The law is clear that, unless subdivision approval has been obtained, a lease of an unsubdivided piece of a parcel of land for a term of more than three years is unregistrable due to Section 73 of the Land Title Act and unenforceable against third-party purchasers (although it may give rise to personal rights between the parties to the lease (see Volume 1, Issue 1 of Real Estate MATTERS). In The Owners, Strata Plan VIS2968 v. K.R.C. Enterprises Inc. 2009 BCCA 36, the B.C. Court of Appeal considered whether the granting of an option to purchase a portion of common property within a strata development is similarly prohibited.
This dispute arose between the owners of bare land strata lots in a development in Sooke, B.C., and the party to whom the developer assigned options to purchase some of the common property of the strata corporation. When the bare land strata plan was registered, the common property of each phase contained a parkland area where the septic field for that phase was located. The developer granted itself options to acquire the parkland areas if the local government extended sewage services to the area in the future such that the septic fields were no longer needed by the strata corporation. The developer notified the strata corporation that the options were being offered for sale and subsequently assigned them to a third party. The strata corporation challenged the options on the basis that they were "dispositions" of common property as contemplated in the old Condominium Act (British Columbia) and, therefore, prohibited by Section 73 of the Land Title Act because the statutory subdivision requirements had not been met.
Section 21(4) of the Condominium Act provided as follows:
"Notwithstanding the Land Title Act, a disposition, not including a lease for a term of 3 years or less, of all or part of the common property of a strata corporation under section 20 is a subdivision of land, and Part 7 of the Land Title Act applies."
Section 21(4) is similar to Section 253 of the Strata Property Act (British Columbia), which also provides that a "disposition" of common property is a subdivision of land and must comply with the subdivision requirements of the Land Title Act.
The court, finding in favour of the strata corporation, determined that the act of granting the options was indeed a "disposition" and a subdivision of land under Section 21(4) of the Condominium Act. Accordingly, the options were invalid because subdivision approval had not first been obtained as required by Section 73 of the Land Title Act.
Given the similarity in wording between Section 21(4) of the Condominium Act and Section 253 of the Strata Property Act, it is very likely that an option to purchase a portion of common property granted to a party, without prior subdivision approval, will be invalid.
In retrospect, the better approach for the developer in this case may have been to retain ownership of the parkland areas by excluding them from the strata plan and then granting the strata corporation an unregistered licence over the septic field areas