Leasehold Property vs Strata Property

Recent Court Decision Regarding 647 Michigan Street (Orchard House)

Orchard House is a leasehold property where the landowner/owner, Westsea Construction Ltd., owns title to the freehold property and the tenant/building residents own title to a leasehold interest registered through a lease at the Land Title Office. The lease allows the landlord to charge the tenants Operating Expenses, which are defined in the lease.

On November 20, 2013, evidence led at trial suggested that Westsea Construction Ltd. charged $1.889 million in Operating Expenses to the building residents for the repair and maintenance of windows, patio doors, and exhaust fans to the building residents, being approximately $20,000 for a studio and $27,000 for a one-bedroom. One resident challenged these costs in legal proceedings, arguing that the repair costs were not pursuant to the lease agreement and accordingly should not to be allocated to the building residents.

On October 1, 2019, at the BC Supreme Court[1], the trial judge concluded that Westsea Construction Ltd. was entitled to undertake the repairs and to charge the building residents their proportionate share of the repair costs as Operating Expenses under the lease agreement. On May 28, 2020, the BC Court of Appeal upheld the Supreme Court decision in favour of Westsea Construction Ltd.[2]              

Unlike owners of a Strata Corporation, the owner of a leasehold property is not required to produce a depreciation report, hold annual general meetings or special general meetings to approve certain repair and maintenance work. Leasehold agreements can be complex with significant liability to the building residents or Lesees and it is recommended that your clients obtain legal advice prior to entering into these agreements.

If you have any questions on the above or we can help you with any real estate related matters, please do not hesitate to contact our office at any time.


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