Strata leaseholds

In B.C. there are strata freeholds and strata leaseholds. Strata freeholds are much more common, but strata leaseholds are becoming more available across the province including strata leaseholds at the University of British Columbia, Simon Fraser University, and Heatherlands.  

Learn more on this page:
Strata leaseholds versus strata freeholds
Strata leaseholds versus long-term tenures
The Province’s Home Buyer Rescission Period does not apply to leasehold properties
Strata leasehold landlords
The lease for strata leaseholds and ground rent
Costs for strata leaseholders
Possible end-of-lease payment
Stages of strata leasehold development

Strata leaseholds versus strata freeholds

In B.C. stratas are a popular form of housing tenure and property development with an estimated 1.5 million people living in strata housing. There are a wide range of residential strata developments, from strata-titled duplexes to townhomes to high-rise condo towers to bare land strata developments “strata subdivisions” and many more. Strata developments can also be residential, commercial, industrial or mixed-use.

Most strata developments in B.C. are freehold but some are strata leasehold.

Both strata freehold owners and strata leaseholders operate within the provisions of B.C.’s strata legislation. Both strata freeholds and strata leaseholds are bought and sold on the real estate market. However for strata leaseholds, the leasehold landlord retains ownership of the land and leaseholders purchase a term lease, often for 99 years, which allows the leaseholders to occupy the strata lot and use the common property. Whereas for strata freehold, the owners own their strata lots individually, and together, as through the strata corporation, they own the land and common property.

For both strata freeholds and strata leaseholds, strata legislation establishes a democratic governance framework for the strata corporation including electing a strata council, owners voting on key decisions, adopting and amending strata bylaws, enforcing strata bylaws, holding annual general meetings and approving annual budgets and special levies. Strata legislation also has requirements for transparency and document disclosure. There are various dispute resolution processes available to strata owners and residents including the Civil Resolution Tribunal (CRT). Learn more about living in a strata. 

Strata leaseholds versus long-term tenures

Strata leaseholds are one type of residential leasehold development in B.C.

Another type of residential leasehold development in B.C. are long-term leasehold tenures or long-term leases.

Sometimes these different types of residential leases get confused.

However long-term tenures are significantly different from strata leaseholds:

• Long-term leasehold tenures are not governed by the Strata Property Act.
• Instead, long-term leasehold tenures are administered by detailed private contracts (which may be 150 pages or more). These contracts may have references to Homeowner Associations (HOAs) and have other superficial similarities to strata legislation, but the strata legislative framework does not apply.
• There may be no avenue for long-term tenure residents to review or approve costs levied by the building owner for repairs and maintenance.
• If there are disputes in long-term tenure housing, the disputes may be resolved at the building level or a remedy sought through the courts. The Civil Resolution Tribunal (CRT) does not have jurisdiction to resolve long-term tenure housing disputes.

The Home Buyer Rescission Period does not apply to leasehold properties

Leasehold properties, including strata leasehold properties, are excluded from the Province’s Home Buyer Rescission Period. This means that purchasers do not have a right to rescind a real estate contract within 3 days. Purchasers may only back out of a transaction where the contract lists conditions which are not met prior to purchase. More information is available here:

• https://www.bcfsa.ca/public-resources/real-estate/home-buyer-rescission-period
• https://www.bcfsa.ca/industry-resources/real-estate-professional-resources/knowledge-base/practice-resources/leasehold-considerations

Strata leasehold landlords

In B.C. only certain public authorities are designated as strata leasehold landlords and authorized to develop strata leaseholds. These public authorities are: the Province, the Government of Canada, local governments, school districts, universities, the Provincial Rental Housing Corporation (BC Housing), Nisga’a Nation and Nisga’a Village, treaty first nations (meaning Modern Treaty Nations), the shíshálh and four companies affiliated with First Nations.

The public authority, as the strata leasehold landlord, retains ownership of the land and leases the land to a developer.

The developer constructs a building. On completion of the building, the developer files a strata plan to form a strata corporation and create individual strata lots. The strata leasehold landlord owns all of the strata lots, and the developer owns a leasehold interest in each strata lot.

The developer can then sell leasehold strata lots to individual buyers. Each sale of a leasehold strata lot takes the form of an assignment by the developer to the purchaser of the developer’s leasehold interest in that strata lot.

Each individual strata leaseholder owns a leasehold interest in a specific strata lot. The freehold title to the strata lots is owned by the public authority, subject to the leasehold interests of the strata leaseholders.

The individual strata leaseholders collectively take over the strata corporation from the developer. The strata corporation owns and manages the strata property during the remaining term of the original lease granted by the public authority, also called the strata leasehold landlord, but the underlying land is still owned by the strata leasehold landlord.

The responsibilities of a strata leasehold corporation are the same as a strata freehold corporation including holding annual general meetings, approving annual budgets, paying for repair and maintenance and administering strata bylaws. Learn more about living in a strata.

The lease for strata leaseholds and ground rent

Although the Strata Property Act governs both strata leasehold and freehold properties, a strata leasehold will also have a lease agreement between each strata leaseholder and the strata leasehold landlord, outlining covering details such as the terms of the lease and what happens at the end of the lease.

It is important to carefully review the lease before purchasing a strata leasehold. A lawyer knowledgeable about strata leaseholds can provide valuable insights.

Elements of the strata lease can include: the terms of the lease; ground rent to the public authority and whether it has been fully prepaid or not; repair and maintenance of the strata unit and the common property; permitted use of the strata unit; property and liability insurance; alteration of the building; and the payment at the end of the strata lease to the strata leaseholder, if any. The obligations of strata leaseholders in their leases may overlap with their obligations under the Strata Property Act.

The length of the lease can vary, and the length of each strata leaseholder’s unit lease matches the length of the original ground lease from the public authority to the developer. Recently strata leaseholds have had 99-year leases, but some earlier strata leaseholds had leases of 60 years. Occasionally negotiations may occur between the strata leasehold landlord and strata leaseholders to extend the lease and the conditions of the lease.

Ground rent

Ground rent is the payment made to the strata leasehold landlord for occupying the land. There are different options for how ground rent is paid including:

1. Ground rent may be pre-paid for the entirety of the lease by the developer to the strata leasehold landlord. This option is quite common in B.C.
2. Ground rent may not be pre-paid and the developer, and ultimately the strata leaseholders, must make regular ground rent payments, for example on a monthly or annual basis. The strata leasehold landlord may also have the option to increase the ground rent (lease payments) at specified intervals for example every five years. Sometimes this ground rent increase can be substantial.
3.  Ground rent may be partially pre-paid, for example for the first 30 years of the lease, and then be adjusted to prevailing market rates.

It is important to note that any ground rent not fully prepaid by the developer may become an obligation of future strata leaseholders.

Costs for strata leaseholders

Some costs for strata leaseholders include:

Purchase price and mortgages: Strata leaseholders (owners of the strata leasehold lot) purchase a long-term lease from the developer, for example, for 99 years. Sometimes the initial purchase of the lease is less expensive than comparable freehold. The relative value of the lease tends to decline as the lease term approaches its termination date, but will fluctuate over time with market values.

• Mortgage providers may require a higher down payment to purchase a strata leasehold property.
• Mortgage providers may be reluctant to issue or renew mortgages towards the end of the lease term.

Strata fees and special levies: both strata leasehold and freehold owners pay strata fees (usually monthly) to operate the strata corporation including paying for maintenance and repair. Both strata leasehold and freehold owners may also be required to pay special levies.

Ground rent: as noted above, ground rent is charged for strata leaseholds, and it may or may not be fully prepaid by the developer.

Possible end-of-lease payment

B.C.’s strata legislation requires the strata leasehold landlord to set out an end-of-lease payment amount in the lease agreement, or, if not referenced in the lease, to pay an amount as if the lease did not expire. Please be advised, however, that there may be no compensation at the end of the lease, as the lease agreement may set the compensation to $0. It is important to carefully read the lease documents and understand whether there will be any end-of-lease compensation prior to purchasing a strata leasehold unit. 

Stages of strata leasehold development

Strata leasehold developments typically have the following stages:

1. The strata leasehold landlord and a developer make a deal for the developer to develop a strata leasehold. The strata leasehold landlord grants a long-term ground lease (now often 99 years) to the developer.
2. The developer completes the building, files a strata plan to form a leasehold strata corporation, and sells leasehold strata lots to individual buyers for a certain period of time, e.g. 99 years term equal to the remaining term of the ground lease.
3. The developer may prepay the ground rent to the strata leasehold landlord for the duration of the lease. Otherwise, the strata leaseholders pay ground rent periodically, which can increase significantly.
4. The individual strata leaseholders take over the strata corporation from the developer. The strata corporation (i.e. all the strata leaseholders) manages the strata and is responsible for repairs, maintenance, and ongoing operations. The strata is governed under the Strata Property Act, regulations and strata bylaws.
5. The underlying land and the building is are still owned by the public authority, the strata leasehold landlord, and reverts to the strata leasehold landlord on expiry of the strata lot leases.
6. The strata leasehold landlord may purchase compensate a strata leaseholder for the value of their leasehold tenant's interest in the strata lot on the termination of the strata lot lease; this amount, if any, is usually set out in the strata leasehold original ground lease documents. However, the lease may also set the compensation to $0. It is important to read lease documents and understand whether there will be any end of lease compensation prior to purchasing a strata leasehold unit.

References: 

Strata Property Act: Part 12 – Leasehold Strata Plans, Sections 199 to 216

Strata Property Regulation: Section 12.1

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