Legislation could prompt stratas to disband
Some two dozen stratas across Metro Vancouver are positioning themselves to dissolve and sell their entire buildings to developers, according to Tony Gioventu, executive director and strata property adviser for the Condominium Home Owners’ Association of B.C.
“In the next months, stratas will be starting to act,” said Gioventu, adding the rough estimate of numbers is based on his organization’s dealings with law offices and commercial brokers. “We know of 25 stratas looking at liquidation. (Most) of them are within two blocks of a SkyTrain station.”
In recent years, many single-family homeowners, especially those who live around designated arterials, have reaped the benefits of real estate deals known as “land assemblies.” This is where several neighbouring homes sold together as a parcel can be worth double or more to a developer looking to build higher-density condo and townhome projects.
Now, more owners of multi-family units stand to cash in after a fresh piece of legislation came into effect two weeks ago.
Just as with single-family homes that are prime fodder for land assemblies, some of these condo and townhome buildings are older and in need of repairs that could be costly for stratas. In some cases, special levies of between $50,000 to $100,000 per unit could be in store for major upgrades. But, if owners group together to sell an entire building to a developer looking to build a much higher-density project, they could see selling prices that are between one-and-a-half to three times their ordinary market value, said Gioventu.
“So a unit that might go for $325,000 could go for as much as $975,000.”
He said buildings in areas targeted for high-density development are the most obvious ones having these conversations. He named zones surrounding SkyTrain stations at Brentwood, Metrotown and Lougheed Mall in Burnaby. There are some in the Lonsdale Quay area, as well as near the SkyTrain station in New Westminster.
“The buildings are generally in a six-block radius of these stations,” he said.
For the hundreds of strata-titled buildings in B.C., a recent change in provincial legislation means that instead of needing 100-per-cent agreement among owners, councils will only need an 80-per-cent vote to disband.
It’s a change that puts B.C.’s rules about joint housing ownership more in line with other provinces, and might make it easier for stratas to push holdout owners into selling and deals to close more quickly.
It used to be that if stratas couldn’t get 100 per cent of the votes to disband and sell, the owners in favour would have to go to court and try to get a legal order in an often long and expensive process.
This is possible, but it can also take longer, according to Peter Roberts, a Lawson Lundell lawyer who has worked with condo owners to sell entire buildings to developers, including the only recent case of a completed deal, which happened in May of a 21-unit building in Coquitlam.
His “strata wind-up group” has been busy in recent months with queries from dozens of groups of owners. A combination of rising property prices, looming repair costs and this new legislation — which says “a lack of unanimity isn’t going to hamper a sale” — has sparked “a greater willingness toward extracting value” from their units, said Roberts.
At first glance, the new legislation might make it seem like it will now be a breeze for a group of owners who want to sell to push through opposition from holdout owners who don’t. However, Roberts said it will still depend on what’s behind the resistance.
“Is it an owner saying, ‘I don’t like this price’? Or someone feeling like, ‘This has been my home for 80 years, my doctor is next door’? There is a difference.”
Groups that want to sell need to be “organized from day one” in order for a sale to happen as quickly as possible, he said. Not getting caught by technicalities is of the essence because once strata minutes show there is a desire to sell an entire building, the market appeal of each unit as an individual sale changes. Asked Roberts: “Who will buy into a development knowing that it’s headed for redevelopment, unless there are buyers looking for a quick profit?”
Bigger picture, there will be some impactful, “unintended consequences” for the market as more stratas seek to dissolve and sell, according to Gioventu.
“The funny little anomaly of this is that, say, a 100-unit townhome complex unit liquidates. (All of a sudden) you will have 100 owners with up to $1 million in their pockets fighting to find a new place to live. Even if only half look to buy in the same area … you will have a significant buying wave. It’s the next housing wave.”
Article compliments of The Province