|
Maximizing a building's potential: Conversion has numerous advantages but must overcome obstacles first
April 2011
|
|
Jason Birnboim, Vice-President at
Beaux Properties |
|
| *V-Report Sponsor |
 |
| |
| |
By Clare Tattersall
Canada’s rising housing prices and relatively low rental vacancy rate has created the perfect storm for the conversion of older apartment buildings to condominiums. However, this is not always an easy feat since many cities across the country have regulated or, like Winnipeg, are seriously considering regulating condo conversion.
Regina has regulated condo conversion since 1994 – apartments cannot be converted when rental vacancies are below three per cent – and has since put a moratorium on all condo conversions. In 2007, Toronto passed a similar bylaw. Landlords must now obtain the city’s permission (and a permit) to demolish or convert rental apartments of six or more units to non-rental housing. If the rental vacancy rate is below 2.5 per cent, and has been so for two consecutive years, conversion is denied. The bylaw also protects apartments that have rents that exceed mid-range rents (according to the Canada Mortgage and Housing Corporation) at the time of applying for a permit.
“There is a bias against converting older rental stock to condominium because it’s perceived as a loss of affordable housing,” says Jason Birnboim, Vice-President of Toronto-based Beaux Properties. “Generally, (landlords) have to have particularly high rents and a majority of residents on board (to be able to proceed with conversion).”
As a result, co-ownership has become a viable alternative. In co-ownership, landlords sell off rental apartments one by one as they become available, resulting in a mix of owners and tenants within the same building. Eventually though, what materializes is a building that essentially mirrors a condominium – people who buy into this type of setup own their individual units. This isn’t to say there aren’t differences between the two. For instance, in a condo, owners have a percentage interest in common areas whereas in co-ownership, purchasers own a percentage of the entire building (by deed), including the common elements. As well, while condo owners receive individual tax bills, co-owners pay their share of property taxes as part of their monthly common expenses.
“While conversion is always the first option, the reason being there is a lot more conventional financing available at cheaper rates, co-ownership is still very attractive,” says Birnboim. “It’s a way to unlock value that is in excess of what it would be worth to … just sell a purpose-built multi-residential income property owing to the fact that people will pay a premium to own residential property versus renting property.”
|
| Additional V-Report Opinions: |
|
|