May 23, 2020

Strange Times Indeed!

What an unusual year 2020 has been so far; whether we are speaking about real estate or life during the COVID-19 pandemic!  With so much news coverage about the pandemic, let’s talk about the state of the housing market during this time of upheaval.  The real estate industry is considered part of the financial services sector.  The financial services sector has been considered an ‘essential service’.  Therefore it has been possible to buy and sell real estate during the pandemic.  With some buyers and sellers nervous about ‘being out there’ during a pandemic, the statistics are reflective of this.  According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, 109 detached homes sold on Vancouver’s Eastside in March 2020.  At the end of April 2020, during the height of government restrictions on the movement of the citizenry, only 49 sales were registered on MLS.  While this represents a drop of over 50% month over month, the number of new listings added to the inventory was down over 50% in April 2020 compared to March 2020.

Thus, the market was more in a ‘pause’ rather than in a major change.  In fact, prices for detached homes in Vancouver East are up over 5% in the last 6 months.  With about 350 detached homes listed for sale on the Eastside (as we go to press), home buyers are left with extremely limited choices in the available inventory.  This is also why sales are down (limited selection of homes for purchase).  As some easing of government restrictions is slated for May 2020, the pent up demand for buying and selling real estate may cause the market to roll again before the Spring is over.

May 23, 2020

Facts about the Strata Contingency Reserve Fund

All strata corporations are required to establish a contingency reserve fund (CRF) under the Strata Property Act, Sec. 92(b) to meet expenses.

What is a CRF?
It’s a fund collected from strata owners through strata fees. A CRF is separate from the annual fund collected for the repair, maintenance and replacement of the common property as identified in a strata depreciation report.

What is the CRF used for?
It’s used for unforeseen expenses, including emergencies, that occur less than once a year or that don’t usually occur, including repairs to common property such as the roof, elevator, sidewalks, railings, or recreational facilities.

Insurance deductibles and legal expenses.
The CRF can also be used for unexpected insurance deductibles as well as unexpected legal costs and expenses approved by a majority vote of the owners at a general meeting for specific projects.

How much is the CRF?
A strata corporation must contribute a minimum of 10% of the annual budget to the CRF until the CRF reaches 24% of the annual budget according to the Strata Property Regulation 3.4.

Regulation 6.1 requires the CRF be equal to at least 25% of the operating fund. If the CRF is below this amount at the time of the AGM, an amount equal to 10% of the operating fund must be contributed annually until the CRF is 25% of the operating fund.

Any amount can be contributed to the CRF with a majority vote. Strata fees and contributions to the CRF are approved in the annual budget by a majority vote of the owners.

How is the CRF collected?
The CRF is collected from the strata fees owners are required to pay. Stratas can add surplus funds from the previous year’s operating budget to the CRF as well as funds remaining from a special levy, or funds from the sale of assets.

Who approves expenditures?
Strata owners must approve expenditures from the CRF with a majority vote.
The strata corporation is required to account for the CRF separately from other strata corporation funds, such as the operating fund and special levy funds, at the end of each fiscal year in a financial report detailing the opening balance, contributions, expenses, and the closing balance.
This ensures each strata owner knows how much of their strata fees go to the operating budget and the CRF.
Inadequate funds.
When the CRF is inadequate to cover an emergency cost, a special assessment is typically levied on each strata property owner, according to their unit entitlement.
A Form B Information Certificate contains information about the strata including monthly maintenance fees and the amount in the CRF.

March 28, 2020

Listing Inventory Low as Demand Jumps!

Any ‘market’ is based on the laws of supply vs. demand. The real estate market here on Vancouver’s Eastside is no different. The supply of detached homes listed for sale is well below the historic norms. At the same time, the demand for these homes has increased as homebuyers have returned to the market after a couple of years on the sidelines. According to Multiple Listing Service (MLS) data from the Real Estate Board of Greater Vancouver, 53 detached Vancouver East homes were sold in January 2020. February 2020 saw 86 houses sell on the Eastside. With listing inventory hovering in the 370 range, the demand vs. supply ratio is just over 1:4. In many instances now, homebuyers are competing with one another on sharply priced listings, and pushing prices up. Meanwhile, the Bank of Canada has lowered its prime interest rate by .5%. Major lenders are expected to follow suit, and lower mortgage rates for eligible homebuyers. This will provide yet more stimulus to homebuyers. As we head into the spring market for 2020, housing prices will likely continue to rise, unless more and more homesellers put their homes on the market. To create a more balanced market, we would require a large amount of new listings be brought to market to absorb the demand.

Understanding Increasing Strata Insurance Rates and Deductibles

Strata owners in BC are facing insurance rate increases of between 50 and 300 per cent this year, according to the Condominium Home Owners Association of BC.

Deductibles to cover claims are also rising. In some cases, we’ve heard of deductibles increasing as much as $500,000.

Remember that insurance doesn’t cover claims under the deductible amount. So, for example, if a plumbing incident were to cause $75,000 in water damage to a strata owner’s unit, and the strata’s deductible was $100,000, then insurance wouldn’t cover the claim. In such a scenario, the owner could have to pay for the damages out of pocket, depending on the strata’s bylaws.

Why are rates increasing?
Strata building insurance premiums are increasing for a variety of reasons, according to the insurance industry. These include an increase in the number of claims, in the cost of repairs and rebuilding, and in the growing number of strata developments. Many strata buildings date back to the 1970’s and ‘80’s and strata owners may be reluctant to undertake major system upgrades until problems occur.

What to do?
Given these rising rates, strata owners should ask their strata corporation or property manager for a copy of the corporation’s certificate of insurance. This document details current deductible amounts.

Strata owners should show the certificate of insurance to their insurance provider and understand what their liability would be in the strata, if the insurance doesn’t cover the deductible.

Strata property owners should also:
–  have a unit owner’s insurance policy
–  have a policy that covers the higher deductible (`insurance deductible insurance) to cover a loss in their unit; and
–  understand the risk of not having enough coverage

The Strata Property Act Part 9 requires strata buildings to be insured for full replacement value of all common property, common assets, and fixtures.

January 21, 2020

Vancouver East Detached Listings Plummet!

As we begin a new year and a new decade, the number of detached homes listed for sale in Vancouver East has dropped dramatically from more normal levels. As we go to press, the Eastside listings inventory is in the range of 350 houses. At the end of November 2019, there were 500 detached homes listed for sale in East Vancouver. In May 2019, there were approximately 700 listings, double the inventory home buyers have to choose from today. According to Multiple Listing Service (MLS) data from the Real Estate Board of Greater Vancouver, 74 detached homes sold in Vancouver East during December 2019. 106 houses changed hands in November 2019. So even with lower sales, an extremely low level of listings gives home buyers fewer choices in their price range and desired location. Thus, we are seeing very busy open houses once again, with multiple offer bidding starting to bump up prices once more. The Home Price Index Benchmark Price for a detached home on the Eastside has started to recover some of the value lost since 2017. December and January can traditionally be slower months for sales and listings, but so far, it appears that home buyers are coming back to the market, and are prepared to ‘pay the price’ to get back in.

January 21, 2020

False Creek Leases

In the 1970’s and 1980’s, the City of Vancouver built affordable housing on city-owned land in the 55-hectare False Creek South neighbourhood between the Burrard and Cambie bridges.

The affordable housing included co-ops, rentals and non-profit housing as well as low-rise strata units offered on 60 year leases.

Market Leases
Of the 825 market housing units, 669 of them are residential leasehold strata units and 48 are commercial strata units for a total of 717 leasehold strata units.
Leases are set to expire between 2036 and 2046.

The leasehold strata units are organized into 12 residential stratas, three commercial stratas and one residential/commercial strata.These 16 stratas are located within 12 different sites.

End of Lease Issues
The two main issues are:

  • Whether the city is going to renew any of the leases past the original term; and
  • What will the value of a lessee’s interest in the strata lot be when the lease ends.

The False Creek South Neighbourhood Association has formed a strata leaseholder society bargaining agency to negotiate lease renewal terms with the city.

In False Creek South the land is, and will continue to be, publicly owned.

For leasehold properties a purchaser is acquiring, by way of assignment of lease, a lessee’s interest in both the strata lot and the proportionate share of the common property. This gives the purchaser an interest in the improvements and the remaining term of an existing lease. The lease gives the purchaser an exclusive right to use the strata lot land associated with the improvements.

With leasehold tenure, the lease will end at some future date. When the lease ends, the buildings and the lands are surrendered back to the landowner—City of Vancouver—and the lessee is required to deliver vacant possession of the strata unit.

Model Strata Lot Lease
The Model Strata Lot Lease is the agreement between the land owner (the City of Vancouver) and each lessee in False Creek South. The Strata Property Act’s provisions specific to leasehold strata also govern the relationship between the tenant and landlord. The Model Strata Lot Lease is registered on title for all strata lots.

When Does the Lease End?
Each of the 16 strata developments in False Creek South have 60-year leases with definite end dates.
The expiries are grouped into three periods:
–  autumn 2036;
–  summer 2040; or
–  autumn 2046.
Exception: Harbour Terrace at 1425 Lamey’s Mill Lane is the exception to this with a September 2050 expiry.

The model strata lot lease registered on title states the lease expiry date. There’s no right of renewal in favour of the tenant in any of the model strata lot leases.

Has Rent Been Paid until Lease End?
Almost all the strata lots in False Creek South are fully pre-paid. This means that a prior lessee paid the city all of the ground rent due until the end of the lease term. For these lots, a seller is selling the remaining term of the lease—an interest in the improvements and the current market value of the remaining right of exclusive use of the land to the buyer. For these lots, today’s value is based on current land value (and not what the rent paid to the city was).
However, not all strata lots in False Creek South are pre-paid.

What Happens at the End of the Lease?
In False Creek South, strata lot lessees have no rights to a renewal beyond the initial term of the lease. The city has the sole choice to end or renew a lease.
At the end of the lease, the lessee must vacate the premises and will receive a final payment from the city. This final payment is the city’s contractual and statutory obligation to purchase each leasehold tenant’s interest in the strata lot at a purchase price that represents its fair market value as agreed to by the city and the lessee or as determined through arbitration, valued as if the lease didn’t terminate. The city’s view is that this amount doesn’t include land value. At the end of the lease, the city will be purchasing the fair market value of the improvements constructed on the land it leased (those improvements could be up to 60 years old).

What Happens if the Lease gets Renewed?
If the city decides to renew a lease (or leases), the lessees are obligated to pay rent for the new renewal term. This rent will be the market rental value of the lands apportioned to the strata lot at the then-current constructed density.

The city also has the choice to determine the length of the new term. It must be at least five years long, but it could be any length of time. For all strata lot lessees, this future rental payment is a significant obligation. They can’t escape it, unless they sell their interest in the strata lot prior to the start of the renewal term. When selling their interest, they have no way to value the obligation today, as they don’t know if the leases will be renewed, or if they have a choice in accepting should a renewal be given. The city has provided rent prepayment options in the past, but isn’t required to do so in future.

Prospective purchasers and their Realtors should seek legal advice prior to purchasing the leasehold interest in the strata lot. The land lease rights and obligations should be the first thing discussed.

Courtesy of Greg Hamilton, City of Vancouver.

November 28, 2019

Temperatures Dropping – Housing Market Heating Up!

As temperatures drop in late fall and the Holiday season is just around the corner, home buyers seem to have decided that now is the time to buy. However, there are fewer homes for sale at this time of year, thus creating the perfect scenario for an increase in prices.

According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, 108 detached East Vancouver homes sold in October 2019.
This is comparable to the 109 houses that were sold in September 2019. Yet, only 73 Eastside homes changed hands in August of this year. Meanwhile, the other part of the supply and demand equation, the number of homes listed for sale, has dropped substantially since the spring. From a listing inventory of about 700 in April 2019, the current inventory of detached houses for sale is down to approximately 530. With a sales to listings ratio of roughly 1:5 pressure is being put on prices. The activity around new listings is very busy, with multiple offer bidding returning to the market, in some cases. While house prices are still below the historic highs of 2+ years ago, they appear to have turned the corner and have started to move upwards. With mortgage rates stable, and home buyers and lenders now used to the more stringent mortgage rules, pent up demand seems to be coming back to the market. As well, home sellers are used to a more competitive listings model and abandoning over-pricing strategies.

Traditionally, sales ebb as we get closer to the Holidays and New Year.

In the short-term we see this run continuing. Will we see more home sellers list their properties to take advantage of the activity now in the market? We’ll be watching closely to see if this continues into 2020.

November 28, 2019

When Renting a Spare Room – Caution!

Websites such as Airbnb, Vacation Rentals by Owner (VRBO), HomeAway and even Craigslist help property owners rent homes, apartments and spare rooms for short terms as well as longer terms.

However, if neighbours complain or police are called, strata councils and municipalities can take action.

Who has authority over short-term rentals?
Strata corporations and the local municipality both have authority.
1.   Under the Strata Property Act, Part 8-Rentals, a strata corporation has the power to establish and enforce rental bylaws, which may include forbidding rentals or limiting the number of rentals. This is often because property owners don’t want to share their pool, exercise equipment, gardens, and visitor parking with short-term renters.
2.   Municipalities. In BC, short-term rentals are under municipal jurisdiction. Rental periods of less than 30 consecutive days are typically considered tourist accommodation.

Depending on the municipality, short-term rentals may be:

-allowed under a specific bylaw; for example, Whistler, through its Tourist Accommodation Regulation bylaw;
-allowed under a residential zoning bylaw; for example, Vancouver, if the property owner is on site and runs a legal bed and breakfast (B&B);
-not allowed; or
-not dealt with.

Property owners must comply with bylaws
If a municipality permits short-term rentals, property owners have to comply with local zoning and business licensing requirements, strata bylaws and insurance requirements.

Property owners must understand:

-the tax implications set out by Canada Revenue Agency and the BC Government;
-the financial risks and liability involved in renting a home or room(s); and
-the insurance coverage required.

Insurance issues

If property owners are renting their apartment, a room or their entire home, they must notify their insurance company.
“The key is disclosure,” says Trudy Lancelyn, Deputy Executive Director of the Insurance Brokers Association of BC. “Talk with your insurance broker because short-term rentals may affect coverage.”

Renting is a material change of use and home owners will typically be required to:

-change their insurance to rented dwelling coverage;
-remove all valuables, breakables, and jewelry, and
-pay a surcharge of as much as 25% on the premium.

A policy may include a “mysterious disappearance restriction.” This covers any items that go missing, and typically requires that there are signs of forced entry.

A strata council can fine a strata owner renting a property as long as the maximum amount of the fine ($500) is set out in the strata’s bylaws. The municipality may also issue fines or prosecute for municipal bylaw violations.

October 9, 2019

Falling Leaves, Falling Listings!

The fall housing market in Vancouver East seems to be finding its equilibrium as fewer listings and an increase in sales helps to balance the sales to listings ratio for detached houses.

According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, 104 detached homes on the Eastside were sold in July 2019. August 2019 sales dropped to 73 houses. However, sales rebounded in September of this year climbing back up to 109 units. As we go to press, the inventory of active listings is just over 600. With a ratio of around 1:6, the detached market appears to have improved over September 2018, when 72 sales were recorded out of a listings inventory of over 800 (1:10 ratio). Meanwhile, the MLS Home Price Index for detached homes in East Vancouver is sitting at $1,358,700 up slightly over the last 3 months.

With mortgage interest rates stable and house prices down from the peak of the market, home buyers appear to be out on the hunt again. With open houses, showings, and sales picking up, some observers believe that the market is stabilizing, boding well for both sellers and buyers.

October 9, 2019

CMHC Now Accepting Applications for the First-time Home Buyer Incentive!

Canada Mortgage and Housing (CMHC) began accepting applications for the new federal $1.25 billion First-Time Home Buyer Incentive on September 2, 2019
There is no application deadline, but funds are available on a first-come, first-served basis.

Those buyers who may be thinking about whether they want to use this incentive should apply as soon as possible.

Available through CMHC, the incentive provides qualified first-time home buyers with an interest-free top up to their down payment in these amounts:
– resale home: 5% of a first-time buyer’s down payment to buy a resale home; or
– newly constructed home: 5% or 10% of a first-time buyer’s down payment to buy a newly constructed home.

Home buyers must have an income of no more than $120,000 and a minimum down payment of 5%.

For details phone 1-877-884-2642 or visit

Have an interesting idea for a newsletter article? Contact Norm and watch this page regularly for updates!