Can You Restrict Rentals: A Case Study

7 novembre 2019 | Justin McLarty

( Disponible en anglais seulement )

The current consensus of most Canadian jurisdictions is that while condominiums may place restrictions on the rental of units, such as a minimum lease term, any attempt to completely restrict or place caps on the amount of units that can be rented will not be enforceable.

A recent Quebec case, Mosca v Tours du Chateau, warns that this consensus may not hold true. It is important, however, to remember that Quebec follows the Civil Code of Quebec (the “Civil Code”), as opposed to the common law that applies in the rest in Canada.

In Mosca, the condominium corporation passed a by-law that restricted the total number of units that could be leased in the entire building to 10% or less. At the time that the by-law was passed, 18% of the units were leased but the by-law grandfathered existing rentals until such time as the 10% threshold was met.

The plaintiffs in Mosca challenged the new by-law on three grounds:

  1. The by-law constituted a fundamental right of owners, and the appropriate approval threshold had not been met;
  2. The by-law violated Section 6 of the Quebec Charter of Human Rights and Freedoms (the « Quebec Charter”); and/or
  3. The by-law was contrary to Article 1102 of the Civil Code.

The court rejected all three of the plaintiffs’ arguments and found that the by-law was enforceable. First, the court found that the new by-law did not change the character of the condominium, but rather modified the way in which owners could exercise their property rights.

Section 6 of the Quebec Charter enshrines the right of the peaceful enjoyment of one’s own property and the respect for private property. The court found that when people decide to live in a community, collective rights take precedence over individual rights and that the by-law did not violate Section 6 of the Quebec Charter.

Finally, the court found that the by-law was not contrary to Article 1102 of the Civil Code. Article 1102 is roughly analogous to Sections 7(5) and 176 of Ontario’s Condominium Act, 1998 and provides that:

“Any decision of the syndicate which, contrary to the declaration of co-ownership, imposes on a co-owner a change in the relative value of his fraction, a change of destination of his private portion or a change in the use he may make of it is without effect.”

The court found the by-law was not a decision of the condominium but rather of the owners themselves.

While the decision in Mosca could provide a rationale for a condominium to limit the total number of units that can be leased at any one time, a corporation in a common law jurisdiction should proceed with caution.

Mosca can immediately be distinguished in other provinces on the grounds that the Civil Code and the Quebec Charter applied. Until a challenge against a similar restriction is made in a Canadian common law jurisdiction we can only speculate how a court would handle this issue, but one can reasonably imagine that public policy concerns would factor into a court’s decision.

With rental rates in some Toronto condominiums exceeding 80% and the shrinking supply of purpose built rentals, a cap on the total number of units that can be rented would be a tough pill to swallow for many.

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