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.

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