Background

HOW LEASES WORK IN FALSE CREEK SOUTH

About 70% of FCS residents live in enclaves mostly built from the mid-1970’s to mid-1980s on land leased from the City for a 60 year term. Several constitute, in one form or another, supportive housing and there are, as well, both market and non-market purpose-built rentals. The remaining homes – the majority – are divided between five housing co-ops providing 531 homes and 13 strata enclaves with a total of 669 units. 

From the outset both co-op members and strata owners have financed the construction and continuing maintenance of the buildings and surroundings. But there are significant differences between the two tenures. 

Each of the five False Creek South co-ops has a single lease with the City of Vancouver (COV) and, as with all co-ops, exists outside of the housing market and is not subject to its price fluctuations. Individual co-op members live in, but neither buy nor sell, their own assigned apartment or townhouse. They bring no equity upon entry; if and when they move on, they take no equity with them. At lease end, the buildings and the land the co-op sits on revert to City control.

Owners of strata units have a markedly different lease relationship. Although there are 13 strata enclaves in False Creek South, the COV does not have 13  leases with strata leaseholders but has individual leases with each strata owner:  669 in all.

People buying into a strata bring their own equity with them through the buy/sell price mechanism set by market forces. (Historically in False Creek South, strata homes have been bought and sold at about 70%-80% of the value of comparable freehold units). How much equity they take with them upon selling also depends on the housing market at the time of sale. 

Here is where the differences between co-ops and stratas are most pronounced.  At lease end the buildings of both, and the land beneath them, revert to City control. But the terms of strata leases (and the Strata Property Act) require the City to pay each individual strata owner whatever amount accurately reflects the fair market value of “the leaseholder’s interest in the strata lot”.

In defining that interest, strata leases contain the same provision as the Strata Property Act (SPA): Upon termination of the lease, the lease landlord (in this case, COV) must purchase the strata lot at “fair market value”, and that must be evaluated “as if the strata lot lease did not expire”. (False Creek South strata lot leases may say “terminate” rather than “expire” but the meaning is the same).

Both the SPA and the existing strata leases themselves contain what’s known as a dispute resolution process. Absent an agreement between the landlord and leaseholder, the determination of what constitutes “fair market value” – the purchase price – must be made by a neutral third party in the form of arbitration under the Arbitration Act.