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What's a Leasehold?

Blog by Adam Knight | November 12th, 2013

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 (North Shore and close to UBC)

  • Leasehold apartment buildings may be owned by developer, corporations or individuals
  • Taxes are often included in the monthly maintenance fee


Leasehold Advantages

  • Price
  • Only choice in places like UBC Endowment Lands and on Native Lands

Leasehold Disadvantages

  • 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


For more information on Leaseholds please contact Adam Knight at 604.916.9940