In British Columbia, there are numerous types of property ownership, such as 'Freehold' (majority of detached homes/land), 'Freehold Strata' (most condos and townhomes), 'Leasehold', 'Co-operatives', 'First Nations Lease', 'Time Share', among others. The most common and clean type of ownership is 'Freehold' which is essentially 'free from hold', from any entity other than the owner. This means that the owner has free ownership rights indefinitely and can use the property for any purpose but in accordance with any restrictive charges or local regulations. This conventional type of ownership is also the most desirable to lenders. The reason for this being that lenders like to own properties that have an interest in land, as they are more secure and easier to liquidate should you default on your mortgage. Most of the other ownership types do not have a guaranteed interest in land, so it may be more challenging to acquire a mortgage on an unconventional type of ownership. For this reason, often unconventional properties are more affordable as they are more challenging to sell.
As a strata lot owner, you have the right to vote in a 'strata council' once a year at an Annual General Meeting. The council is made up of owners who volunteer their time to help manage the building. Most complexes will also have a Strata Management Company that they use to help advise the council and communicate to owners. As an owner, you have 1 vote for every strata lot you own. Big decisions are made during an AGM or SGM (Special General Meeting) and require 75% of owners to agree. The strata council can make smaller day-to-day decisions and have a limit of how much they can spend (without running it by the owners first). Any changes to bylaws, budgets, or special levies must be voted on by all of the owners.
The Strata Property Act changed in January 1st, 2010 to exempt developers from implementing rental restrictions on all new builds. This means that if you buy a newer condo directly from a developer, you will be allowed to rent this home. Even if 75% of the owners then want to implement rental restrictions, you will be grandfathered in to the original rental bylaw and be able to rent your unit. It is not until you sell your unit that the new owner will have to abide by the current rental bylaws. Since so many owners now buy for an investment, newer buildings (less than 10 years old) often allow 100% rentals because they would never be able to get 75% of the owners to agree on implementing restrictions. It’s a win for developers as well as they have a larger pool of buyers to market their homes to. If you are looking specifically for an investment or just want the option to rent your place out in the future, make sure to inform your Realtor so they can customize your search accordingly.
If you buy into a 'Freehold Strata', you are buying the right to a unit (strata lot) with a joint interest (shared with the other owners) in the common areas (lobby, parking, amenities etc.) and land that the development sits on. Since you own a part of the complex you are also responsible for paying to maintain it in the form of monthly 'strata fees' or 'maintenance fees'. You may have also heard the term 'HOA fees', but a 'Homeowners Association' is an American term that we don’t use in Canada. These fees pay for the maintenance, insurance and management of the building. The amount of this fee is decided by the 'Unit Entitlement', which is kind of like your percentage share of the total operating costs of the building. Usually, this share is calculated by the size of your unit divided by the total square footage of all of the units. You are generally responsible for the maintenance inside your unit, except for the components that are shared (such as a roof or common pipes and sometimes envelopes). This means if only your toilet is plugged, you better buy a plunger.
As a strata lot owner, you have the right to vote in a 'strata council' once a year at an Annual General Meeting. The council is made up of owners who volunteer their time to help manage the building. Most complexes will also have a Strata Management Company that they use to help advise the council and communicate to owners. As an owner, you have 1 vote for every strata lot you own. Big decisions are made during an AGM or SGM (Special General Meeting) and require 75% of owners to agree. The strata council can make smaller day-to-day decisions and have a limit of how much they can spend (without running it by the owners first). Any changes to bylaws, budgets, or special levies must be voted on by all of the owners.
While the majority of buyers purchase condos for individual use, many investors also purchase condos with the intent of renting that condo out to someone else. Many older stratas in Vancouver have voted in rental restrictions (by 75% of owners in agreement), meaning that either rentals are not allowed, or by restricting them to a limited amount of rentals such as 10% of the total units that are allowed to rent at one time. The idea behind this is that owners will take better care of the building and their units because they have a vested interest.
The Strata Property Act changed in January 1st, 2010 to exempt developers from implementing rental restrictions on all new builds. This means that if you buy a newer condo directly from a developer, you will be allowed to rent this home. Even if 75% of the owners then want to implement rental restrictions, you will be grandfathered in to the original rental bylaw and be able to rent your unit. It is not until you sell your unit that the new owner will have to abide by the current rental bylaws. Since so many owners now buy for an investment, newer buildings (less than 10 years old) often allow 100% rentals because they would never be able to get 75% of the owners to agree on implementing restrictions. It’s a win for developers as well as they have a larger pool of buyers to market their homes to. If you are looking specifically for an investment or just want the option to rent your place out in the future, make sure to inform your Realtor so they can customize your search accordingly.
It is important to note that if you are a condo/townhouse owner and a big building expense arises that is not budgeted for, such as a rainscreening project because the building envelope has failed, (ie. ‘a leaky condo’) then the strata will have to raise the funds to pay for it. They usually do this by assessing the cost to the owners as per their unit entitlement (percentage share). Sometimes the strata will use some of their CRF (Contingency Reserve Fund ie. savings) to pay a portion of it, but often there is not enough money to cover the entire cost. The amount raised by charging the owners is called a ‘special levy’, and in order to best avoid hefty levies you will want to do your homework on the building prior to purchasing. Smaller levies (say under $5k) are more likely to occur in any building, but this can fluctuate depending on the age of the building, how well maintained it is, and how pro-active the strata council is.
Either way, it's a good idea to put a little money aside as part of your maintenance fund (just like you might if you owned a detached home). A good Realtor can include additional clauses into your contract in order to protect you, as well as help read through all of the strata documents with you and advise accordingly. Click here to view a Step-By-Step Buyer’s Guide that I put together which further outlines the steps of buying and the approximate costs that you can expect.
Need some advice on your current situation? Contact me to set up a free consultation 604-346-6920.
Best,
Kate