When Cooperatives Become Uncooperative #520
When we think of residential occupation, our minds turn to fee simple ownership, strata property ownership or maybe rental occupation. A lesser known but growing form of housing is cooperative housing under the Cooperative Association Act SBC 1999 c.28 (“Act”).
Unlike strata ownership, members of a cooperative do not own a specific unit. Members of the cooperative own shares in the association, and the association in turn owns the housing units occupied by its members. The allocation and occupation of the various units is determined through application of the cooperative’s rules and policies, which are adopted by the members and administrated by the board.
But what happens when one member of the cooperative is unhappy with the rules and policies adopted by their fellow members?
In a recent case1 a Vancouver cooperative owned a number of units spread across thirteen buildings in six locations. The thirty-nine units ranged from bachelor suites to four-bedroom units. Housing allocation was determined by need, based upon the number of persons in a member’s household and the presumption that each person in a member’s household required one bedroom.
Of course, household size naturally grew and shrunk over time creating a tension between growing families needing more bedrooms (“under-housed families”) and shrinking families needing fewer bedrooms (“over-housed families”). The policies generally stated that over-housed families were required to self-report as people moved out and relocate to smaller accommodations, freeing up the larger units for under-housed members. Not surprisingly, some over-housed members had grown attached to their units and were reluctant to relocate. The board of the cooperative had been less than aggressive in enforcing their policies against over-housed members. Evidence indicated that attempts over the years to modify the existing policies regarding under-housed and over-housed families had been contentious and unsuccessful.
Two under-housed members, who had been waiting for a larger unit for seven years, had been unsuccessfully trying to initiate changes to the policies for some time. They eventually commenced a petition under section 156 of the Act claiming that the cooperative association was conducting itself in a manner which was oppressive or unfairly prejudicial to one or more of the members. As part of those proceedings the court ordered that they be allowed to submit a revised policy for consideration by the members. At the same time the directors submitted revisions to the policies which arguably further advantaged over-housed families to the detriment of under-housed families. The claimants’ policy revisions were rejected, and the directors’ policy changes were adopted by a vote of 75% of the members.
In assessing the petition, the Court set out a two-stage test for establishing oppression under the Act:
1. Does the evidence support a reasonable expectation by the claimant as to how they would be treated, and
2. does the evidence establish that the reasonable expectation was violated by conduct falling within the terms “oppression,” “unfair prejudice” or “unfair disregard”?
The cooperative opposed the petition claiming that the court should give deference to the will of the members who had overwhelmingly adopted the revised policies. The court distinguished the oppression remedy thusly: “Nor can the democratic nature of the decision be given the same weight as it is in other contexts. The democratic process is fundamentally majoritarian. The oppression remedy exists in part to protect minorities from certain kinds of democratic decisions even though those decisions are approved by a majority of directors or members.”2 The judge relied upon a BC Court of Appeal decision dealing with the oppression remedy in the Strata Property Act where the court said, “The view that significantly unfair decisions reached through a fair process are insulated from judicial intervention would rob the section of any meaningful purpose.”3
The Court in this case determined that the rules and policies of the cooperative oppressed the claimants specifically and under-housed families in general, and ordered wholesale changes to the rules and policies contrary to the wishes of the majority of members.
This case is instructive for both prospective and existing members of cooperatives. The former must carefully read and understand the rules and policies of the cooperative before joining, as change may be difficult, and existing members must appreciate that simply having a majority of members in agreement may not be enough where a court finds the rules and policies oppressive.
|1.||Potter v. Vancouver East Cooperative Housing Association, 2019 BCSC 871.|
|2.||Potter v Vancouver East Cooperative Housing Association, 2019 BCSC 871 para 118.|
|3.||Dollan v The Owners, Strata Plan BCS 1589, BCCA 44 para 64.|
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