Cheap condos, costly surprises: The fine print on $300K homes in Vancouver

They look so tantalizing when they pop up on your sad and desperate search: more than three dozen apartments in Vancouver for sale at an asking price of less than $400,000. One is even listed at $282,000.

Sure, the maintenance payments seem high—$1,000 a month for some of them—but how bad could that be when you’d have a mortgage that’s smaller than the cost of some people’s kitchen renos?

Welcome to the back alleys and quirky side streets of Vancouver real estate, my friend. Where you soon discover there is truly no free lunch. Especially for the majority of the apartments listed, which are in a special, strange category all their own.

A few of the under- $400,000 collection that I perused on one particular day this past spring were easy to understand.

There are the apartments at 138 East Hastings Street, the Sequel building. Four of them, in fact, priced at between $349,000 and $385,000. Newish, looking reasonable, taxes at $1,000 or so for the year and maintenance fees in the $270-a-month range.

That’s the unlikely condo project—an experimental venture by a private developer with BC Housing support to introduce affordable ownership housing to the area—that replaced the once-legendary Pantages vaudeville theatre.

It’s also plumb in the middle of a block that’s now home to Vancouver’s first supervised-injection site and the empty lot where the hellish Balmoral Hotel used to sit, both of which lie on the opposite side of the street. It’s on the same side as the Carnegie Community Centre, a couple of boarded-up storefronts, a dubious-looking convenience store and the Brandiz Hotel. A block where the sound of sirens is, unfortunately, all too familiar. Aha, the price makes sense now.

Then there’s the Lee Building, beloved by hipsters of all generations. The historic brick building at Main and Broadway—with its early-20th-century design and unusual-for-Vancouver sidewalk arcade—had a place on the fifth floor recently listed for $550,000. The secret there? You have to buy outright because the building’s apartments are an “undivided interest.” Unlike with a condo, you don’t own a legally defined air parcel. To get a mortgage, you’d have to get every other person in the building to co-sign and, since that isn’t going to happen, you’ll need to find that $550,000 on your own.

A couple of other anomalies are in the list—a unit at the Rosedale on Robson, where you have the right to stay 12 nights a year; a small apartment in a high-rise in the Joyce–Collingwood neighbourhood near Boundary and Kingsway.

But the dominant group of apartments—older buildings in the West End, one in Mount Pleasant on the day I looked—are the vestigial remains of ancient real estate history, it turns out. When the brash new NDP government was elected in 1972 with a promise to establish rent control, a few apartment owners trying to avoid that dire fate converted their buildings to leasehold, according to Douglas Harris, a UBC law professor who has extensively researched the history of apartment ownership, and Mike Walker, a Vancouver lawyer from the blue-chip firm Miller Thomson who specializes in unusual real estate issues.

That move by those 1970s owners also helped them avoid the cost of converting to strata—the form of ownership most of us are familiar with. Had they gone the strata route, they would have had to spend a considerable amount to upgrade the buildings, as required by strata legislation. As a result, approximately 2,500 apartments in about 20 buildings across the province, most in Vancouver and  Victoria, aren’t regulated by either the Residential Tenancy Act or the Strata Property Act.

Those 99-year-lease  buildings are about halfway through their lives, with terms expiring in 2073 or 2074,  according to various listings.

And… there’s a wide range of opinions on how all that is working out.

Realtor Angie Kirk, who has, by chance, sold a few leasehold apartments among her other listings, says that the purchasers “love them,” though she acknowledges that many buyers are hesitant at the thought of the lease ending in 50 years (even though those units are now being sold for higher prices). They have one advantage in that they’re not subject to Vancouver’s Empty Homes Tax, but Kirk cautions that very few banks will lend on them and those that do require a 25- to 35-percent down payment. “And you have to have your own contingency fund,” she says.

Another realtor, Dwayne Launt, had a leasehold apartment himself for a while in a building in Mount Pleasant. “I’m a big believer in leaseholds,” he tells me in a pleasantly long, meandering conversation about the state of Vancouver condos and leaseholds. But, he says, buyers need to be aware that they will be responsible for maintaining the common areas to keep the building in reasonable shape and there won’t be a strata council that can scrutinize or veto expenses. That means repair bills will come along that need to be paid. Also, the price of regular amenities can change. When his building was sold by the former owner to one of Vancouver’s big landholders, Deecorp, the cost of doing laundry went from around 50 cents a load to nearly $3; parking rose from about $7 a month to over $100.

For the price buyers are paying, though, he thinks it’s worthwhile. You get an apartment for $300,000 to $400,000 that would be $600,000 or more if it were a regular condo in the same area, size and condition.

Launt admits that, because there is no strata council, “ideally, you have a benevolent dictator, but it’s not a democracy.”

The problems arrive when you have a non-benevolent dictator. That’s the case for leaseholders in certain buildings in B.C. right now. Some lessees living in buildings under the control of Alberta- based Sheridan Investments even went public last year with complaints about their skyrocketing maintenance bills. One former journalist, Gerald Rotering, has been advocating for basic tenant protections for long-term residential lessees in B.C.—with a focus on Westsea Construction, the lessor of his own building in Victoria—at his website, orchardhouselease holder.ca.

There, he “advocates for provincial law to give all B.C. long-term residential lessees basic tenant protections,  including the right to disclosure about the spending of their money and some limit on suite-fee and capital- expense billings.”

Many are hoping the  province will step in, following MLA Spencer Chandra  Herbert’s hearings on the issue last year—prompted by an outcry of complaints.

For one anonymous lessee who spoke to BCBusiness—a former TV producer who had to retire early because of a medical condition—waiting for the outcome of those hearings has been painful. She has lived in a Sheridan building in the West End since 2013 and eventually bought the unit in 2022 from the lessor. She knew she’d need to pay $8,500 for her share of repairs to the water pipes, which were leaking and needed fixing. However, she was recently also informed that she will owe about $35,000 more for window replacement.

“There are so many of us who are living on a fixed income, including me,” she said. On top of that, she adds, she noticed in the last annual report that part of the costs for the building, covered in maintenance fees, included $400,000 for lawyers. “I have no idea what that’s for,” she says. “It looks like if I write anything, I get a letter back from a lawyer and we pay for it.” She hopes the government will simply buy the buildings, though that wish seems unlikely to be realized.

The province has not yet disclosed its plans. When I reached out to Housing Minister Ravi Kahlon for a statement, the reply from his office read: “We’ve heard the concerns that have been raised and understand changes are needed to address situations like this. We’re doing the work now to find the best path forward and make sure we get it right.” So, stay tuned.

In the meantime, at least one group of leaseholders scored a victory recently.

Lawyer Mike Walker represented the leaseholders in the case, in which the owner of a 1970s conversion in  Vancouver’s west side was panicking about selling in a bad market, and so offered the lease purchasers a deal: at the end of the lease, the owner would pay out to each of the buyers their proportionate share of the value of the property. At some point, the lessor sold the building to an insurance company, which recently reviewed its holdings and wondered why it was bearing the risks of managing a building that it would never own (despite receiving management fees to offset those costs).

Two years ago, the current leaseholders got to buy out the insurance company’s interest in the property for $1, just so the firm could get it off its books.

Now that’s a good deal.