Land Lease in BC

While the predominant type of homeownership in Canada is freehold ownership, where the homeowner owns the home and the land on which it sits, leasehold ownership structures are also prevalent in Canada. This kind of ownership structure exists in a very small fraction, and the homeowners in such structures own the dwelling unit but lease the land on which it sits.

The landlord of such leaseholds can be individuals, organizations, governments, institutions, or any other entities. The leases are set for a term length that can often be renewed. While buying a house on leased land in BC might be cheaper than buying a freehold house, the process may be more complicated and may require expert guidance. Before buying a leasehold home, one may seek legal consultation with a lawyer who has knowledge of leasehold matters or talks with a realtor who deals in leasehold. You will have to consider many factors, such as time left on the lease, available funding options and mortgage rates, and associated fees and costs.

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An alternative to the traditional homeownership structure, land lease housing allows buyers to buy just the home without having to buy the land under it. This can significantly reduce the upfront cost, but there are many other factors that one should consider before buying a leasehold property.

• The resident owns the property but not the land it's on. The land can be owned by individuals, companies, first nations communities, institutions, or governments.
• The resident typically pays a monthly rent to the landowner for the entire duration of the lease. Some leases are prepaid upfront, in which case rent isn’t required to be paid.
• The price of leasehold properties is usually lower than freehold ones as the land is not sold.
• If the property is part of a planned community, you may have to pay an HOA fee on top of the rent.
• Getting a mortgage from traditional lenders, such as banks, for a leasehold property may be difficult, and alternative mortgage lenders may charge higher rates than for freehold properties.
• A surrender clause may require you to surrender all structures built on the land when the lease expires.
• If the conditions of the lease are not met, the leaseholder may be evicted.
• Leases are registered at the land titles registry.

There are four main types of land available for leasehold in British Columbia.

• 1. Privately Owned Land: Individuals and private organizations can lease land owned by them for a long term through a residential lease agreement. Some key facts about such leases are:
  • Such leases are filed in the land registry of BC.
  • The lease tenure in such cases is usually 99 years.
  • Leases are usually transferable; however, the transfer often requires the landlord’s consent.
• 2. Public Land: Land owned by the provincial or federal government is called crown land or public land. 94% of the land in BC is owned and controlled by the BC government.
  • Such lands can be leased for residential, recreational, industrial, research, and other purposes.
  • The application to lease should be made with the BC Ministry of Forests, Lands, Natural Resource Operations, and Rural Development (FLNRORD).
  • The lease term length varies depending on the intended use of the land.
  • Residential leases normally have a term length of up to 30 years.

1. 3. Institutional Land: Public institutions such as universities and municipalities also lease out land owned by them. For example, the land owned by the University of British Columbia (UBC) is leased to generate revenue from land development. The UBC Properties Trust is a leaseholder of UBC lands that oversees the rental housing and development activities on the lands.
   • The lease term length is usually 99 years.
   • The leases are registered in the BC land registry.
2. 4. First Nations Owned Land: These are lands owned by the federal government but reserved for the First Nations. The First Nations have the right to occupy and lease these lands.
   • The lease may be registered in the BC land titles registry, the First Nations Land Registry, or both.
   • Many cottages in Canada are built on lands reserved for First Nations.

While residential leaseholds aren’t very common in British Columbia, you may occasionally come across leasehold homes available for sale. Leasehold properties can be bought and sold at the end of each contract, and the new leaseholder earns the right to occupation of the property. The common characteristics of a long-term residential lease in BC are as follows:

• A long-term residential lease term is usually for 99 years.
• The leaseholder is usually responsible for paying the property taxes, while they also pay a monthly fee to the landlord for the building’s maintenance and repair.
• The lease can be sold on a real estate market; however, the landlord may reserve some rights in these matters.
• The Residential Tenancy Act or the Strata Property Act doesn’t govern these leases.

The British Columbia government offers an opportunity for individuals and developers to lease crown land for permanent residential development as a part of the Residential Program. Crown land may also be sold for residential purposes in some cases. The land may be made available in urban as well as rural areas through a public tender or public lot draw. There are certain circumstances under which crown land may be made available by application:

• In remote areas where the privately available land cannot meet the residential sector’s requirement, crown land may be available for lease.
• Some land is required for residential development to support industries or commercial activities.

Notably, the BC government no longer accepts applications for leasing shorelands that haven’t been leased previously; however, existing shoreland residential lots may be available for purchase on the Crown land sales inventory. Lease tenure is restricted to existing urban and rural residential lots that do not conform to the subdivision standards of the Land Title Act, as well as to lots located within an existing subdivision where neighboring lots have been approved for leasing and infilling is taking place.

The lease or license of occupation tenure depends on the intended use of the land, the required length of tenure, and the available services and access. To lease crown land for residential purposes, you must pay an annual rent to the government. The rent varies depending on the lease type. The common types of leases, their term lengths, and costs are as follows:

The minimum annual rent for crown land is $500. Some crown land may be available for sale for residential use and is sold at a fair market value (FMV).

Direct applications can be made for occupying crown land in remote areas for ancillary uses, thermal loops, and in rare cases, float homes. The application package should at least include:

• The application form
• At least two site maps
• The management plan
• The application checklist

Buying a property along with leasing the land where its located provides the lessee with the benefit of exclusive use of the property without the obligation to purchase the land. In addition, leasehold arrangements can provide landowners with the opportunity to earn income from lands that cannot be sold, such as property belonging to institutions or indigenous communities. Leasehold properties can be an affordable choice for those seeking to downsize in retirement or for first-time homebuyers looking to enter the market. Nonetheless, potential buyers of leasehold properties should thoughtfully evaluate factors such as the remaining time on the lease, additional fees that may arise, and the terms of any surrender clauses.