Executive Summary: Key Legal and Evidentiary Issues

• Mr. Hildebrand's business licence was terminated for non-renewal when he failed to pay the $35.21 fee by the January 17, 2022 deadline due to personal health issues and a motor vehicle accident

• The City refused to issue a new licence because individual kitchens in the rental units were expressly prohibited under Bylaw 8000 for boarding or lodging houses

• Zoning Bylaw 12375 (September 26, 2022) rezoned the property to "MF2 – Townhouse Housing" where boarding and lodging houses were no longer permitted uses

• Council's reconsideration unanimously upheld the Licence Inspector's decision to refuse the new business licence application

• The petitioner argued procedural unfairness regarding the termination process and that his short-term rental use was a lawful non-conforming use

• Justice Coval found the City's decisions were neither procedurally unfair nor unreasonable, dismissing the petition with costs at Scale B

Background and property history

Dennis Axle Hildebrand is the sole registered owner of a property at 911 Bernard Avenue in Kelowna, British Columbia, featuring a three-storey, apartment-style building built in the early 1900s. According to City records, the building was converted into a rooming house known as the Bernard Lodge Apartment Building in March 1953, with plans from that time showing nine bedrooms and two bathrooms. The building was later remodelled to create seven self-contained living units, each with its own kitchen, though the City's records do not include permits for the kitchens.

The business licence and zoning framework

Mr. Hildebrand purchased the property in 2010. By that time, it had seven rental units located on three floors, each being a one-bedroom or bachelor suite with a self-contained kitchen including a fridge and stove. Initially, he rented the suites to both short-term (under 30 days) and long-term renters. Since late 2019 or early 2020, he has rented primarily to short-term renters, including through Airbnb, under the name the Kelowna Art Lodge. Each year from 2010-2021, Mr. Hildebrand obtained a business licence for a seven-unit rooming house, paying the $35 annual fee through his online business account.

From October 1998-2022, Bylaw 8000 zoned the property "RM4 – Urban Residential Zone," which permitted lodging and boarding houses but expressly prohibited them from having individual kitchens. On September 26, 2022, Council Zoning Bylaw No. 12375 rezoned the property to "MF2 – Townhouse Housing," where boarding and lodging houses were no longer permitted.

Licence termination and subsequent refusals

On December 3, 2021, the City sent its business licence renewal notice to Mr. Hildebrand's online email account for the Kelowna Art Lodge. The renewal notice stated the current licence expired on December 31, 2021, and the due date for the $35.21 renewal charge was January 17, 2022. It included a warning that non-payment could result in the cancellation of the licence. Mr. Hildebrand did not pay the renewal fee by the due date. His evidence is that around this time he was involved in a motor vehicle accident and struggling with health issues and so not monitoring his email.

In mid-2022, the City received a complaint regarding alleged bylaw infractions on the property, referring to placement of an unpermitted shipping container in the lane, building work such as exterior railing and stair additions being done without permits, and the use of the property for short-term rentals through platforms such as Airbnb. As part of the City's response, staff noted that the licensing database indicated no renewal of his rooming house licence. On September 27, 2022, staff terminated his licence in the City records for non-payment of the renewal fee. There were no damages awarded in this case.

In November 2022, the City sent violation notices to Mr. Hildebrand for operating without a business licence. He immediately attempted to pay the renewal fee but was told his licence had been terminated and he must apply for a new licence, which he did. By letter of December 6, 2022, the City's Licensing Manager rejected Mr. Hildebrand's application, stating that "secondary suites cannot be located in a boarding or lodging house." On January 9, 2023, Mr. Hildebrand submitted a second application, which was rejected on April 24, 2023 with the same reasoning.

In July 2023, staff proposed a compromise whereby Mr. Hildebrand could receive a licence for long-term rentals (minimum 30 days), which staff said could be considered a legal non-conforming use. Mr. Hildebrand insisted on continuing with short-term rentals.

The reconsideration hearing

On April 27, 2023, Mr. Hildebrand requested reconsideration of the licence refusal by Council. The reconsideration occurred on July 22, 2024. Staff presented a report explaining that while a rooming house business was permitted under Bylaw 8000, sleeping units in boarding or lodging houses may not contain kitchens. Since the boarding units had been converted into individual apartments with their own kitchens, no lawful boarding or lodging house use was actually occurring at the time Bylaw 12375 was adopted, and therefore the property did not have lawful non-conforming status.

Council unanimously resolved to uphold the decision of the Licence Inspector to refuse issuance of a business licence for Mr. Hildebrand's rooming house business.

Legal analysis and standard of review

The parties agreed that the standard of review for the decisions is reasonableness. Justice Coval noted that in judicial review, the court must take a "reasons first" approach, evaluating the administrative decision-maker's justification rather than the conclusion the court itself would have reached.

Regarding the licence termination, the Court found it was not procedurally unfair. The City followed a reasonable process in accordance with the Community Charter and its Licensing Bylaw 7878. Justice Coval agreed with the City that Section 15(1)(d) of the Community Charter, not Section 60(3), addresses the terms and conditions of business licence renewals, and that notice and an opportunity to be heard were not required. Section 60 does not refer to renewals and, read in context, addresses cancellation of a licence for cause. The renewal notice clearly spelled out the renewal due date and potential consequences of failing to meet it.

Lawful non-conforming use determination

On the question of lawful non-conforming use, the Court found the City's decision reasonable. Bylaw 8000 defined "SLEEPING UNIT" as "a habitable room, or a group of two or more habitable rooms, not equipped with self-contained cooking facilities, providing accommodation for guests." Since Mr. Hildebrand's units each had individual kitchens, his use was not lawful under Bylaw 8000 and therefore could not qualify as lawful non-conforming under Bylaw 12375.

Mr. Hildebrand raised a new argument at the petition hearing—that his use was lawful under the earlier Bylaw 4500 (which governed from 1976-1998) and had remained lawfully non-conforming ever since. Justice Coval rejected this argument on two grounds: first, it was not raised before the City during the application process; second, even under Bylaw 4500, short-term rentals in separate dwelling units with individual kitchens would not have qualified as a conforming lodging house use. Bylaw 4500 defined a lodger as "a person who resides with a family" and defined family to include persons "all living together as a single housekeeping unit and using common cooking facilities."

Ruling and outcome

Justice Coval concluded that Mr. Hildebrand had not demonstrated the City's decisions to be procedurally unfair or unreasonable. The petition was dismissed with costs to the City at Scale B. No specific monetary amount beyond costs was determined in this judgment. During the hearing, the Court was told that Mr. Hildebrand continues to use the property for short-term rentals despite the absence of a business licence.