Condominium Act. These bylaws can be changed or added to by filing a bylaw amendment at the land title office. Many strata corporations have filed bylaw amendments at the land title office to provide for rental restrictions and other matters. However, to the extent that, on January 1, 2002, a pre-existing strata corporation is relying on some or all of the Part 5 bylaws (as opposed to bylaws filed at the land title office), the new Standard Bylaws will be substituted for those Part 5 bylaws. 

As a result, all pre-existing strata corporations should carefully review the new Standard Bylaws. If there is a Standard Bylaw that a strata corporation does not wish to adopt, the strata corporation should replace, amend or disapply this bylaw by passing and filing at the land title office a new “substitute” bylaw before January 1, 2002.

The most controversial bylaws are usually those that deal with rental restrictions, pets and age restrictions. Some questions about how the new Strata Property Act deals with these types of bylaws are answered below. 

Can a strata corporation prohibit rentals?
Under the former Condominium Act, a strata corporation could pass a bylaw to “limit” the number of strata lots that may be rented. Various court decisions held that this did not permit a strata corporation to “prohibit” rentals – in other words, the bylaws had to permit at least one rental. Under the new Strata Property Act, a strata corporation may prohibit the rental of strata lots. However, any restriction will not apply to family members (the owner’s spouse, or a parent or child of the owner or of the owner’s spouse).

May a strata corporation screen tenants?
Under the new Act, a strata corporation may control the conduct, but not the choice, of tenants. Strata corporations may no longer screen tenants, establish screening criteria, require the approval of tenants or require terms to be inserted in tenancy agreements.

Can an owner apply for an exemption from a rental restriction bylaw?
Yes, on the grounds that it causes hardship to the owner. The strata corporation cannot unreasonably refuse to grant an exemption. In a recent case, the court stated that economic hardship, combined with a “leaky condo” problem, might be sufficient grounds for an exemption.

What about existing rentals?
If a tenant occupies a strata lot when a rental restriction bylaw is passed, the bylaw will not apply to the strata lot until one year after that tenant moves out. If the strata lot is not rented when the bylaw is passed, the bylaw applies one year after it is passed. If a developer reserved the right to rent a strata lot for a period of time, the rental restriction does not apply until the earlier of the sale of the strata lot by the first purchaser or the expiry of the developer’s rental reservation period.

Are there any new requirements for landlords?
Yes, a landlord must give the tenant a “Notice of Tenant’s Responsibilities” and a copy of the bylaws and rules of the strata corporation. If the landlord does not comply with this requirement, the tenant must still comply with the bylaws and rules, but may terminate the tenancy and have the landlord pay the moving expenses.

Can a strata corporation prohibit pets?
Yes, but the bylaw will not apply to a pet living with an owner or tenant when the bylaw is passed.

Do the Standard Bylaws allow pets?
Yes, the Standard Bylaws permit 1 dog or 1 cat, 2 caged birds, a reasonable number of fish and a reasonable number of small caged mammals.

Can bylaws restrict the age of strata lot owners? 
No, but the bylaws may restrict the age of occupants of strata lots. An age restriction bylaw will not apply to persons occupying a strata lot when the bylaw is passed.

If you have any questions about the Strata Property Act or the Standard Bylaws, please call us.

Homeowners Ordered to Remove Suite

A B.C. couple that excavated their crawl space and converted it into a secondary suite, in violation of a municipal bylaw, was recently ordered to restore their home to its original condition.

In 1994 the couple built a two-storey house with a crawl space on a lot they owned in Burnaby. The lot was zoned for single-family homes with a maximum floor area of 2,400 square feet. The house built on the lot was just under the maximum permitted floor area. In 1995 the owners excavated part of the crawl space for a suite, resulting in the floor to ceiling height being increased from 4 feet to 8 feet, and increasing the floor area of the home by about 700 square feet.

After the City found out about the excavation, the owners applied for a building permit, which was refused. An application for a variance was also refused, and in 1997 the city began legal action against the owners to force them to restore the crawl space. The trial judge found in favour of the City. The owners appealed to the B.C. Court of Appeal.

The owners’ main defence was that the City didn’t prosecute thousands of owners of illegal suites, but only those that it received a complaint about. They argued that by ignoring the other illegal suites and proceeding only against the defendants because a complaint was received, the City was violating their right to equality under the Charter of Rights.

In essence the defendants’ position was that the City should not be permitted to enforce its bylaws unless it had a system in place for enforcing all breaches of its bylaws.

The Court of Appeal dismissed this argument, comparing it to a motorist ticketed for speeding arguing that the ticket should be ruled invalid because other motorists have driven over the speed limit without being issued tickets.

Finally, the court refused to exercise its discretion to refuse to make the order. Restoring the crawl space would require the defendants to spend a considerable sum of money. The court weighed the public interest of enforcing the bylaw against the hardship the order would impose on the defendants.

Given that the defendants knowingly and deliberately flouted the bylaw for their own benefit, the court ordered that they restore the crawl space to its original condition. This case illustrates the danger for homeowners who attempt to circumvent local bylaws. The courts may not be sympathetic to them if they are prosecuted.

New Condo Legislation In Force

A new act has replaced the Condominium Act as the primary legislation covering the development and governance of condominiums in B.C. The Strata Property Act, along with its amendments, regulations and forms, came into force on July 1, 2000. The new Act applies to all condominiums, both new and existing.

The responsibilities of the owner developer in the initial stages of the strata corporation have been expanded and clarified. For example, developers will be required to:

  • act in the best interests of the strata corporation
  • contribute start-up money to the contingency reserve fund
  • provide more comprehensive documents to the strata corporation, including “as-built” plans and warranties
  • compensate strata corporations for serious under-estimation of expenses, and for failure to call the first meeting or to transfer documents to the strata corporation.

Rules of governance and procedure for the strata corporation have been enhanced and clarified. Many of these provisions have been moved from the bylaws to the body of the Act to ensure that they will not be changed.

The creation and enforcement of bylaws is substantially the same. Some of the key provisions regarding bylaws include the following:

  • Owners must ratify new rules at a general meeting
  • The Act does not prohibit age restriction bylaws
  • New age and pet bylaws will not apply to currently resident persons and pets
  • New procedures for bylaw enforcement include giving persons against whom a complaint has been made a hearing before imposing any penalty
  • The Act makes tenants responsible for complying with the bylaws, and makes landlords responsible for disclosing the bylaws to tenants.

The bylaws of existing strata corporations will remain in force until January 1, 2002, when they will be replaced by a new set of Standard Bylaws. However, the Standard Bylaws will not affect any bylaws that have been filed at the Land Title Office, except to the extent that the filed bylaws do not comply with the Act..

Condominium rentals are often a cause of dispute. The new Act maintains and clarifies a strata corporation’s ability to pass bylaws limiting or prohibiting the rental of strata lots. However, rental restriction bylaws will not apply to family members, and owners will have one year to comply with any new rental restriction bylaw.

If you would like more information or have any questions about this new legislation, please call us.

More information is also available at http://www.fin.gov.bc.ca/strata.htm

SWEETHEART STRATA DEAL UNSWEETENED

A B.C. Supreme Court judge recently ruled that the developer of a strata-titled development had an obligation not to put its interests ahead of the interests of future owners.

The developer had agreed to give the first purchaser in the development an exclusive 99-year lease of a rooftop patio owned by the strata corporation. Since the developer owned all of the strata lots, it entered into the lease on the strata corporation’s behalf. The lease provided that no rent was payable to the strata corporation, and that the strata corporation would pay for all maintenance and repair costs. The purchaser would not have purchased the strata lot if the developer had not included the lease of the patio.

Subsequent purchasers were aware of the lease and there were no complaints about it until 11 years later, when a new owner convinced the strata corporation to pass a bylaw making the first purchaser responsible for all of the costs of the leased patio area. 

The first purchaser brought an action against the strata corporation for a declaration that the bylaw was unenforceable because it violated the lease. However, the judge ruled that the lease was void because it was not in the best interest of all of the owners. Because strata corporations have a duty under the Strata Property Act to manage common property for the benefit of all owners, developers are not permitted to use their initial control of the strata corporation to benefit themselves at the expense of future owners.

Legal Non-Conformity

Under the Municipal Act (since renamed the Local Government Act), municipalities may pass zoning bylaws to regulate the use and density of land and the use and location of buildings. Often the existing use of land or buildings will not conform to the requirements of these new zoning bylaws. Section 911 of the Municipal Act (formerly section 970) allows the existing use of land or a building to continue despite a new bylaw as a legal non-conforming use, on certain conditions.

The existing use may continue unless the use is discontinued for a period of six months, and the discontinuance is not the result of normal seasonal or agricultural practices. As well, if a non-conforming building is damaged or destroyed to the extent of 75% or more of its value above its foundations, it cannot be repaired or replaced unless it conforms to the bylaw.

If the use and density of an existing building conforms to a new bylaw but the building’s siting, size or dimensions do not, section 911 allows the building to be repaired, extended or altered as long as it does not result in a worse contravention of the bylaw.

The BC Court of Appeal recently considered the interpretation of section 911. The case dealt with a family that co-owned a parcel of recreational property with several other individuals in a communal ownership arrangement. Each owner was entitled to the exclusive use of one of 17 segments of the property, and each segment had a cabin on it. In 1977 the local regional district passed a zoning bylaw allowing only three cabins on the property. The use of the 17 existing cabins was allowed to continue as a legal non-conforming use.

In 1991 the family’s cabin was partially destroyed by fire, to the extent of approximately 50%. Perhaps unaware of the provisions of the Municipal Act, the family allowed the local fire department to burn the cabin to the ground as a training exercise. When the family applied to rebuild the cabin, the regional district refused to grant a building permit. The family rebuilt the cabin anyhow, and despite a stop work order issued by the regional district.

The regional district applied to the court for an order to have the cabin removed, on the basis that it was not allowed under section 911 because the original cabin was destroyed beyond 75% of its value. The trial judge ruled that, when determining if a building has been destroyed beyond 75% of its value, section 911 should be interpreted to apply to the buildings on a parcel of land as a whole, and not to the single building at issue. Because the fire did not affect the other cabins on the land, section 911 did not prohibit the replacement of the family’s cabin.

The Court of Appeal disagreed. It held that section 911 must be interpreted to apply to each separate building on a parcel of land (unless the building is one of several other buildings that together form a single enterprise, such as a farm or a camp). It stated that the purpose of section 911 is to ensure that non-conforming uses are not continued indefinitely, and that property eventually comes into conformity with municipal zoning bylaws. As a result, the court ruled that the cabin was not permitted as a legally non-conforming use under section 911.

However, the court refused to order removal of the cabin. The court held that it would be “highly inequitable” to order removal, given that the cabin was almost identical to its predecessor, and that it was not disruptive to adjacent property owners or to the environment. The court acknowledged that this was “one of those rare cases” where it was appropriate for the court to refuse to enforce a statute.

The ruling didn’t leave the family totally off the hook. They were ordered to bring the cabin into compliance with new floodplain requirements

Homeowner Protection Act – Rules for Builders

In response to the leaky condo crisis, the B.C. government passed a new law called the Homeowner Protection Act. The Homeowner Protection Act creates the Homeowner Protection Office, and requires compulsory licensing for builders and mandatory warranty coverage on new homes. (In addition, recent regulations under the Act introduced licensing and warranty requirements for building envelope repairs – click here for more information.)

Builder Licensing

All residential builders (including developers and general contractors) must be licensed by the Homeowner Protection Office. Licenses are for one year only and must be renewed annually. The Homeowner Protection Office has the authority to monitor builders and cancel their licenses.

New Home Warranties

To obtain a building permit, builders must provide proof of third-party warranty coverage for the home. The warranty provider must be licensed with the government. Warranties must provide the following minimum coverage:

  • 2 years for materials and labour
  • 5 years for building envelope (including water penetration)
  • 10 years for structural defects

Owner-Built Homes

The Act sets out special rules for owner-built homes. An owner-builder is a person who builds a single, detached home for their own personal use, not more than once in any 18 month period. An owner-builder does not have to be licensed or provide a third-party warranty on their home. Instead, they must file an Owner-Builder Declaration and Disclosure Notice with their building permit application. If an owner-builder sells a home within 10 years of completion, they must give the buyer a copy of the Owner Builder Declaration and Disclosure Notice. The Disclosure Notice alerts buyers to the fact that the home is not protected by a third-party warranty.

If you have any questions about the requirements under the Homeowner Protection Act, please contact us, or visit the Homeowner Protection Office.

FAQs About B.C.’s Builders Lien Act

B.C.’s Builders Lien Act came into force on February 1, 1998. It updated and in some cases significantly changed the law under the former Builders Lien Act.

In this article we answer questions about the Act from the perspective of a landlord, an owner building a house, a purchaser, a contractor and a lender:

Q. I am a landlord of a commercial building. How can I protect myself from lien claims for work done for my tenants?

A. The Act permits you to file a Notice of Interest against your property at the Land Title Office. The notice warns that the your interest in the land  is not bound by a builders lien unless the work was done at your express request. Any trades who supply work or materials to your property for your tenants will not be able to claim a lien against your interest in the property, unless you authorized the work.

Q. I am having a house built for me. What is a builders lien holdback and is it necessary?

A. The Act requires you to hold back 10% of each payment to the contractor (the builders lien holdback) in a special account so that there is money available for payment of liens. Without a holdback, you could be responsible for the full amount of all lien claims even if the contract price was already paid in full.

Q. What do I do with the holdback?

A. As the owner, you are required to pay the holdback into an account at a savings institution. If you don’t, the contractor can stop working and sue you for damages arising from the work stoppage. If you don’t have a general contractor, a separate holdback account is required for every contract. Withdrawals from the holdback account will require the contractor’s signature as well as your own.

Q. Is a special holdback account always necessary?

A. Yes, with two exceptions. The first is where the value of work and material supplied is less than $100,000 (e.g. renovations). The second is where you have authorized the construction lender to disburse the mortgage money on your behalf, in which case the lender holds back 10% from each draw. However, this results in an area of liability for lenders that most will not be willing to enter.

Q. I am purchasing a new home. Should I be worried about builder’s liens?

A. Yes. If you purchase the home within 45 days of its completion, there could be lien claims filed after you become the owner. You could be in the position of having to pay the liens, even though you already paid the purchase price in full. The Act deals with this problem by permitting purchasers to hold back 10% of the purchase price from the seller until the time for filing liens expired, but these provisions have not been proclaimed. As a result, you must ensure that your contract permits you to hold back funds if the time for filing liens has not expired by closing.

Q. I am a framing contractor. Do I still have until 31 days after substantial completion of the building to file a builders lien?

A. No. You now have until 45 days after a payment certifier issues a certificate of completion for your contract. The payment certifier is usually the architect or engineer, but may be the owner or the owner and general contractor together if your contract does not identify the payment certifier. However, regardless of when or whether a certificate of completion is issued, you may not file a lien after 45 days from the date of substantial completion, abandonment or termination of the general contractor’s contract (or, if there is no general contractor, of the project).

Q. Do I still need to wait until 41 days after substantial completion of the entire building to receive my share of the builders lien holdback?

A. No. Under the multiple holdback system, the general contractor maintains a separate holdback for each subcontract, which will be released 55 days after the payment certifier issues a certificate of completion for that subcontract.

Q. I work for a bank. The bank is ready to advance a draw on a construction mortgage, but there are liens filed against the property. The draw is needed to complete the building. How can the bank’s advance have priority over the liens?

A. The general rule is that advances made by a lender after a lien is filed do not have priority over the lien. However, it may be possible for the bank to apply the advance to the payment of the liens. The Act also allows the bank to apply for a court order that the mortgage advance will have priority over the filed liens. The court will make the order if it is satisfied that the advance will be applied to complete the construction and will result in increased value to the property at least equal to the amount of the advance.

For more specific information on how the Builders Lien Act affects you, contact us at your convenience.

 

Buyer Must Pay GST on Real Estate

A buyer must pay the GST on any taxable purchase, even if the parties did not think that any GST was payable, according to a recent decision of the B.C. Supreme Court.

Under the GST legislation, when GST is payable, the buyer is generally responsible to pay it, while the seller is responsible to collect it from the buyer and remit it to the Crown. The property in this case was a used residential and commercial building. The residential portion of the building was exempt from GST. The commercial portion was taxable, but the seller assumed that the buyer was registered for GST, relieving her of her duty to collect and remit the tax. As a GST registrant, the buyer would have been responsible to remit the tax himself, but would have been able to offset the GST payable against the GST collected on the commercial rents of the tenants.

Unfortunately for everyone, the buyer did not register for GST. When Revenue Canada discovered that the sale went through, it assessed GST, penalties and interest of over $20,000. Although the tax was payable by the buyer, Revenue Canada demanded payment only from the seller, because she should have collected it from the buyer.

The seller eventually paid the tax and then sued the buyer to recover the amount paid. However, the Excise Tax Act (the GST legislation), only allows a seller to recover GST from a buyer if the seller has notified the buyer by an invoice, receipt or in the sale agreement that GST is either included in the purchase price or in addition to it. The sale agreement did not specify whether GST was included in or in addition to the purchase price.

The seller therefore tried to meet the requirements of the Excise Tax Act by providing an invoice to the buyer (2 ½ years after the sale completed!) stating that GST was in addition to the purchase price. The judge, however, concluded that the seller met the requirements of the Act because of a clause on the reverse side of the Real Estate Board’s standard form Contract of Purchase and Sale. The clause requires that each party must comply with the Excise Tax Act. Under the Excise Tax Act, if GST is payable, the buyer is required to pay it.

Accordingly, the clause on the reverse side of the contract, by requiring the parties to comply with the Act, meant that the buyer would be required to pay any GST. The judge concluded that this clause was sufficient notice to the buyer that GST was in addition to the purchase price, and the seller was able to recover the GST she paid from the buyer. This case illustrates the pitfalls that can arise for buyers and sellers of real estate, and the importance of receiving legal advice.