Form J and the Fear of Urban Decay

Disclaimer: This is not a legal opinion and should not be relied upon as such. Although we are experts in strata property management in British Columbia, members of the public are encouraged to seek legal opinions on their specific circumstances before acting.

In October of 2009 the provincial government passed many changes to the Strata Property Act of BC that all had different implementation periods. Some have been highly advertised, such as Depreciation Reports. However, an important change has received little news, and it has a big impact on strata corporations’ ability to pass and enforce their rental restriction bylaws.

Since the strata act was implemented in 2000; there has been many debates, and some court cases, surrounding the issue of who benefits from the Form J (the Rental Disclosure Statement) the developer files during construction. To remove any ambiguity the legislature established some clear language in the amendments passed October 2009. The application of the Form J is now based on when it was filed.

If it was filed prior to January 1st, 2010 only the original developer and the first purchaser may rely on the form J until it expires.

If it was filed after December 31st, 2009 it can be relied upon by the developer and any subsequent purchaser until it expires.

The form J, known as the Rental Disclosure Statement, is a document filed by the developer to prevent the strata corporation from passing a rental restriction bylaw. I believe the intent was to protect the developer and pre-construction purchasers, to rent their units should they be unable to sell them in a timely manner after construction. However, this latest change does more. This restriction prevents the strata’s control of how many investor owned units and tenants reside in the strata, until the form J expires. Many Form Js have a 100 year expiry date. Plus, many realtors in this “soft” market are using this as a feature to encourage investor purchasers.

The fear that most owners have that drives them to enact a rental restriction bylaw can be summed up in the concept of “Urban Decay”. To synopsise Urban Decay: If a community experiences an influx of people with less invested interest, and possibly less financial means, the area experiences a noticeable degradation of its visual appeal and value. Property owners fear Urban Decay. It also ties in with the “Broken Glass” theory: If you don’t repair vandalized property quickly, people are more likely to vandalize the property further. Both theories have been proven and continue to stand true within our society. So it is a valid fear that owners experience. To further aggravate the situation the Strata Property Act specifically prohibits the Strata Corporation from becoming involved in the screening process for tenants. Further, until changes are made to the Residential Tenancy Act, Strata’s cannot evict tenants through the Residential Tenancy Office.

So how do you control this to prevent Urban Decay and Broken Glass theory. Same way you control anything in strata. The only two ways to control anything in strata:

1. Just and consistent application of your bylaws (damage to property, noise, etc…)
2. Strata Fees

If you stay on top of every resident educating them on the bylaws and enforcement process. Building a community watch program to monitor the building. Educate council on the process of judicious review of complaints and application of penalties. Build a strong community by holding social events like: barbeques, game days, dinners, or wellness clubs. This should discourage delinquents from residing in the building. However, I strongly caution against over-enforcement, this can seriously detract from the community.

If the rise in rentals is creating higher maintenance costs, then raise the fees to compensate and ensure the property is kept up to avoid the “broken glass” effect. If the fees start rising investor owners reduction of profit will probably encourage them to sell. This is about maintaining the asset and worth of the property, not an encouragement to deliberately attack other owners through fee hikes. This should happen naturally and as required, until the issue reaches a natural balance. Be prepared for the arguments about: “why do we have to pay, for someone else causing a problem?” The answer is simply “because we live in a strata community and benefit and lose together.” It may not be fair but it is one reality of strata living.

I also want to state that not all tenants are a problem. I was a tenant once in my life: paid my rent, was respectful of my neighbors, and helped maintain the property. I think like any group they get a bad reputation from the small percentage that cause problems.

Owners shouldn’t fear the effects of the new form J rules. Simply approach the issues in a different way.

As always if you have questions regarding this blog post or general strata questions feel free to contact us.