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.