After 23 years marketing Real Estate, I still hear too many potential buyers tell me that they won’t consider buying a condominium property because “you don’t own any land.” I don’t know how or where this urban legend began but it’s time to put this one to rest.
The truth is a condominium owner does own land in most cases. Assuming that the project owns the site that it occupies, each owner owns a proportional interest in the common property. This includes the land the condominium complex has been built on. Proportional interest simply means that the larger the dwelling you own, the more interest you have in the land ownership. In law, this type of condominium ownership is called Freehold Strata.
This legal ownership is all documented in the Strata Property Act of British Columbia. While it is possible for a Strata property to be situated on leased land, this is not the case for the majority of condominium projects. In most cases, buyers will be purchasing a freehold strata property when they choose their condominium home.
But isn’t the amount of land ownership really small when proportionally shared? How much can this land really be worth? Don’t be fooled, the value of the land is significant! In order for a strata property to be built, the zoning has to allow the necessary densification. In other words, you have to be able to put more homes on a given area of land. This higher density zoning greatly increases value versus land that can only be used for single family homes. The more homes you can build on a site, the more value to the land. Zoning that allows high rise towers is the most valuable.
A perfect example of this is North Vancouver’s Woodcroft Estates. There are six high rise buildings on the site with a total of 1,222 suites. The owners proportionally own the entire 13 acres of land the complex occupies. Here is the question: how much is 13 acres of land, zoned for high rise towers, located in North Vancouver’s lower Capilano area worth today? The answer is tens of millions of dollars!
So the next time someone suggests to you that buying a condominium is a bad idea because “you don’t own any land”, tell them to check their math. Freehold Strata ownership does make you a landowner despite what followers of this persistent urban legend believe.
© Marc Haslam 2009