The Supreme Court of British Columbia, in its recent decision in 585582 B.C. Ltd. v. Anderson, upheld as valid and enforceable a mandatory rental pool restrictive covenant registered against strata lots in a resort development. The covenant in question was similar in substance to those often registered against strata lots forming part of strata resort hotels in BC.  It set out that strata lot owners could not rent their strata lots to the public, except in accordance with a rental pool management agreement that provided that the rental revenue would be split 50/50 between the hotel operator and the strata lot owner.

One strata lot owner began renting his unit on his own and not through the rental pool. He sought a declaration that the restrictive covenant registered against his property was void, as it was not negative in substance, lacked certainty and did not “concern” the land but, instead, simply benefited a business.

The necessary conditions of covenants which run with land are summarized in Westbank Holdings Ltd. v. Westgate Shopping Centre Ltd., 2001 BCCA 268 as follows:

  1. “The covenant must be negative in substance and constitute a burden on the covenantor’s land analogous to an easement.  No personal or affirmative covenant requiring the expenditure of money or the doing of some act can, apart from statute, be made to run with the land.
  2. The covenant must be one that touches and concerns the land; i.e., it must be imposed for the benefit or to enhance the value of the benefited land.  Further that land must be capable of being benefited by the covenant at the time it is imposed.
  3. The benefited as well as the burdened land must be defined with precision in the instrument creating the restrictive covenant.
  4. The conveyance or agreement should state the covenant is imposed on the covenantor’s land for the protection of specified land of the covenantee.
  5. Unless the contrary is authorized by statute, the titles to both the benefited land and the burdened land are required to be registered.
  6. Apart from statute the covenantee must be a person other than the covenantor.”

The court found that (i) as the covenant prevented strata lot owners from renting on their own and keeping all the resulting revenue, it was restrictive and thus a negative covenant.  The fact that the covenant mitigated the burden of this restriction by providing the rental pool management agreement as another basis for renting did not change the restrictive nature of the covenant; (b) the fact that a prospective purchaser would have to look outside the covenant (to the rental pool management agreement) to see the terms for renting did not void the covenant for lack of certainty.  The restriction on private rentals set out in the covenant was unequivocal; and (c) although the dominant tenement in this case (Strata Lot 2) was no more than the front desk of the resort, it was sufficient to constitute the dominant tenement so as to permit the covenant to “touch and concern” the land. The front desk was critical to the operation of the resort and benefited from the restrictive covenant.  The restrictive covenant was enforceable and prevented the strata lot owner from renting his strata lot outside the rental pool arrangement.