British Columbia's old condominium and townhouse projects could be the new target for developers – potentially offering windfall profits for owners – following a change to the provincial Strata Property Act.
The proposed change, which could come into effect by year’s end, would make it easier for strata owners to dissolve their strata corporation and sell the entire building. Under the change, 80% of strata owners, rather than the current unanimous vote, would be needed to dissolve the strata.
“I have had one group of condominium owners reach out to me already,” said real estate agent Lance Coulson, a multi-family specialist with CBRE commercial real estate, Vancouver.
Darren Donnelly, of Clark Wilson LLP’s commercial real estate group, said the new legislation has passed first reading, and he expects it to become law as early as the end of this year.
Donnelly has been involved with a number of such cases under the former regulations, and he said the change will trigger a rush of applications.
The first condominiums in B.C. were built beginning in the mid-1960s, and some strata buildings were converted from even older condominiums.
“[Strata] owners may wish to terminate their strata corporation for several reasons,” Donnelly said.
“As older strata corporations reach the end of their life cycle, major building and common property components start to fail, resulting in expensive repair bills. In some cases, strata owners want to sell the property to a developer who can put it to better or more profitable uses. For example, strata members living in a low-rise building on a large property may see the opportunity to have the land redeveloped into a larger building with more units.”
B.C.’s strata depreciation reports, now mandatory for most buildings, have exposed the level of repairs that some buildings will need.
Older complexes, especially those close to SkyTrain stations or on major Metro Vancouver corridors, might have lower density than the current municipal zoning allows. This could mean, for example, that a 50-unit condominium building could be demolished and rebuilt with 75 or more modern strata units if the floor space ratio allows.
“There are potential windfall prices available based on development values,” Donnelly said.
Coulson, who has helped broker some of Metro Vancouver’s largest recent apartment deals, expects most of the action to be focused around aging and smaller low-rise condominium projects where it would be easier to get most owners agreed to a sale.
“It will take some time to get started,” he said, “but this will be a big trend.”
Donnelly predicts that some applications will end up in court, if the vote is at just 80% and a minority of owners don’t want to sell.
In such cases, he said, even if the court rules that the sale should proceed, the real estate broker or developer would have to convince the court that the reluctant owners would receive the maximum value for their units and that the project would be widely marketed.
The court could rule against the sale, but Donnelly expects most applications would have the necessary backing of owners before proceeding. •