Saturday, October 27, 2012

The trouble with Condos..especially older Condos!

Daphne Bramham's excellent column in today's Vancouver Sun has prompted me to publish a story outline I drafted earlier this year. Unfortunately, I don't have the time at the moment to follow up on this, but hopefully Daphne and other writers will.

Recently there have been various legislative changes, court decisions and  stories in the Vancouver Sun and other media that could have a significant impact on condominium living. These include:
  • Deficiency reports: A new requirement that a strata corporation prepare a 'Deficiency Report' that describes the condition of the building or complex, along with a maintenance and repair strategy and financial plan. While the strata corporation is not legally obligated to undertake the repairs, I expect many will do so, sometimes at considerable cost. Furthermore, these reports are likely  to be requested by prospective purchasers, and this could impact property values...upwards and downwards depending on the building condition and financial reserves;
  • Approval for sale of entire project: a court recently ruled that in the case of a building or complex in very poor condition (that might more reasonably be demolished, rather than fixed) 100% of the owners must agree to  the sale. A pending sale to a developer who wanted to redevelop the site was therefore cancelled. The future of the complex is now very uncertain.  Furthermore, there are many other older buildings and complexes that may cost more to fix than they are worth. In some instances, low density propjects might be sold for considerably more as a development site than as individual units.  Australia recently indicated a willingness to consider a change in the percentage of owners who must agree to a sale, and other jurisdictions are reviewing their requirements, since it is usually impossible to get 100% of the owners to agree on anything!
  • Insurance claims: stories regarding building repairs that reveal that residents can be liable for significant costs when they cause damage to other units. While there may be insurance, often the deductible is in the tens of thousands of dollars. One Vancouver condo owner had to pay a $60,000 deductible after his tenant caused damage to suites below.
  •  Changes to strata bylaws related to smoking and other matters: another story noting that 91% of the owners of a condominium project voted to make their building smoke free...even within the suites! While I am not a smoker, I can sympathesize with condo owners who do smoke and may be facing a smoking their own suite!
I expect these legislative changes, court decisions and related publicity may cause a number of people to reconsider whether to buy into a condominium project, especially an older building that has not been well maintained. So what are the options?

Fee-simple developments: A new option could be individually owned 'fee simple' row houses. In May, the province amended legislation to make it easier for developers to build 'fee simple' row houses, whereby each purchaser owns his own unit outright, without having to be part of a condominium. At a recent legal workshop at which I spoke on the topic, some people questioned whether it might be possible to convert existing condominiums into a fee-simple form of ownership. While this will be difficult in most cases based solely on the recent legislative changes, if other legislative changes were made, and municipalities were supportive, this could be a viable option for many condominium rowhouse owners.

As announced earlier this month, the Mayor's Affordable Housing Task Force City is recommending that the City accommodate higher density single family housing and additional low-rise multi family in 'transition zones' behind arterials and near transit and community services. This could result in new alternatives to condominium living.

Other BC municipalities are also taking a new look at creating opportunities for additonal multi-family housing and alternative housing choices.  Recently I spoke to the Tri-Cities mayors, councillors and staff on the future look of suburban density.

While the condominium is by no means dead, I do believe that it is important that existing owners and potential buyers be aware of both the advantages and disadvantages of this form of housing and the alternatives that may be forthcoming.


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