16 Jan

Leaseholds, Part 2, the False Creek Story

General

Posted by: Jonathan Barlow

In the late 1960’s, faced with largely abandoned, polluted industrial lands on the south side of False Creek, city planners proposed the idea of redeveloping an eighty acre parcel of land to mixed use housing. They envisioned a mix of market, co-op and affordable rental housing in what might potentially become a thriving community.

False Creek is, for the most part, reclaimed land. Originally, the shoreline edged up against what is now Clark Drive and the water covered was five times the area it does now.

Having been developed as industrial lands through the late nineteenth and early twentieth centuries, industry flourished in what is now False Creek South until the 1950s, when the area was left largely abandoned and heavily polluted.

The redeveloped eighty acres now comprise about nineteen hundred homes which are split into thirds by use. One third is strata, one third co-op and the final third, market and non-market rental housing.

At the time of the original proposal, the idea was considered to be pretty avant garde; nothing like it had ever been proposed before. Even the idea of leasing out land for residential purposes was not common practice in Canada.

It may be however that the idea of leasing the land was a way avoiding the obligation of cleaning up the polluted land before selling it.

The leases themselves were drawn up for 60 years with a rental payment adjustment at year thirty and are due to expire between 2022 and and 2046.

As the expiry dates approach, the financing policies of most financial institutions, most of which do allow for mortgages on city leased land, are putting a virtual stranglehold on the existing lessees.

Most institutions who mortgage leased land properties amortize their mortgages to a maximum of five years less than the expiry date of the leases.

This means that without an extended lease provision in place, co-ops cannot borrow to make improvements or remediate damage and a generation of aging strata owners cannot sell and downsize because the new owners cannot find meaningful long term financing. Non-market renters fear the end of the leases will bring re-development, with potential loss of their homes and easy access to the facilities that make their lives easier.

There is hope however; when he was re-elected in 2014, Mayor Robertson committed to resolving the lease and redevelopment issues before the end of this term.

A massive effort is now underway by the city and the neighbourhood association to develop a new plan. The neighbourhood association is encouraging the city to look at density increases for the area as this will only enhance the neighbourhood. One obvious area for development that has been suggested is the abandoned railway lands on sixth avenue.

Hopefully, by 2018, a new plan and lease extensions will be in place and what was once just a good idea that became a working reality will be allowed to grow and continue, for the benefit of new and existing residents alike.

As always, if you have any questions, need help or would like to run through some scenarios, please call or email.

Regards,

JB

Jonathan Barlow
778-230-2572
jbarlow@dominionlending.ca

9 Jan

The ABCs of Homes on Leased Land

General

Posted by: Jonathan Barlow

The term “Property on Leased Land” tends to make any Mortgage Professionals heart skip a beat, especially if it’s going on an application they’re working on.

For the potential homeowner, the advantages of a home on leased land ( greater affordability, potentially fantastic locations and some simply stunning homes) are balanced with challenges of finding financing and the extra levels of risk associated with leasing the ground your home stands on.

But what are those increased risks?

Three that immediately spring to mind are;

You don’t own the land that your home stands on.

Leases are finite. They may be renewed at much higher (closer to market) rates.

Leases can end. Leases may not be renewed at all.

Layer in to that the different levels of risk in the various bodies that actually lease land and the risks may be too much for most lenders.

You can potentially be leasing your land from anyone but generally there are three types of lessor;

a ) Government
A local example of government leased land is the South False Creek area of Vancouver, where I live. There are about 1800 homes on leased land in False Creek, some of it Co-op, some of it Strata and some of it rental.

b) Indigenous Lands
The most recognizable Indigenous leased land to most Lower Mainlanders is the 75 homes in Musqueam Park in South Vancouver.

C) Lands owned by a Corporation
A colourful example is the leased land around Horne Lake on Vancouver Island. Now owned by the Horne Lake Licenseholders Association ( a homeowners group ) the land was owned by a German Prince for forty years.

Leasing in any of these situations will present their own unique set of challenges but in all but the most obscure circumstances, financing is available. Its simply a matter of knowing which lender will have an interest.

Over the next three articles, we’ll do a deep dive into local examples of all three types of lessors and explore the history, current status, benefits and challenges of each example.

Up next: False Creek Leaseholds, a great idea that still works.