In a recent decision of the Alberta Court of King’s Bench, the rights of condominium owners to enjoy the full benefits of property ownership have been further diminished.
At the outset, it’s worth noting that condominium living denotes a method of property ownership, not to be confused with any particular style of property. Put simply, it’s a mode of ownership which involved a communal aspect, and which is, as a result governed by its own legislation; the Condominium Property Acti (the “Act”). For the most part, condominium ownership bears very few differences from other forms of fee simple ownership, though such owners do need to submit to the will of the majority when it comes to the use and management of common property and various other aspects tied to that communal style of living.
Restrictions on Short-Term Rentals
However, the recent decision of Condominium Corporation No. 042 5177 v. Kuzioii has reinforced the ability of condominium boards to place severe restrictions on how owners can use their own units. In Kuzio, the Court recognized the dissonance between the rights normally afforded the fee simple owner of real property and the limitations imposed through the condominium Bylaws, rules and regulations, and the discretion given in many cases to the condominium board itself. The Court reconciled this through the position that the communal nature of condominium living distinguishes that fee simple interest from other fee simple ownership scenarios, where control is not surrendered to a board of directors.
At issue in Kuzio was the ability of an owner to offer up their unit for rent on any one of the various short-term rental platforms proliferating the market, including Airbnb, Expedia, Kayak and Homeaway. In particular, the Court made a prior interim injunction permanent, preventing the Respondent owners from offering their units for short-term rentals. In doing so, the Court upheld revisions to the condominium bylaws which prevented owners from using their units for “…any commercial or professional purpose…”. In affirming the application of the bylaw to restrict short-term rentals, the Court found that, while the Act protects the right of Owners to lease their units, in the absence of a lease, any paid occupancy of a unit would be deemed to be use for a commercial purpose.
Numerous jurisdictions have struggled to address the specific needs and liabilities surrounding short-term rentals. The solutions adopted by various municipalities in North America include limiting short-term rentals to a person’s principal residence, special taxes to be collected by short-term rental operators, limitation on the type of properties rentable (including prohibitions against basement suites, coach house and above-garage suites) and even absolute bans on short-term rentals in apartment buildings. These approaches, though implemented by local law or bylaw, have, in many situations, the same effect as rules put in place at the condominium corporation level.
Other Limitations Imposed through Condominium Bylaws
There are other examples of limitations imposed through condominium bylaws that have the effect of preventing owners from exercising what would otherwise be very ordinary rights associated with property ownership. In the recent Court of King’s Bench decision of Lupuliak v. Condominium Plan No. 8211689iii, the Court agreed that the board acted reasonably in demanding that an owner remove a doorbell camera installed, without the board’s permission, following a break-in at the owner’s unit. In making its determination, the Court quoted noted author Bruce Ziff, nothing the “[p]articipation in the condominium projects necessarily involves a surrender of some degree of proprietary independence. An owner is at the mercy of the rules enacted through the internal decision-making process.”iv
However, Kuzio is somewhat distinct, insofar as in characterizing short-term rentals as a license agreement, rather than a lease, the Court was able to side-step the provision in the Act which prevents a condo board from creating bylaws which obstruct an owner from leasing their units. What remains is uncertainty; what is a long enough rental to be a “lease”? One week? A month? At present, there doesn’t seem to be any answer to this question.
There are a number of lessons to be learned from Kuzio and other such decisions, the biggest takeaway being perhaps that if one wishes to acquire a condominium property, one would be well served to first conduct a thorough review of the condominium bylaws and confirm that those bylaws don’t contain any prohibition which would affect one’s intended use. At the same time, one needs to be mindful of the fact that, while sometimes difficult to do, bylaws can be changed, and what is permissible today may not remain so in the future. As well, in many cases, an owner may be well served by seeking a role on the Board to have their say in decision making.
Questions about how these developments could impact you? Contact Sean F. J. Curran.
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i R.S.A. 2000, c. C-22
ii Condominium Corporation No. 042 5177 v. Drew Kuzio et al., 2020 ABQB 152
iv Bruce Ziff, Principles of Property Law, 5th ed (Toronto: Carswell, 2010) at 366