Insurance Insights

Old purchase agreements may keep condo unit owners from selling their buildings

condo

As of last year, strata corporations can be terminated with an 80% vote. This change in legislation has made it easier for condo unit owners to sell their buildings for redevelopment. While getting enough owners in a strata to meet that threshold is no small feat, there is another point of contention that has arose creating further obstacles.

For any strata building constructed prior to 2000 in BC, the purchase agreement defines how funds generated from selling the building is to be divided among owners. Therefore, the value of each unit is not determined by current assessed value.

Instead, for buildings constructed before or in 1974, the value is set by relative area with no other considerations that would affect market value. Among those built from 1974 to 2000, the value is set based on the developer’s estimate for each unit at the time the plan was filed.

As you can imagine, those values can be dramatically lower than their current assessed value. A unit owner could be losing tens of thousands of dollars or more in a group sale. The difference is even bigger if the buyer is looking to rezone, in which case, owners could be selling their property for twice the current assessed value, if not more.

This situation can create chaos and substantial conflict among unit owners. Unfortunately, there is no easy solution. A change to the distribution agreement itself would require agreement by 100% of the owners in a strata. In some cases, developers are negotiating with unit owners individually, but this is only feasible in with smaller groups of owners.

With the rapid rate of development expected to continue across BC, this same roadblock is likely to arise again and again.

 

For more information and resources on insurance and risk management for property owners, managers and developers, please contact us.

Source: “New hitch for group condo sales causing anguish among residents” by Frances Bula, The Globe and Mail (July 7, 2017).

Get an Insurance Quote Today!