What's a Leasehold?
- When you buy, you don't buy the land, you buy the Right Of Exclusive Possession of your unit
- Right Of Exclusive Possession terminates at the end of the lease period
- Types Pre-Paid/Not Pre-Paid Strata/Non-Strata:
- Pre-Paid for the term of the lease
- Not-Prepaid: A monthly lease payment which can be raised according to the
terms of the lease
- Strata – Rules are governed by the BC Strata Property Act.
- Non-Strata - Not ruled by the BC Strata Property Act
Older buildings pre-1980's
- End of the lease payout:
- Strata – Outlined in section 214 of the Strata Property Act
- Landlord must purchase the Tenants interest
- Based on Schedule in the Strata plan
- If no Schedule is in the strata plan then Fair Market value
- Non-Strata be outlined in the head lease
- When or If rent increases can happen is outlined in the lease. Note that pre-paid leases generally don't get any increase during the life of the lease.
- When you sell, you assign the lease to the next buyer
- Schedule of Restrictions tells you what you can and can not do with the property. (Examples: Can you rent it out or have pets)
- Property can only be leased from
- Federal Government
- Provincial Government
- Municipal Government
- University or School Board
- Native bands (NorthShore and close to UBC)
- Leasehold apartment buildings may be owned by developer, corporations or individuals
- Taxes are often included in the monthly maintenance fee
- Only choice in places like UBC Endowment Lands and on Native Lands
- Each year you have one less year on your lease so you are buying a decreasing asset
- Uncertainty, especially in a Non-Strata with no payout formula in the lease (I have read that there are some leases that have a zero payout at the end, and those with converted to Rental)
- Less people are willing to buy a leasehold, so your resale will take longer
- Leaseholds don't increase in value as quickly as freehold's
- Leaseholds require a larger down payment (25%-30%) depending on the bank or mortgage broker that you are dealing with.
- Banks will only lend for 5 years less than the remaining lease. For example, you would only be able to get a 15 year amortization on a lease that expires in 20 years.
- Potentially huge increases when the lease runs out.
- Very hard to re-sell when their are less than 15 years remaining on the lease