Cashing in Old Condos
Change to Strata Property Act will allow easier sale of entire buildings, leading to a potential windfall for owners and developers, says Frank O'Brien
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Metro Vancouver’s aging condominium and townhouse projects could be the new target of developers – potentially offering windfall profits for strata owners – when a change to the provincial Strata Property Act comes into effect. That could happen by year-end.
Under the proposed change, it will be easier for strata owners to dissolve their strata corporation and sell the entire building. Under the change, 80 per cent of strata owners, rather than the current unanimous vote, will be needed to dissolve the strata.
“I have had one group of condominium owners reach out to me already,” says real estate agent Lance Coulson, a multi-family commercial specialist with CBRE commercial real estate, Vancouver.
Darren Donnelly, of Clark Wilson Commercial Real Estate Group, said the new legislation has passed first reading and he expects it to become law as early as December.
Donnelly has been involved with a number of such cases under the former regulations and he believes the change will trigger a rush of applications.
The first condominiums in BC were built in the mid-1960s, and some strata buildings were converted from even older condominiums.
Owners may wish to terminate their strata corporation for several reasons. Major building components, like roofs and foundations may start to fail, threatening expensive repair bills. In some cases, strata owners may simply want to sell the property to a developer for the current land value, which can be much higher than an old building is worth.
Not all owners can expect a big cash out. The ideal is buildings close to SkyTrain stations and those on major corridors where higher density is allowed under updated official community plans (OCP) of the local municipality.
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.
Coulson, whose team has helped broker some of the largest recent apartment deals in Metro Vancouver, 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 to agree to a sale. “It will take some time to get started, but this will be a big trend,” he predicts.
Donnelly expects some applications will end up in court, if the vote is just at 80 per cent and a minority of owners simply doesn’t want to sell. But he expects most applications will have the necessary backing of owners before proceeding.
For investors, the first thing to check is the OCP for an area and then to start looking for condominium and townhouse complexes that have a combination of a large land base, an aging structure, and a higher density allowance.
Based on current land values, there are potential windfall prices available.
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