In a recent decision, the B.C. Supreme Court confirmed the validity of a relatively common form of allocation of parking stalls and storage lockers in condominium developments.
The case One West Holdings Ltd. v. The Owners, Strata Plan LMS 2995 ("One West") involved a strata development in Vancouver. During the development process, but before the strata plan was filed, the developer granted an option to lease, and then a lease, over the parkade area (part of the common property of the strata) to a related company. That company then assigned the parking stalls to the purchasers of the strata lots when they purchased units in the development. The parking company also kept a number of stalls that they rented out to the public.
The strata took the position that the parking lease was invalid. Several years after the first purchasers bought strata lots in the development, the strata took back control of the public parking stalls by installing their own gate and blocking access by the parking company. The developer brought this claim and argued that the strata had breached the lease.
The strata's main argument was that the lease of the parking stalls was void because it violated the Condominium Act (the predecessor legislation to the Strata Property Act). The Condominium Act, among other things, required a special resolution of the owners to dispose of common property (and a disposition included granting a lease of the common property). Even though the strata had not been created when the option to lease was granted, the strata argued that the Condominium Act applied because at the time the option was granted, the developer intended to create a strata. The court found that the Condominium Act did not apply to the option to lease, and the parking lease, at the time it was entered into, because the strata did not exist yet. The Condominium Act only applied once the strata was created, and not before.
The strata also argued that the developer breached a fiduciary duty to the purchasers of individual strata lots. In the strata's view, the developer created a conflict of interest by retaining the right to parking stalls to lease for its own benefit, when it also had a duty to manage the common property for the benefit of the future strata lot owners. The court found that no fiduciary duty existed. Rather, the purchase of the strata lots was a commercial transaction, the developer did not undertake to act in the best interests of the purchasers, and there was nothing to indicate that the purchasers had any specific vulnerability. Additionally, there was no evidence that if the strata lot purchasers had explicitly been made aware that the developer intended to benefit from retaining and renting the public parking stalls, it would have impacted their decision to buy a unit in the development.
Finally, the strata argued that in the event the parking lease was valid, the strata did not breach the parking lease by taking control of the public parking stalls. The strata's interpretation of the parking lease was that the parking lease did not permit the parking company to rent out parking stalls to the public. The court disagreed, and found that the parking lease did permit the parking company to rent the parking stalls.
Ultimately, the court determined that the parking lease was valid and binding against the strata corporation.
The parking arrangement used by the developer of the strata is a common one used by many developers of strata buildings. It provides a flexible method to allocate parking stalls (and often storage lockers) to purchasers of strata lots, while allowing the developer to retain some control after the strata is created. Thousands of parking stalls in B.C. use the same legal structure. With the decision in One West, the court has confirmed that this type of parking structure is still a viable method for developers of stratas in B.C.
While the decision was appealed, it was settled, and this case thus stands for the proposition that this long standing legal structure is valid.
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