November 2021

Listing Inventory Shrinks in Active Fall Market

Following a relatively quiet summer market, Vancouver’s Eastside has seen homebuyers back on the house hunt this fall. The problem is that the number of detached homes listed for sale has been dropping since the spring. As we go to press, the number of detached homes for sale in Vancouver East has ebbed to about 400. According to statistics from the Multiple Listing Service (MLS) of the Real Estate Board of Greater Vancouver, buyers snapped up 138 detached homes in September 2021. 137 sales were recorded in October. With a sales to listings ratio of approximately 1:3, pressure continues to build on house prices. When new records were being set for home prices on the Eastside in the spring of this year, expectations were that prices were likely to ease somewhat (or at least level off).  However, the autumn listing season is falling well short of the anticipated increase to the listing inventory. Yet again, buyers are often competing with each other when a new listing does hit the market.

There are hints from the Bank of Canada that increases to interest rates are in the offing. So far though, mortgage rates are holding at extremely low levels (5 year fixed mortgages can be found for well under 3% to qualified buyers).

For home sellers, now may be the right time to go to market. However, these same sellers need to prepare a plan, as they may then become the buyer in a very tight market.

November 2021

Land Owner Transparency Act

The BC government enacted the Land Owner Transparency Act (LOTA) which requires mandatory disclosure of beneficial ownership of BC land and the creation of a publicly searchable registry.

Reporting bodies holding an interest in BC land as of November 30, 2020, were required to file a transparency report to disclose beneficial ownership by no later than November 30, 2021.  This date has now been extended to November 30, 2022.

A reporting body includes relevant corporations, relevant partnerships and relevant trusts as defined under the LOTA. Societies and co-ops are also          reporting bodies.

Applicable interests in land include an estate in fee simple, a life estate, and a right to occupy land under a lease with a term of more than 10 years.

Any organization owning any land or holding a lease of more than 10 years must file a transparency report if it:

  • meets the definition of a reporting body;
  • is not exempted from the reporting requirements under LOTA;
  • holds an interest in land in BC; and
  • hasn’t already filed a transparency report.

What is a transparency report?

A transparency report is filed by a legal professional and includes information about the organization (reporting body) and for each individual interest holder identified in connection with the reporting body.

If a society or co-op owns/leases multiple properties, one report can cover multiple properties.

Who files the report?

The Land Title and Survey Authority of BC  (LTSA) is responsible for developing and operating the Land Owner Transparency Registry (LOTR).

A legal professional must complete and file reports directly using their LTSA   Enterprise account and a digital certification signature (known as a Juricert).

Costs include the ‘myLTSA’ filing fees of approximately $40 plus tax, in addition to the fees charged by a legal professional.

Read about the Land Owner Transparency Registry (LOTR) at https://landtransparency.ca/

September 2021

Summer Heat Slows House Sales in Vancouver East!

After a sizzling spring market, the summer market slowed down, due to factors both traditional, and COVID-19 related. Generally, with kids out of school, July and August  are the months that families have to enjoy a summer vacation. This means many prospective Buyers and Sellers (and their Realtors) may be taking a break from their real estate activities. As well, in the time of COVID-19, Summer 2021 saw the Provincial Government easing travel restrictions throughout B.C. There was pent up demand to travel and get away from the sense of being cooped up at home. Thus, the statistics from the Multiple Listing Service (MLS) of the Real Estate Board of Greater Vancouver reflect this summer season. There were 144 detached houses in Vancouver East sold in July 2021. August sales ebbed to 102.

With kids back in school and the traditional summer holiday season over after Labour Day, it is expected that real estate activity will pick up for the fall. While the Benchmark Price for Single Family Detached homes on the Eastside has dropped slightly (about 1.2% over the last 3 months), the current lack of inventory could lead to a new round of price increases. As we go to press, the listing inventory for houses in Vancouver East is sitting around 500. Low interest rates continue to be an incentive for prospective Buyers to return to the market.

Mortgage rates of less than 2% can often be found on terms under 5 years. With the fall market upon us, the key will be the demand for homes vs. the supply available. We will be watching this dynamic to see how the market performs over the next few months.

September 2021

New Massey tunnel by 2030

The BC Government will replace the 62-year-old Massey Tunnel connecting Richmond and Delta with a new eight-lane, toll-free, immersed-tube tunnel.

The goal is to “improve traffic flow and make travel by transit, walking and cycling more convenient and attractive, without costing commuters hundreds of dollars a year in unfair tolls,” said Rob Fleming, Minister of Transportation and Infrastructure.

The new tunnel will open in 2030 and is estimated to cost $4.15 billion. Two of the eight lanes will be dedicated for bus rapid transit, and there will be separated pathways for cyclists and pedestrians.

Why a tunnel, not a bridge?
A business case reviewed two options:  the eight-lane tunnel and an eight-lane bridge.

Tunnel
Length (infrastructure): 1,054 metres
Estimated Cost: $4.15 billion

Bridge
Length (infrastructure): 2,805 metres (3x tunnel)
Estimated Cost: $4.22 billion

The B.C. Government chose the tunnel as the best option because it:

  • has the fewest impacts on agricultural land;
  • won’t introduce new navigational restrictions affecting the Fraser  River;
  • best facilitates the movement of trucks and cyclists with a much lower overall elevation change;
  • best meets the regional vision/interests, as endorsed by the MetroVancouver Board;
  • limits visual, noise, shading and lighting impacts;
  • allows for work to start immediately on the bottleneck areas of the Highway 99 corridor; and
  • provides protection from inclement weather for everyone who uses this crossing.

Next Steps
The Government will proceed with an environmental assessment process, including ongoing engagement with Indigenous peoples, and preparing for procurement.

Until the tunnel opens in 2030, the Government will address traffic congestion by improving transit and cycling infrastructure along the Highway 99 corridor and replacing the Steveston Interchange.

July 2021

Will the Summer Heat Calm the Local Housing Market?

With hot summer weather upon us, school out, and COVID-19 restrictions starting to ease, there seems to be a little less panic in the Vancouver Eastside detached housing market. According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, 155 detached homes sold in June 2021.

This is down from the 190 sales in May 2021. However, this slowing of sales compared to the Spring activity may be counteracted as the number of new listings being added to the inventory has been dropping too. As a result, the Benchmark Price for a detached home in Vancouver East has flattened as of the end of June 2021 vs. the previous month.

The Benchmark Price for a Single Family Detached home in Vancouver East is $1,696,500.00.

Meanwhile, on July 14 the Bank of Canada maintained its current overnight lending rate.

With the Bank of Canada stress test rules kicking in as of June 1, 2021, home prices are up about 16% compared to June 2020, and a general fatigue with multiple offer scenarios, home buyers appear to be ready for that summer holiday!

July 2021

Cambie Corridor—30,000 New Homes Coming

The Cambie Corridor is now the biggest growth area in Vancouver, and in the next 30 years is expected to double in population and add more than 30,000 new homes.

Where these homes and the amenities to service them will be located were key topics in a presentation by City planners to more than 100 REALTORS® attending a live webinar (via Zoom) on May 11, 2021.

The Cambie Corridor plan, which guides change and growth, will create neighbourhoods with places for current and future residents to live, work, shop, play, and be part of a community.

Part of a City-Wide Plan
Susan Hay, deputy director of planning and Neil Hrushowy, director community planning, explained that the Cambie Corridor is part of a City-wide planning    process that began in 2019, known as “Planning Vancouver Together.”  This developing plan updates the previous City-wide plan which was approved in 1995.

Largest Survey in City History
To launch the planning process, the City undertook the largest open survey in its history to find out key issues to 2050.

In Vancouver, 52% of all land contains only 15% of dwelling units – primarily all detached; and 50% of residents in the City are renters.

This presents significant problems. The City needs more affordable market housing as well as rentals, co-operatives, social and non-market housing – and not just concentrated on arterial roads such as the Broadway corridor.

The City has a severe lack of small livable neighbourhoods where residents’ needs are met. For example, neighbourhoods where residents can run out to get milk or drop children off at the local daycare. Diverse housing, amenities, shops, and workplaces with opportunities to gather and socialize would create self-contained vibrant neighbourhoods.

Oakridge Municipal Town Centre (MTC)
The Oakridge MTC is one of 17 planned town centres across Vancouver and represents a rethinking of single-family neighbourhoods.

When fully developed, this Centre will contain diverse, high-density market and rental housing, retail and office space and robust public benefits such as a new civic centre and a park.

Heather Lands
This 21-acre site owned by the Musqueam Indian Band, Squamish Nation and Tsleil-Waututh Nation (MST Corporation) and Canada Lands Company, will also contain a diversity of housing types and tenures, away from arterial roads, to give residents a break from higher noise and pollution.

Housing types will include 2,600 units of high-rise and mid-rise towers, and townhouses set amidst four acres of parkland and walking/biking trails.

Public benefits will include a youth centre, a childcare centre and non-profit office space located between West 27th and 33rd Avenues and Willow and Ash Streets.

The Oakridge Transit Centre (OTC)
Used as a bus depot from 1940 to 2006, this 14-acre site parallel to West 41st Avenue will include retail space and farmers markets, as well as new pedestrian and site connections.

The housing plan includes 1,600 new units – market, rental, and social housing on 3.3 acres of the site.

Street Improvements
The City is improving safety and access for all road users along Cambie Street and King Edward Avenue between Heather and Ontario Streets.

This includes upgrading road conditions for everyone walking, biking, rolling, and driving.  There are upgrades to electrical infrastructure including streetlights.

Q & A
Q: How much will be affordable market housing?
A: 25% of all units of all major projects will be either social housing or rental with 20% of rental units geared to moderate income – $30,000.00 to $50,000.00.  The MST will have 20% of units in attainable housing and market homes which will be more affordable given the homes are on 99-year leases.

Q: What about parking?
A: The goal is to get residents around using other alternatives.  The City plans zero parking projects. There are significant changing perceptions around the need for a car, according to the City.

May 2021

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.

May 2021

Facts About the Strata Contingency 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.  Strata’s 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.

Accountability
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 2021

Lack of Listing Drives Home Prices Higher!

As home buyers continue to snap up homes at a rapid pace, the number of listings of homes for sale is not keeping up. According to the Multiple Listing Service (MLS) of the Real Estate Board of Greater Vancouver, 109 East Vancouver detached houses were sold in January 2021. Sales increased in February 2021 to 137.  With a listing inventory of around 400 (as we go to press) the sales-to-listings ratio is about 1:3. Generally, analysts suggest there is upward pressure on prices when the ratio surpasses 1:5. We are well beyond that! As a result, house prices in Vancouver East (as of February 28, 2021) are up 9.5% over last year. This Benchmark Price is a composite from the Home Price Index, and some types of homes have risen in price well beyond the Index.

The Benchmark Price for a Single Family Detached home in Vancouver East is now up to $1,565,800 as of February 2021. Townhouses and other ‘Attached’ units are starting to feel the pressure too.

Meanwhile, on March 10, 2021 the Bank of Canada kept its trend-setting interest rate at the record low of 0.25%. With COVID-19 forcing people to stay close to home, people are not travelling, and spending money like in normal times. Money saved in the bank receives little or no interest. Thus, real estate has become one of the popular vehicles for ‘saving’ money or helping family members get into housing. With spring upon us, we anticipate that this traditionally busy period will continue.

March 2021

BC Strata Insurers to end ‘Best Terms Pricing’

In 2019, insurance premiums skyrocketed for many of the owners of the province’s 32,218 filed strata plans and 671,351 active strata lots.

With premiums continuing to rise and some strata’s unable to buy insurance, in February 2020, the BC Government asked the BC Financial Services Authority (BCFSA) to go on a fact-finding investigation under section 213 of the Financial Institutions Act.  The BCFSA is the agency responsible for regulating the private insurance sector.

In June, the BCFSA issued an interim report which found that a practice known as `best terms pricing´ had contributed to premiums increasing an average of 50% in Metro Vancouver. A subsequent report found that 94% of sample properties had been negatively affected by best terms pricing.

This practice refers to a process where insurance brokers collect quotes from multiple insurers.  When each insurer quotes on a strata property, it sets out the amount of risk it’s prepared to accept and a rate charge.

The quotes are conditional quotes, based on all the insurers receiving the same terms.  Instead of the premium being set by the quote of each insurer, or by an average of all quotes, under best terms pricing the final price is set by the highest rate quoted by any of the insurers on the policy.

Changes as of November 1, 2020—As a result of the investigation, in July 2020, the BC legislature passed Bill 14-2020:  Municipal Affairs and Housing Statutes Amendment Act (No.2), 2020, which received royal assent in August 2020.

The Bill amends insurance-related provisions of the Strata Property Act (SPA) and the Financial Institutions Act introducing regulatory changes, effective November 1, 2020 that address rising strata insurance and best terms pricing.

Bests Terms Pricing—This practice will end in January 2021.

Renew or not renew—Insurers or insurance agents are now required to provide a 30-day advance notice, directly to strata corporations, of their intention to not renew an insurance policy or of any material changes to the policy.  This change ensures that strata corporations will have time to select other insurance options in advance of any cost increases.

Commission disclosure—Insurance agents are now required to disclose their commission amount, or a reasonable estimate, to strata corporations.  Penalties for non-disclosure include fines up to $25,000 for an individual, or $50,000 for a corporation.

Referral fees—Referral fees to strata property managers from strata insurance transactions are prohibited. These regulatory changes were made to bring transparency to the industry so that strata corporations have the information needed to make informed decisions about their insurance needs.

January 2021

Vancouver Empty Homes Tax Increases to 3%

Mayor Kennedy Stewart has followed through on a 2018 election campaign promise and has tripled the Empty Homes Tax (EHT) rate to 3% from the original rate of 1% when the tax was introduced in 2017.

In 2019 the rate increased to 1.25%. The new rate takes effect in 2021.

The increase is supported by new data released by the Canada Mortgage and Housing Corporation (CMHC) which finds Vancouver-specific policies, such as the EHT, have led to a greater number of condominiums moving onto the long-term rental market.

The EHT is credited with helping to bring more than 5,000 condominiums to the long-term rental market, including almost 3,000 in the downtown core, according to Alvin Singh, communications director for the mayor’s office.

Since 2017, the EHT has resulted in a 25% reduction in vacant homes and has generated $61.3 million in net revenues. These revenues have been allocated to support affordable housing initiatives.

Despite the effectiveness of the EHT, nearly 2,000 homes remain empty, according to Mayor Stewart

The tax rate remains at 1.25% for the 2020 tax year. Declarations for 2020 are due by February 2, 2021.

Vancouver Council will amend the Vacancy Tax Bylaw to reflect this rate increase at a future meeting.

In 2019, the Vancouver Census Metropolitan Area (CMA) gained 11,118 rental condominiums, an increase of 18.9%, according to CMHC.

The increase resulted because:

  • 2,294 rental units from new condominiums were completed, purchased by investors and then offered for rent on the long-term rental market upon completion; and
  • 8,824 existing units were converted to being offered as long-term rental units in 2019. These units were previously used by their owners, or changed owners and the new owner opted to rent out the unit.

These rentals were likely helped along because of Vancouver EHT and the provincial Speculation and Vacancy Tax.

January 2021

Listing Inventory Lags Behind Demand for Homes!

Welcome to 2021! As we prepare for another busy year in local real estate, let’s do a quick look back at the end of 2020. According to the Multiple Listing Service (MLS) of the Real Estate Board of Greater Vancouver, 133 detached homes sold in Vancouver East during December 2020.

This is down slightly from the 137 sales in November 2020. Traditionally, the number of listings eases during the holiday season, and this past December was no different. Only 105 Eastside houses were added to existing inventory levels last month. With monthly sales exceeding that amount, we start 2020 with extremely low levels of listings for sale in Vancouver East. The COVID-19 pandemic seems to have helped create the demand for detached homes on the Eastside. Growing families, higher costs associated with strata living and having space to more easily social distance all seem to be driving people back to the detached market. Add in extremely low mortgage rates and you have a demand for houses that isn’t being met by existing listing inventory. As we go to press there are under 350 detached homes listed for sale on the Eastside. With a sales to listings ratio of around 1:3, prices for houses continue to escalate.

The Benchmark Price for a detached home in Vancouver East is up over 10% compared to December 2019.

Often, with a new year comes a resolution for change. Will home sellers take advantage of the increase in price and sales activity to list their properties for sale? If not, home buyers will continue to be forced to compete for the limited inventory of detached houses listed for sale.

November 27, 2020

Strong Eastside Housing Market Continues!

In spite of the second wave of the COVID-19 pandemic, detached homes on Vancouver’s Eastside continue to be in big demand.  As young families have been trying to make do in attached units such as condos, today’s record low mortgage rates are allowing these families to make the move to single family homes.

According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, 171 detached houses were sold in Vancouver East during the month of September 2020.  Sales dipped slightly in October 2020, as 151 houses changed hands.  However, the sales to listings ratio (the indicator of the housing market’s strength) is tight.  With about 500 Eastside detached homes for sale, as we go to print, the ratio is about 3:10.

Consequently, house prices have now jumped up over 9% compared to October 2019.  The Benchmark Price for a Single Family Detached home in Vancouver East is up to $1,507,200 as of the end of October 2020.

As the City of Vancouver pushes for higher density we are seeing the loss of single family detached housing to make way for more multifamily development.  This will impact the supply of detached homes available to families on the Eastside.  With some mortgages now available at under 2% to qualified buyers, it appears that the detached market in Vancouver East will continue to have strength in both unit sales and prices.

November 27, 2020

Federal government pledges $51.5 million for affordable housing in Vancouver

The federal government has agreed to provide $51.5 million to house Vancouver’s rapidly increasing homeless population.

The funding, to be delivered through Canada Mortgage and Housing Corporation (CMHC), is part of the federal government’s $1-billion Rapid Housing Initiative developed during consultations between the federal government and the Federation of Canadian Municipalities ‘Big City Mayors’ Caucus.

The city will combine Rapid Housing Initiative funds with the city’s $30 million emergency housing initiative approved in October 2020.

A staff report identified 29 units in undisclosed buildings that could cost $125 million to $240 million to buy, with another $11 million required for operating costs, including providing tenants with access to health care and other services.

CMHC has opened applications to government and non-government entities seeking funding for projects including modular home construction and converting existing buildings to affordable housing.

Vancouver Council has also directed city staff to use the 65-unit city-owned 2400 Motel on Kingsway and the Jericho Hostel at Jericho Beach to house homeless residents.

September 29, 2020

Pandemic Fails to Cool Eastside Detached Housing Market!

As the unprecedented year of 2020 moves into autumn, the COVID-19 pandemic has not slowed the recent demand for detached homes on Vancouver’s Eastside. While the spring ‘lockdown’ caused sales to drop, the number of houses listed for sale also dropped. Since then, homebuyers have been taking advantage of record low interest rates to snap up the reduced number of homes listed for sale.

According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, 141 detached houses sold on the Eastside in July 2020. 118 sales were registered in August 2020. However, after Labour Day, and as schools began to re-open, homebuyers returned to the hunt. As we have gotten used to wearing masks, sanitizing our hands, and staying `socially distant’, we still have lives to live. This means that people who have a reason to buy a home (upsizing, downsizing, job situation) are still in the market. Meanwhile, listing inventory continues to grow at a snail’s pace. As we go to press, we have less than 550 detached homes for sale in Vancouver East.

The Benchmark Price for a Single Family Detached home on the Eastside is now up to $1,502,700 as of the end of August 2020 (according to the MLS Home Price Index). This is up 10.1% from August in 2019. This is not surprising when some lenders are offering huge discounts from their posted mortgage rates.

In some cases, a 5 year closed mortgage can be found for under 2% to qualified buyers. While the economic picture is not all rosy, sometimes life just has to carry on, even in these complicated times.

September 29, 2020

Home buyers with less than 20% down payment…

Applying for a high-ratio mortgage with a regulated financial institution are typically offered a contract mortgage interest rate.

The regulated financial institution is required to ensure the borrower can make mortgage payments at one of two rates:
• The Bank of Canada qualifying rate, or
• The contracted rate plus 2%.

Borrowers must qualify for the higher of the two rates, which means their income must be sufficient and their debt low enough to make mortgage payments at that higher rate. This is known as the stress test.

How is the Bank of Canada’s rate determined?
The Bank of Canada doesn’t control the 5-year qualifying rate. They set the rules for how it’s calculated, according to BC Real Estate Association chief economist, Brendon Ogmundson.

The rate is an average of large lenders’ posted rates. When a majority of those lenders lower their posted rate, it’s reflected in the official qualifying rate.

As of August 12, 2020, this rate is 4.79%. An average 5-year fixed rate in the market is 2.2%, so the qualifying rate is still a significant spread over what most borrowers are actually paying at current market rates.

You can always check the rate here: www.bankofcanada.ca/rates/daily-digest/

July 26, 2020

Spring Market Hits in the Summer!

Traditionally, the spring is the most active time of year for real estate sales and listings. However, the spring of 2020 was not a ‘traditional’ spring in anybody’s mind! COVID-19 protocols placed restrictions on business and personal activity this spring, resulting in a major slowdown of home listings and sales. While sale prices for detached homes on Vancouver’s Eastside remained mostly steady, buyers and sellers seemed to take a ‘wait and see’ attitude. According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, there were 64 detached houses sold in Vancouver East in May 2020. June 2020 sales jumped up to 105 units. With low levels of Active Listings to choose from (around 430 as we go to press), homebuyers have been forced into multiple offer situations over desirable, well-priced listings.

Low interest rates, designed to stimulate the economy, have also pushed buyers off the fence and into the market.

Meanwhile, the Benchmark Price for a Single Family Detached home in Vancouver East has now moved up 7.9% at the end of June 2020 over the same time last year.

According to the MLS Home Price Index, we are still below the peak of the market in late 2017, early 2018. With home sellers seeing improvements to home prices, it appears we may be seeing more listings being brought to market this summer. Will this be enough to satisfy the pent up buyer demand and ease the pressure being put on home prices? So far the ’traditionally’ slower summer housing market has been keeping us as busy as an active spring market.

July 26, 2020

Report Highlights Causes of Spiking Strata Insurance Premiums

The state of the BC strata insurance market is unhealthy and fails to meet the goals of sustainability, affordability, and availability, according to a new interim report from the BC Financial Services Authority (BCFSA) released on June 16.

Tasked by the Province to determine the cause of unaffordable insurance premiums, BCFSA conducted an in-depth analysis, finding that:

  • 1.5 million BC residents (one in three) live in strata properties which range from under $1 million to over $200 million in insured value;
  • Strata insurance premiums rose an average of 40% year-over-year province-wide and 50% in Metro Vancouver, with deductibles increasing up to triple digits;
  • A majority (54%) of strata properties experienced a premium increase of less than 30% compared to premiums the previous year; and
  • 31% of strata properties saw increases in the 30-50% range, 9% faced year-over-year increases of 50-100% and 6% saw strata premium increases in excess of  100% compared to the previous year.

Both local and global factors are driving up the cost of strata insurance.

  • Insurers are incurring losses from minor claims such as water damage due to poor building maintenance practices and construction quality issues. Water damage from plumbing leaks and failures accounted for 46% of the total claim costs since 2017 (56% alone in 2018 or 11,000 claims), with an average claim paid of $3,350 after the deductible.
  • New building construction, building material changes, and rising replacement costs have put further strain on industry profitability.

Data suggests strata insurance has been used to fill the gaps where proper, ongoing maintenance practices haven’t been implemented.

Claims may also be the result of strata insurers absorbing costs that could be covered under the new home warranty programs. It’s often unclear whether the cause of the loss was from a construction defect or poor maintenance.

Other factors including rising property values and excessive exposure to earthquake risk have caused insurers to reduce the amount of strata insurance they offer in the province.

Future Issues
Buildings considered to be higher risk will see large increases and may not be able to obtain full, or in some cases any, insurance coverage.

Stakeholder engagement
In the coming months BCFSA will meet with stakeholders to continue to explore causes, and regulatory as well as industry solutions.

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.
Accountability.
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.

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

July 26, 2020

Spring Market Hits in the Summer!

Traditionally, the spring is the most active time of year for real estate sales and listings. However, the spring of 2020 was not a ‘traditional’ spring in anybody’s mind! COVID-19 protocols placed restrictions on business and personal activity this spring, resulting in a major slowdown of home listings and sales. While sale prices for detached homes on Vancouver’s Eastside remained mostly steady, buyers and sellers seemed to take a ‘wait and see’ attitude. According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, there were 64 detached houses sold in Vancouver East in May 2020. June 2020 sales jumped up to 105 units. With low levels of Active Listings to choose from (around 430 as we go to press), homebuyers have been forced into multiple offer situations over desirable, well-priced listings.

Low interest rates, designed to stimulate the economy, have also pushed buyers off the fence and into the market.
Meanwhile, the Benchmark Price for a Single Family Detached home in Vancouver East has now moved up 7.9% at the end of June 2020 over the same time last year.

According to the MLS Home Price Index, we are still below the peak of the market in late 2017, early 2018. With home sellers seeing improvements to home prices, it appears we may be seeing more listings being brought to market this summer. Will this be enough to satisfy the pent up buyer demand and ease the pressure being put on home prices? So far the ’traditionally’ slower summer housing market has been keeping us as busy as an active spring market.

July 26, 2020

Report Highlights Causes of Spiking Strata Insurance Premiums

The state of the BC strata insurance market is unhealthy and fails to meet the goals of sustainability, affordability, and availability, according to a new interim report from the BC Financial Services Authority (BCFSA) released on June 16.

Tasked by the Province to determine the cause of unaffordable insurance premiums, BCFSA conducted an in-depth analysis, finding that:
-1.5 million BC residents (one in three) live in strata properties which range from under $1 million to over $200 million in insured value;
-Strata insurance premiums rose an average of 40% year-over-year province-wide and 50% in Metro Vancouver, with deductibles increasing up to triple digits;
-A majority (54%) of strata properties experienced a premium increase of less than 30% compared to premiums the previous year; and
-31% of strata properties saw increases in the 30-50% range, 9% faced year-over-year increases of 50-100% and 6% saw strata premium increases in excess of  100% compared to the previous year.

Both local and global factors are driving up the cost of strata insurance.
-Insurers are incurring losses from minor claims such as water damage due to poor building maintenance practices and construction quality issues. Water damage from plumbing leaks and failures accounted for 46% of the total claim costs since 2017 (56% alone in 2018 or 11,000 claims), with an average claim paid of $3,350 after the deductible.
-New building construction, building material changes, and rising replacement costs have put further strain on industry profitability.

Data suggests strata insurance has been used to fill the gaps where proper, ongoing maintenance practices haven’t been implemented.
Claims may also be the result of strata insurers absorbing costs that could be covered under the new home warranty programs. It’s often unclear whether the cause of the loss was from a construction defect or poor maintenance.
Other factors including rising property values and excessive exposure to earthquake risk have caused insurers to reduce the amount of strata insurance they offer in the province.

Future Issues
Buildings considered to be higher risk will see large increases and may not be able to obtain full, or in some cases any, insurance coverage.

Stakeholder engagement
In the coming months BCFSA will meet with stakeholders to continue to explore causes, and regulatory as well as industry solutions.

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.

July 26, 2020

Spring Market Hits in the Summer!

Traditionally, the spring is the most active time of year for real estate sales and listings. However, the spring of 2020 was not a ‘traditional’ spring in anybody’s mind! COVID-19 protocols placed restrictions on business and personal activity this spring, resulting in a major slowdown of home listings and sales. While sale prices for detached homes on Vancouver’s Eastside remained mostly steady, buyers and sellers seemed to take a ‘wait and see’ attitude. According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, there were 64 detached houses sold in Vancouver East in May 2020. June 2020 sales jumped up to 105 units. With low levels of Active Listings to choose from (around 430 as we go to press), homebuyers have been forced into multiple offer situations over desirable, well-priced listings.

Low interest rates, designed to stimulate the economy, have also pushed buyers off the fence and into the market.
Meanwhile, the Benchmark Price for a Single Family Detached home in Vancouver East has now moved up 7.9% at the end of June 2020 over the same time last year.

According to the MLS Home Price Index, we are still below the peak of the market in late 2017, early 2018. With home sellers seeing improvements to home prices, it appears we may be seeing more listings being brought to market this summer. Will this be enough to satisfy the pent up buyer demand and ease the pressure being put on home prices? So far the ’traditionally’ slower summer housing market has been keeping us as busy as an active spring market.

July 26, 2020

Report Highlights Causes of Spiking Strata Insurance Premiums

The state of the BC strata insurance market is unhealthy and fails to meet the goals of sustainability, affordability, and availability, according to a new interim report from the BC Financial Services Authority (BCFSA) released on June 16.

Tasked by the Province to determine the cause of unaffordable insurance premiums, BCFSA conducted an in-depth analysis, finding that:
-1.5 million BC residents (one in three) live in strata properties which range from under $1 million to over $200 million in insured value;
-Strata insurance premiums rose an average of 40% year-over-year province-wide and 50% in Metro Vancouver, with deductibles increasing up to triple digits;
-A majority (54%) of strata properties experienced a premium increase of less than 30% compared to premiums the previous year; and
-31% of strata properties saw increases in the 30-50% range, 9% faced year-over-year increases of 50-100% and 6% saw strata premium increases in excess of  100% compared to the previous year.

Both local and global factors are driving up the cost of strata insurance.
-Insurers are incurring losses from minor claims such as water damage due to poor building maintenance practices and construction quality issues. Water damage from plumbing leaks and failures accounted for 46% of the total claim costs since 2017 (56% alone in 2018 or 11,000 claims), with an average claim paid of $3,350 after the deductible.
-New building construction, building material changes, and rising replacement costs have put further strain on industry profitability.

Data suggests strata insurance has been used to fill the gaps where proper, ongoing maintenance practices haven’t been implemented.
Claims may also be the result of strata insurers absorbing costs that could be covered under the new home warranty programs. It’s often unclear whether the cause of the loss was from a construction defect or poor maintenance.
Other factors including rising property values and excessive exposure to earthquake risk have caused insurers to reduce the amount of strata insurance they offer in the province.

Future Issues
Buildings considered to be higher risk will see large increases and may not be able to obtain full, or in some cases any, insurance coverage.

Stakeholder engagement
In the coming months BCFSA will meet with stakeholders to continue to explore causes, and regulatory as well as industry solutions.

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.

July 26, 2020

Spring Market Hits in the Summer!

Traditionally, the spring is the most active time of year for real estate sales and listings. However, the spring of 2020 was not a ‘traditional’ spring in anybody’s mind! COVID-19 protocols placed restrictions on business and personal activity this spring, resulting in a major slowdown of home listings and sales. While sale prices for detached homes on Vancouver’s Eastside remained mostly steady, buyers and sellers seemed to take a ‘wait and see’ attitude. According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, there were 64 detached houses sold in Vancouver East in May 2020. June 2020 sales jumped up to 105 units. With low levels of Active Listings to choose from (around 430 as we go to press), homebuyers have been forced into multiple offer situations over desirable, well-priced listings.

Low interest rates, designed to stimulate the economy, have also pushed buyers off the fence and into the market.
Meanwhile, the Benchmark Price for a Single Family Detached home in Vancouver East has now moved up 7.9% at the end of June 2020 over the same time last year.

According to the MLS Home Price Index, we are still below the peak of the market in late 2017, early 2018. With home sellers seeing improvements to home prices, it appears we may be seeing more listings being brought to market this summer. Will this be enough to satisfy the pent up buyer demand and ease the pressure being put on home prices? So far the ’traditionally’ slower summer housing market has been keeping us as busy as an active spring market.

July 26, 2020

Report Highlights Causes of Spiking Strata Insurance Premiums

The state of the BC strata insurance market is unhealthy and fails to meet the goals of sustainability, affordability, and availability, according to a new interim report from the BC Financial Services Authority (BCFSA) released on June 16.

Tasked by the Province to determine the cause of unaffordable insurance premiums, BCFSA conducted an in-depth analysis, finding that:
-1.5 million BC residents (one in three) live in strata properties which range from under $1 million to over $200 million in insured value;
-Strata insurance premiums rose an average of 40% year-over-year province-wide and 50% in Metro Vancouver, with deductibles increasing up to triple digits;
-A majority (54%) of strata properties experienced a premium increase of less than 30% compared to premiums the previous year; and
-31% of strata properties saw increases in the 30-50% range, 9% faced year-over-year increases of 50-100% and 6% saw strata premium increases in excess of  100% compared to the previous year.

Both local and global factors are driving up the cost of strata insurance.
-Insurers are incurring losses from minor claims such as water damage due to poor building maintenance practices and construction quality issues. Water damage from plumbing leaks and failures accounted for 46% of the total claim costs since 2017 (56% alone in 2018 or 11,000 claims), with an average claim paid of $3,350 after the deductible.
-New building construction, building material changes, and rising replacement costs have put further strain on industry profitability.

Data suggests strata insurance has been used to fill the gaps where proper, ongoing maintenance practices haven’t been implemented.
Claims may also be the result of strata insurers absorbing costs that could be covered under the new home warranty programs. It’s often unclear whether the cause of the loss was from a construction defect or poor maintenance.
Other factors including rising property values and excessive exposure to earthquake risk have caused insurers to reduce the amount of strata insurance they offer in the province.

Future Issues
Buildings considered to be higher risk will see large increases and may not be able to obtain full, or in some cases any, insurance coverage.

Stakeholder engagement
In the coming months BCFSA will meet with stakeholders to continue to explore causes, and regulatory as well as industry solutions.

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.
Accountability.
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.

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

July 26, 2020

Spring Market Hits in the Summer!

Traditionally, the spring is the most active time of year for real estate sales and listings. However, the spring of 2020 was not a ‘traditional’ spring in anybody’s mind! COVID-19 protocols placed restrictions on business and personal activity this spring, resulting in a major slowdown of home listings and sales. While sale prices for detached homes on Vancouver’s Eastside remained mostly steady, buyers and sellers seemed to take a ‘wait and see’ attitude. According to Multiple Listing Service (MLS) statistics from the Real Estate Board of Greater Vancouver, there were 64 detached houses sold in Vancouver East in May 2020. June 2020 sales jumped up to 105 units. With low levels of Active Listings to choose from (around 430 as we go to press), homebuyers have been forced into multiple offer situations over desirable, well-priced listings.

Low interest rates, designed to stimulate the economy, have also pushed buyers off the fence and into the market.
Meanwhile, the Benchmark Price for a Single Family Detached home in Vancouver East has now moved up 7.9% at the end of June 2020 over the same time last year.

According to the MLS Home Price Index, we are still below the peak of the market in late 2017, early 2018. With home sellers seeing improvements to home prices, it appears we may be seeing more listings being brought to market this summer. Will this be enough to satisfy the pent up buyer demand and ease the pressure being put on home prices? So far the ’traditionally’ slower summer housing market has been keeping us as busy as an active spring market.

July 26, 2020

Report Highlights Causes of Spiking Strata Insurance Premiums

The state of the BC strata insurance market is unhealthy and fails to meet the goals of sustainability, affordability, and availability, according to a new interim report from the BC Financial Services Authority (BCFSA) released on June 16.

Tasked by the Province to determine the cause of unaffordable insurance premiums, BCFSA conducted an in-depth analysis, finding that:
-1.5 million BC residents (one in three) live in strata properties which range from under $1 million to over $200 million in insured value;
-Strata insurance premiums rose an average of 40% year-over-year province-wide and 50% in Metro Vancouver, with deductibles increasing up to triple digits;
-A majority (54%) of strata properties experienced a premium increase of less than 30% compared to premiums the previous year; and
-31% of strata properties saw increases in the 30-50% range, 9% faced year-over-year increases of 50-100% and 6% saw strata premium increases in excess of  100% compared to the previous year.

Both local and global factors are driving up the cost of strata insurance.
-Insurers are incurring losses from minor claims such as water damage due to poor building maintenance practices and construction quality issues. Water damage from plumbing leaks and failures accounted for 46% of the total claim costs since 2017 (56% alone in 2018 or 11,000 claims), with an average claim paid of $3,350 after the deductible.
-New building construction, building material changes, and rising replacement costs have put further strain on industry profitability.

Data suggests strata insurance has been used to fill the gaps where proper, ongoing maintenance practices haven’t been implemented.
Claims may also be the result of strata insurers absorbing costs that could be covered under the new home warranty programs. It’s often unclear whether the cause of the loss was from a construction defect or poor maintenance.
Other factors including rising property values and excessive exposure to earthquake risk have caused insurers to reduce the amount of strata insurance they offer in the province.

Future Issues
Buildings considered to be higher risk will see large increases and may not be able to obtain full, or in some cases any, insurance coverage.

Stakeholder engagement
In the coming months BCFSA will meet with stakeholders to continue to explore causes, and regulatory as well as industry solutions.

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.
Accountability.
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.

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