Vancouver raises False Creek lease rates 700%

Buying a condo on leased land in False Creek just became a whole lot more expensive. The city of Vancouver jacked up lease rates overnight with an average increase of SEVEN HUNDRED PERCENT! This story from 24hrs.

“Richard Cooper woke yesterday to find his payments had jumped from $102 monthly to $785.
“I got up this morning and there was a bulletin,” Cooper told 24 hours.

Condo owner George Stratis was among the hardest hit. He wasn’t aware of the increase until he was contacted by 24 hours yesterday. “You’ve got to be kidding me! That’s absurd,” Stratis said, when told his payments had jumped by $1,400 a month. “That’s larger than a mortgage.”

Stratis could now owe the city about $20,000 a year. That’s on top of his regular property taxes.”

One owner has seen their payments raise from $121.50 to $2,000 – An incredible SIXTEEN HUNDRED PERCENT increase! The city claims that these lease rates have been stuck at a low value for thirty years and that todays increase reflects the current value of the land. Leasehold value has been a contentious issue between residents of False Creek and the city of Vancouver for years. Some residents claim this former industrial land is contaminated and overvalued by as much as 40-50 per cent.

“They’re simply boldly making the statement saying this land is worth top dollar and we should be getting as much rent for it as if it were clean,” said Renger, a senior city planner in another jurisdiction. “That’s not what market land value is about.”

I have a feeling that even at the peak of a boom you’re going to see listings for leased land property in False Creek plummet in value as owners, particularly retirees try to get out of their lease-hold condos.

Update: there’s more info in the Georgia Straight – apparently these increases are on 118 units that decided not to prepay their lease in 2001. The only False Creek resident that was there during the October 3rd council vote in favour of increasing the lease rates was Merv Therriault:

“This has all been predictable,” Therriault told the Straight. “In 1998, we got a document through an FOI [request] that said a large increase in rent will present a political burden to council in 2006.”

Though the increase was forseen, apparently the size of the increase was not:

“COPE Coun. David Cadman told the Straight that no one could have predicted land values would rise so much, but it’s council’s job to uphold the lease agreements. Both Cadman and Therriault predict that when the leases expire in 2040, South False Creek will likely be sold and turned into a Yaletown-like development.”

I’m unclear on the legal status of units built of leased land. If the city decides to sell the land in 2040 when the leases expire do they need to buy the buildings from their current owners, or can they just tear them down with no compensation since the lease for the land is up?

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Anonymous
Anonymous
13 years ago

If you bought a condo for $100,000 and rented it for $1000 per month you would earn 12% (as long as there are no other expenses). As long as you get $1000/month you always get 12% return, regardless of the value of the property. This is the same as the city. They are still getting the same rate of return on this land based on the original price they paid for it. They not not improved it at all or had any expenses incurred with it, so why are they putting up the rent? Just to force people out?

Chillout
Chillout
13 years ago

Here are a few facts most of your correpondents seem to be unaware of….1. These leases halfway through their 60 year period.2. The lease agreement provides for a renegotiation of the rent after the first 30 years. Note that it is a negotiation – the City does not have the power to unilaterally impose new fees.3. The lease agreement allows for arbitration if the City and the leaseholders cannot reach agreement on new fees.4. No-one has been ofically contacted by the City with respect to the proposed new fees yet. The numbers circulating are taken from City Hall Minutes published on the internet. This thing has some way to play out yet, but most of your correspondents have decided it's already a done deal! How many have actually read the lease agreement with the City?

raconteur49
raconteur49
13 years ago

Hang in there .. et bon courage 🙂

Anonymous
Anonymous
13 years ago

The scary thing is that a real estate agent told us that the lease will not go up by much and then when we called City Hall, they say that they did not know anything and that it would be up to an independent evaluator to decide. I think it's a shame for any new folks who bought in from a previous owner who choose not to pre-pay the lease.In any case, I guess this means that all the property values in False Creek will go for a dive. No Lease or Lease, everyone looses. Now we know how the Olympics are being paid for!

Anonymous
Anonymous
13 years ago

Let this be a lesson. Don't buy leasehold properties sitting on land owned by Salish, UBC, SFU, City or otherwise.

Win Lose or Draw
Win Lose or Draw
13 years ago

I have little capacity for empathy for people who cannot heed loud, long warnings. Believing one has an entitlement to below-market cost is nothing more than freeloading.

Lets Organize
Lets Organize
13 years ago

We paid ~$410,000 for our 2-bed condo, on leased land. The City claims the market value for the land our unit sits upon is $250,000. That means that (hypothetically) if we owned the land (held this condo as fee simple), we should be able to sell it for $660,000. Is anyone out there willing to pay $660,000 for a 2-bed, 1-bath, 1100 sq ft 30-year old condo in need of a new roof?That is ridiculous.

Anonymous
Anonymous
13 years ago

My land rent in False Creek just increased by $10,332 a year. At a 30% tax bracket I now must earn about $15,000 more a year to keep my home in False Creek. At 58 years old I can't earn that much more money per year. My $861 per month increase would pay for a mortgage of about $133,000. My home is now effectively worth that much less!!

Anonymous
Anonymous
13 years ago

These people have had a decade in which to deal with this upcoming issue. They can *not* expect the rates to remain flat forever.The city should offer to spread the increase over two years. This would give the owners a fair chance to pack their bags. There are wealthy buyers and the property is desirable; they'll happily pay the new rate.It'll be win-win: the owners get incentive to sell in a hot market; the buyers go into the deal with their eyes open; the city gets realistic lease rate payments.

Anonymous
Anonymous
13 years ago

"If the city decides to sell the land in 2040 when the leases expire do they need to buy the buildings from their current owners, or can they just tear them down with no compensation since the lease for the land is up?"…………………..I'd like to know how it works here in Vancouver too.Public housing (known as HDB for short) in Singapore are on 99-year leasehold land. It's generally believed that extension will be given once the lease expires if the structure is still stable, or the building will be demolished, the land title to revert to the State and the condo-occupants to walk away with no compensation.However, these 99-year leasehold condos are priced at around C$120k (1 bedroom) to C$200 (3 bedrooms). Luxury condos built on private freehold land are around C$400 – x,xxx,xxx.00

Anonymous
Anonymous
13 years ago

well because oil is a commodity and housing is …hmmm well I guess now housing is a commodity. even starting to trade housing futures on the commodity market.

Anonymous
Anonymous
13 years ago

When you sign a lease, or buy a lease hold property, you sign a contract with the city. In the contract, the city guarantees the lease for X number of years. After that, it's all up in the air. Will you go to Saudi Arabia and demand oil for $20 a barrel today?

Anonymous
Anonymous
13 years ago

oops I did find it in the Sun, and the Straight, where they have a bit better explanationhttp://www.straight.com/content.cfm?id=21026118 lease holders are affected In 2001, residents who had not prepaid their leases were given the opportunity to do so, to avoid renegotiating every 10 years. These 118 chose not to do so.I wonder if they were unable to afford it, or simply gamblers.

Anonymous
Anonymous
13 years ago

actually lots of thing don't get more expensive overtime- once adjusted for inflation. Real estate over the long term is one of those things.This rate of increase is unfair, I can't imagine it will stand. The city must be hoping to force those who can't afford it out. What will the ramifications be? Why is 24 reporting on this but not the Sun? Is this a hoax? This kind of property tax is regressive, it has no bearing on the owners ability to pay, targeting the most vulnerable. Those on fixed incomes and those who bought years ago and could never afford to buy in this climate. They will be taxed out of their homes. The people affected may actually be people who bought a home to live in rather than soley as an INVESTMENT in which case they might… Read more »

d_oush
d_oush
13 years ago

I'm not unsympathetic. I don't think its right to raise the rates that high that fast, but to expect costs to stay the same after 30 years is not realistic. You cant find anything that cost the same as it did 30 years ago. Even if it's true that its contaminated its still prime central land in a booming city.It also seems to me that part of owning is being prepared for extra costs. Even if your property is not on leased land you can still run into repair costs or tax increases.I feel sorry for the people that are affected by this rate increase, but I'm sure that a lot of them probably knew it was just a matter of time before it happened.

bc_cele
bc_cele
13 years ago

Nice to see the sympathy there d_oush. Are you still in school? How about we just adjust your fees to what they would be in a free-market, without a government subsidy? That will be another 12K please.

bc_cele
bc_cele
13 years ago

Seems like there may be a court challenge in the near future. If you can't jack up rents more than a fixed amount – and this is just another form of rent – then why should you be allowed to do it for leaseholds?

d_oush
d_oush
13 years ago

OH come on. These lease payments have been around for 30 years! of course they are going to go up. I cant buy or rent a house for the same price that I could 30 years ago, so why should lease payments be any different?

tinybubbles
tinybubbles
13 years ago

This is a shameful move by the City of Vancouver, but I guess this is what happens when money comes before everything else.disgusting.

Anonymous
Anonymous
13 years ago

I wonder how many people have been driven by boom pricing to consider lease-hold property an investment though? Wh wants to bet that you'll see falsecreek leasehold condos show up on MLS in the next couple of weeks in the sub $200k range?

xeus
xeus
13 years ago

This is exactly why leasehold property is NOT a good investment. I feel sorry for these people, but this is what can happen when you rent the land you live on.

bellcurve
bellcurve
13 years ago

How can they arbitrarily jack up the cost of a lease this much? Why would they not at least endeavor to set a schedule of increases so that these costs are more manageable for the people that live there?I can't imagine dealing with an expensive increase like this. I hope that people there haven't bet their nest-egg on a leasehold condo.