Commercial Litigation and Dispute Resolution Blog

In a recent decision (V.I.T. Estates Ltd. v. New Westminster (City), 2023 BCCA 183), the BC Court of Appeal dismissed a challenge to a zoning bylaw requiring that certain privately-owned strata units in the City of New Westminster be used as rental properties. The Court’s conclusion turned primarily on its finding that the Residential Tenancy Act (“RTA”) does not give landlords a right to occupy residential units, but rather, restricts that right.

Background

In January 2019, New Westminster enacted Bylaw 8078 (the “Bylaw”), which limited specific parcels of land to ‘residential rental tenure.’ The effect of the Bylaw was to prevent owners of existing rental units within multi-family residential buildings on those parcels from occupying their units: the units could only be lawfully occupied by tenants in accordance with the RTA. This was a strategic decision on the part of the City to preserve rental housing supply, and came following amendments to the Local Government Act, R.S.B.C. 2015, c. 1 (“LGA”) in 2018, which authorized municipalities to adopt rental-only zoning bylaws.

Six privately-owned buildings were affected by the Bylaw. As a result, owners of units in those buildings brought a petition challenging the Bylaw, arguing it was incompatible with provisions of the RTA that permit property owners to terminate a tenancy if they wish to occupy the unit. The owners sought to have the Bylaw quashed or set aside, or in the alternative, declared inoperative in relation to their properties. The BC Supreme Court dismissed the petitions (2021 BCSC 573).

Court of Appeal Decision

On appeal, the owners argued that the Bylaw was void for uncertainty due to internal contradictions, beyond the jurisdiction of the City, and inoperative due to conflicts with the RTA. The Court of Appeal dismissed the owners’ appeal, finding that each of their arguments rested on the flawed assumption that section 49 of the RTA grants landlords a right to occupy rental units in circumstances where the landlord (or a close family member) intends in good faith to occupy the unit. The Court held that the RTA does not establish such a right, but simply governs the manner in which a tenancy may be terminated in those circumstances. As a result, section 49 in fact restricts the common law right of property owners to occupy their premises.

The Court began by reaffirming that the standard of review on challenges to the validity of a municipal bylaw is presumptively reasonableness, in accordance with Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 and recent municipal law jurisprudence (see: 1120732 BC Ltd v Whistler (Resort Municipality), 2020 BCCA 101 and 1193652 BC Ltd v New Westminster (City), 2021 BCCA 176). However, on the question of whether a bylaw is impermissibly vague or uncertain, a distinct standard of review applies: the reviewing court must ask whether a reasonably intelligent person can make “some sense” of the bylaw. This requires a benevolent interpretation of the bylaw and, unlike reasonableness, affords no deference to the municipality.

Applying this test to the owners’ uncertainty argument, the Court found no difficulty reading the Bylaw in tandem with the RTA. The Court considered the purpose and effect of the RTA, finding that it governs the relationship between landlords and tenants, not the relationship between a landlord and their property. In other words, the RTA neither comprehensively governs land use rights nor prevents municipalities from regulating those rights. With respect to section 49 in particular, the Court emphasized that it requires a property owner to have a good faith intention to occupy a rental unit – and a good faith intention cannot exist where other circumstances, such as a legally enacted bylaw, will prevent the owner’s occupancy. Unlike the RTA, the Bylaw governs the manner in which landlords are entitled to use their land.

Next, the Court of Appeal found that, in amending the LGA, the Province clearly intended to give municipalities the ability to preserve rental accommodations by limiting property uses to rental tenures. The owners’ argument that the City lacked jurisdiction to enact the Bylaw similarly failed because nothing in the RTA prevents a municipality from restricting a landlord’s right to occupy residential property, when the municipality is exercising powers validly conferred under the LGA.

On this issue, the Court acknowledged that generally, legislation should not be interpreted as interfering with property rights unless it is clearly intended to do so. However, the Court found that the LGA does clearly indicate an intention to allow such interference, as zoning bylaws are inherently designed to restrict property uses.

In sum, the Court of Appeal found that the Bylaw is neither internally nor externally inconsistent, and the City reasonably interpreted the LGA as authorizing its enactment. As such, there was no basis to set aside the Bylaw.

Takeaway

This decision confirms that municipalities, acting in accordance with section 481.1 of the LGA, can create rental-only zones and thus restrict the right of private owners to occupy their property. However, municipalities cannot use this type of bylaw to prevent owners who currently occupy their property from continuing to do so: under section 535.1 of the LGA, if an owner occupies a unit at the time a rental-only zoning bylaw is passed, the bylaw will not apply to them unless and/or until they begin to rent out the unit. Similarly, a change in ownership or the issuance of building or development permits to units that are currently owner-occupied, does not require the unit to be rented to a tenant. In short, a rental-only zoning bylaw can only restrict the occupancy of existing rental units.

Further, the Court has not considered whether municipalities can enact rental-only zoning bylaws outside of the powers conferred under the LGA. The City of Vancouver, for example, is governed by the Vancouver Charter, S.B.C. 1953, c. 55, which contains similar provisions on rental zoning but is a distinct statutory scheme.

If you have any questions about this decision and how it may impact your property or your rights under the RTA or LGA, please contact a member of our Commercial Litigation or Real Estate groups.