Understanding Freehold, Leasehold & Co-op Ownership in Vancouver

Freehold strata

With a conventional freehold strata, you receive registered title to your strata lot and share ownership of the common property and common assets with the other strata owners. The strata corporation manages the common property, owners pay strata fees and contribute to the contingency reserve fund, and major work may also be funded by special levies. There is no predetermined expiry date on the ownership.

Leasehold

With a leasehold property, someone else owns the underlying land. You are purchasing an interest for a specified period under a lease. The landowner may be the City of Vancouver, the provincial or federal government, an Indigenous Nation or related entity, or a private landowner or corporation.

Simply knowing that a property is leasehold is not enough. A buyer needs to know who owns the land, how long the lease runs, how many years remain, whether the lease is prepaid, whether ground rent can change, and what the lease says about renewal, resale and expiry.

Market co-op

A market co-op is different again. Instead of receiving title to an individual strata lot, you generally purchase shares in a corporation together with the right to occupy a particular home. The corporation owns the property, and your rights are governed by its corporate documents, bylaws and occupancy agreement.

Vancouver leaseholds should not all be treated as though they are the same. Many were originally created with long terms, commonly 99 years, and some still have many decades remaining. A long prepaid lease with 60 or 70 years left is a very different proposition from a lease with 10 or 15 years remaining.

False Creek South - City of Vancouver

False Creek South is the best-known Vancouver example. Much of the City-owned land there was developed in the 1970s and 1980s using leases that were typically about 60 years. The City currently identifies 12 residential leasehold strata buildings containing 669 units, with the great majority of the leases prepaid and most City leases in the neighbourhood expiring between 2036 and 2046.

These are still strata properties, with strata corporations, councils, bylaws, budgets, contingency reserve funds and special levies. The important difference is that the City owns the land beneath them.

Other City of Vancouver leaseholds

City-owned leasehold properties also exist outside False Creek South, including parts of East and South Vancouver. Some were established under much longer original lease terms and may still have many years remaining. The words 'City of Vancouver leasehold' identify the landowner; they do not tell you the terms of the lease.

Crown and other government leaseholds

Some Vancouver properties are on land owned by the provincial or federal Crown or another public authority. Many long-term government leases were originally established for lengthy terms, often 99 years. A long prepaid Crown lease may be quite financeable and may feel much like ordinary strata ownership in day-to-day use, but legally the land is still leased and the remaining term matters.

Indigenous Nation lands

Residential development on Indigenous Nation lands includes condos, townhomes and, in some locations, detached homes. The well-known Musqueam residential leases in southwest Vancouver provide a historical example of why rent-review clauses matter: some older leases eventually produced very large rent increases when rent was reset using land-value formulas. Modern developments can have very different structures, so one Indigenous-land lease should never be assumed to operate like another.

Private and corporate leaseholds

Private leaseholds can be different again. The private company retains ownership of the underlying land, while the purchaser acquires a long-term leasehold interest, sometimes for as long as 99 years.

The low purchase price can make these properties look extremely attractive. But this is an area where buyers need to understand exactly what they are buying — and what protections they may not have.

Unlike a conventional strata, maintenance, insurance and major capital expenses are not managed through a strata corporation with a contingency reserve fund. Purchasers are typically responsible for major expenses such as roofs, plumbing, mechanical systems and other repairs, with costs assessed whenever, or however the leasing company decides. There may no guaranteed right to renew or extend the lease when it expires, and some agreements allow the landowner to recover legal and administrative costs from leaseholders.

That inexpensive purchase price can therefore come with obligations and risks that are very different from conventional home ownership. A property that initially appears to be an extraordinary bargain can become considerably less attractive once the terms of the lease and the potential future costs are fully understood.

With a private leasehold, the old saying is particularly appropriate:

“If it sounds too good to be true, it probably is.”

The ownership structure can also affect closing costs and buyer protections. A conventional market co-op transaction is generally a purchase of corporate shares and occupancy rights rather than a transfer of an individually titled parcel. As a result, the usual Property Transfer Tax associated with registering a transfer of real property generally does not arise on the purchaser's acquisition of the co-op shares. Buyers should still obtain legal and tax advice for the particular transaction.

Vancouver's Empty Homes Tax also works differently for a co-op because the co-op property is generally not divided into separately titled taxable strata lots. The City treats a housing co-operative at the property level for Empty Homes Tax purposes rather than treating each shareholder as the owner of a separate strata parcel.

There is also an important difference under BC's Home Buyer Rescission Period. Residential property located on leased land and leasehold interests in residential real property are exempt from the statutory three-business-day rescission period. Buyers of leasehold property should therefore pay particular attention to appropriate subjects and due diligence before committing.

Leasehold and market co-op properties can offer very good housing and, for the right buyer, good value. They may provide a larger home, a better location, waterfront living or an entry price well below a comparable freehold property.

The lower price, however, should be understood rather than simply celebrated. With leasehold, ask how much time will remain when you eventually sell, whether financing will still be available, whether a rent review is approaching and what happens at expiry. With a co-op, consider the down payment the next purchaser may need, whether rentals or pets are restricted, whether board approval is required and how those rules affect the future buyer pool.

The question is not simply, 'Can I buy this property today?' It is also, 'Who will be able to buy it from me when I am ready to sell?'

• Who owns the land, and what exactly am I purchasing?
• How many years remain on the lease?
• Is the lease prepaid or non-prepaid?
• If ground rent continues, when is it reviewed and how is it calculated?
• What happens when the lease expires, and is compensation provided?
• Will my lender finance this property on acceptable terms?
• How might financing change before I eventually sell?
• For a co-op, what are the membership, rental, pet and renovation rules?
• Does the co-op own or lease its land?
• What are the financial condition, debt and future capital obligations of the strata or co-op?

Freehold, leasehold and market co-op homes can all be sensible choices. They are simply different forms of ownership, and those differences can have real financial and practical consequences.

A freehold strata purchaser owns a strata lot and shares in the land. A leasehold purchaser acquires an interest for a defined period while someone else owns the land. A market co-op purchaser generally owns shares in a corporation together with the right to occupy a particular home.

The home may look exactly the same. What you are actually buying may be completely different. Before deciding whether the price represents good value, understand the ownership, the financing, the rules, the future costs and the eventual resale.