Leasehold Strata and Prepaid Leases in British Columbia

Some strata units in British Columbia are sold on a lease rather than as a freehold lot. You may see them called leasehold units or prepaid leases. The price can look attractive, but what you are buying is a right to occupy for a set period, and that changes questions about expiry, resale and financing.

The rules for these units depend heavily on the lease itself and on the land title documents. This article does not set out those lease rules. It explains the questions to ask, and the general strata rules and documents that still help you assess the unit, so you can talk to a lawyer with a clear list.

This article covers the law of British Columbia.

What makes a leasehold unit different

With a freehold strata lot you own the lot. With a leasehold unit you hold a lease, usually for a fixed term, and someone else owns the land. A prepaid lease generally means the lease payments for all or most of the term were paid up front. What your lease allows and what happens at the end of the term depend on the lease and your title documents, and a bylaw is also unenforceable to the extent it contravenes the Act, the regulations, the Human Rights Code or other law.

Before you make an offer, ask for the full lease and any related agreements, and have a lawyer explain them to you in plain terms.

Key risks to ask about

• Lease expiry: how many years remain, whether renewal or extension is possible, and what you receive, if anything, when the lease ends.
• Resale: whether a future buyer will find the remaining term acceptable, and whether the lease limits transfers.
• Financing: whether lenders will mortgage the unit, on what terms, and how the remaining term affects approval.
• Ground rent or other payments: whether any amounts are payable in addition to strata fees, and how they may change.
• Consent or approval requirements in the lease before you can sell, rent or mortgage.

On bylaws, a strata bylaw is unenforceable to the extent it contravenes the Act, the regulations, the Human Rights Code or other law, or restricts an owner's right to freely sell, lease, mortgage or dispose of a lot. How that applies to a leasehold unit and the lease terms is a question for your lawyer.

Strata documents still matter

Within one week of a request by an owner, a purchaser or a person authorized by either, the strata corporation must give the requester an Information Certificate (Form B). A purchaser includes anyone with an agreement to buy a strata lot that has not yet been conveyed, and the agreement does not have to be unconditional, so a buyer in the subject-removal period can ask for it. The strata may refuse to issue it until the fee is paid, and the fee is capped at $35 plus photocopying. If the strata has sections, request a Form B from both the strata corporation and the relevant section.

The Form B discloses monthly strata fees, amounts owing, approved future special levies, expected budget overruns, the contingency reserve fund balance, outstanding notices and work orders, and a summary of insurance, with the rules, current budget and most recent depreciation report attached. Information in a Form B is binding on the strata in its dealings with a person who reasonably relied on it.

Costs that can still reach you

Depreciation reports estimate repair and replacement costs, and a report must contain a 30-year contingency reserve fund cost projection and at least three 30-year funding models. A strata with fewer than 5 strata lots does not need a depreciation report. Whether a leasehold strata has special arrangements for these costs depends on its documents.

What to do next

• Get the full lease, title documents and any amendments before you make or firm up an offer.
• Request the Form B early and read every attachment.
• Ask a lawyer to explain the lease term, renewal rights, resale limits and any approval requirements.
• Speak with your lender before removing conditions to confirm financing for a leasehold unit.
• Ask your insurer what coverage you need for your lot and contents.

Because the answers turn on the specific lease, a lawyer's review before you remove subjects is well worth the time.

Frequently asked questions