Leasehold strata living: A viable, vibrant alternative to freehold

Although leasehold strata is a time-honoured tradition in many areas of the world, in BC, it remains something of a rarity. It’s seldom discussed, frequently misunderstood, and often perceived as a second-best alternative to freehold or fee simple.

Today, the popularity of strata leasehold is on the rise, especially with the increasing number of First Nation properties currently under development.

There’s also one potential bonus that’s easy to overlook. Sometimes leasehold creates an opportunity to live in places you wouldn’t be able to live otherwise. For example, at UBC, there’s virtually no freehold land and at SFU, there’s none. If you want to be part of the campus lifestyle, leasehold is a way to be able to do it.

In this issue, NextHome chats with Richard Bell, principal at Bell Alliance, about some of the myths and realities of the leasehold market.

New Home + Condo Guide: Is leasehold recognized as a valid form of homeownership under the regulations of BC’s Condominium Act?
Richard Bell: Yes, part three of the Condominium Act specifically addresses strata leasehold properties.

New Home + Condo Guide: So, a leasehold development is effectively the same as a freehold in terms of getting a mortgage or leaving the property to a beneficiary of your will?
RB: Exactly. You’ll also be subject to paying property tax the same as other types of homeownership. One difference worth noting, though, is that if your lease is with First Nations, there is a different land title registration process.

NH+CG: Are there different types of leasehold properties?
RB: Leases are either prepaid, meaning the cost is built into the purchase price with no further payments until that lease expires, or they’re non-prepaid, meaning the owner will have a monthly lease payment in addition to strata fees and any mortgage they’re carrying. Most, but not all leases today are prepaid for a certain amount of time—usually 99 years.

NH+CG: What happens at the end of the lease term?
RB: The property title reverts to the owner. Depending on the lease, there may be a right of renewal. However, where there is no right of renewal, there may be the ability to negotiate an extension such as what is currently taking place with the city of Vancouver on the False Creek leaseholds.

NH+CG: There is a fair amount of anecdotal information suggesting leasehold properties appreciate at roughly the same rate as freehold, especially well-located, well-designed condos from a quality builder. Is that true throughout the entire lease period?
RB: If you’re thinking about a leasehold purchase, you need to consider how close your “expiry date” is, because as you approach the end of the lease, the value of your asset will go down. If you’ve just bought a new home with a 99-year lease, there’s obviously not going to be much impact on the value, so yes, it will appreciate. But in an area like South False Creek, where some leases are expiring in the next few years, there’s a significant impact on marketability and price.

NH+CG: Any final thoughts?
RB: In Vancouver, some of the most valuable properties are leasehold owned by the city or the school board. And now the trend of building quality homes in partnership with First Nations is going to increase the prominence of this homeownership into focus—which is a good thing.
Richard Bell is the founding partner of Bell Alliance LLP, a board member of Small Housing BC and World Housing, as well as a past board member of the Arts Club Theatre. Visit bellalliance.ca to learn more.