Who owns the land a condo is built on?

[urbandreamer]

Hey UT real estate gurus, this may be a dumb question but something I've always wondered about: who really owns the land after a condo is built and registered?

For example, does the condo corporation sign a 99 year lease on the land? Does the original land owner/property developer some how maintain an interest in the land?

Why am I wondering about this issue? Well let's think into the future--say 2120, when some of these current condos going up today are rotting crapholes waiting to be demo-ed: who has title to the land?

 

[Skeezix]

I'm not a real estate lawyer, but the developer/original owner does not retain any interest. The condo owners own their respective units (which, in the case of most condos, involves strata parcels), with common elements held by the condo corporation.

 

[Conrad Black]

This brings up an interesting point. Has anyone ever bought out a condo building for redevelopment? It has to be pretty hard to buy out 200 or more owners.

 

[Observer Walt]

^ That's correct, the land is part of the "common elements". I have never heard of a condo being built on leased land (as some freehold buildings are); I'm not sure whether there is even any legal provision for that.

 

[cmystikal]

This brings up an interesting point. Has anyone ever bought out a condo building for redevelopment? It has to be pretty hard to buy out 200 or more owners.

I know of at least one apartment conversion (to a condo) in Mississauga. It is a little easier to not renew leases, or offer people packages or incentives to leave an apartment building than to buy people out of existing condos.

I think you would have a hard time building a case to buy a condo out at market rates, retro-fit the building and be able to turn a reasonable profit.

 

[nekz]

^ That's correct, the land is part of the "common elements". I have never heard of a condo being built on leased land (as some freehold buildings are); I'm not sure whether there is even any legal provision for that.

But the definition of a freehold property is that it is not on leased land... otherwise it'd be leasehold.

I haven't seen many leasehold properties available, other than in older parts of Brampton and south Scarborough. And those are usually single family properties.

 

[nekz]

I think you would have a hard time building a case to buy a condo out at market rates, retro-fit the building and be able to turn a reasonable profit.

I guess when you can turn a reasonable profit, Toronto would have used up all it's land, and urban sprawl have been contained. It'd be like London or Hong Kong...

That'd be scary.

 

[nekz]

Why am I wondering about this issue? Well let's think into the future--say 2120, when some of these current condos going up today are rotting crapholes waiting to be demo-ed: who has title to the land?

Then again guys, what about those office buildings and banks on Bay Street and other parts of the core? They've been here well over 100 years...

Or maybe by the time it becomes profitable to retrofit a new building on the land, the old condo building would have depreciated so much that it wouldn't cost much to buy out the residents...

 

[rbt]

Or maybe by the time it becomes profitable to retrofit a new building on the land, the old condo building would have depreciated so much that it wouldn't cost much to buy out the residents...

320, 330, 340 Dixon Road and other buildings in the area are pretty much ready for exactly what you describe. 2 bedroom units in those buildings sell for as little as $50,000, the building is literally falling apart, and typically has about $1000/month in maintenance fees on a unit.

The exit strategy is defined within Ontario Law.

At some point the condo corporation will be required by law to do a major overhaul probably well above what is available in the reserve funds. Substantial damage (repairs costing more than 25% of the buildings total value) can occur due to lack of proper maintenance. Even at $1000/month these buildings are not being fixed up and the maintenance costs will increase as more major system repairs are put off.

Anyway, 25% of the buildings value will require a substantial special assessment to fix. If you owned a $50k unit and were asked for $25k to perform repairs you might not want to do such a thing. Residents have the option of turning down that special assessment and "abandoning" the building instead as a group. I believe it requires a vote by 80% of the residents to terminate the condominium corporation.

When a condo corporation terminates the corporation (a single entity) sells the entire package (land, building, etc.) on behalf of the owners then divvies up the proceeds.


It should actually be easier dealing with old condo buildings than trying to do land consolidations as you don't need everybody to take part, just a large majority.

 

[freshcutgrass]

Leasehold property is not common in Toronto. Purchasing leasehold property when it will be your residence is not a good idea, as the real value of the property is the land, not the bricks and mortar. Land is also relatively cheap in Toronto, so as not to be prohibative to buy outright and develope. Land in Manhattan or London for instance is far too valuable, so leasing is a lot of times the only alternative.

There is also no guarantee that your lease will be renewed, and if it is, the new price could be more than you bargained for (government-owned land is probably the safest bet). Also, selling leasehold property can be difficult, depending on how much time is left on the lease.

In the case of a cash-flow property, such as a large office tower, leasehold makes more sense (First Canadian Place for instance has the building and the land it sits on as separately deeded property).

Toronto has probably the worst-case scenario for leashold property...the Toronto Islands homes...not only do they not own the land their houses sit on, or sell it at market prices, they cannot make a profit at all on it, and cannot even choose who the buyer is. Man, you really gotta want to live their badly to choose to live under those conditions.

 

[urbandreamer]

I'd love to live on the Islands. Sort of how I imagine living in Hamilton, only you're even closer to Toronto.

 

[nekz]

Not in any living soul's lifetime Mr. Nekz. HK is an island and London is hundreds of years older than TO and much more dense as I'm sure you are aware.

I hear you Investor. I'm not saying it will likely happen, but I'm also not saying that it can't happen.

Edit: I'm just saying that it'd be scary IF it did happen. I couldn't imagine being forced to buy property in Manhattan or London or Hong Kong, and end up with $100 monthly disposable income.