Part 57 published on 01/03/17
Strata Corporation not bound by positive covenants in parking facility agreement
Strata Plan LMS 3905 is an office building. It is one of several properties having certain rights in relation to a parking facility that is part of a large multi-use complex. Prior to creation of the strata corporation, the developer registered an agreement against the different parcels purporting to bind subsequent owners of those parcels. Among other things, the agreement gave the different properties easements for vehicular access to the parking facility and to make use of a certain number of parking spaces in the parking facility. The agreement also obligated the parties to pay an annual base rate plus a percentage of the parking facility “operating expenses” (such payments to the made to the owner/operator of the parking facility).
Although the strata corporation did pay these amounts for a period of time, disputes arose between the parties about the payments. Ultimately the strata corporation applied for an order that the covenants requiring it to pay an annual base rate and a percentage of operating expenses were not enforceable against the strata corporation or, alternatively, that those covenants should be corrected to reflect the true intention of the original parties to the easement.
The Court agreed with the strata corporation. The Court held that the payment obligations are positive covenants that do not “run with the land”, and therefore are not binding upon subsequent owners (who were not original signatories to the agreement). Furthermore, the Court held that the agreement did not constitute a pre-incorporation contract (entered into in anticipation of creation of the strata corporation and ratified by the strata corporation); nor was the strata corporation bound by the positive covenants due to its historical conduct (ie. by making payments in the mistaken belief that those obligations were valid and binding on the strata corporation).
[Editorial Note: In the absence of an agreement, the party with the benefit of an easement is typically obligated to contribute to the costs to maintain, repair and operate the easement property. So, I would assume that the strata corporation would be obligated to pay some amount, but the decision offers no indication as to how that amount might be calculated.]