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Who absorbs the cost of CACs when a whole strata sells to a developer?

Question: When a strata “winds-up” and sells the property to a developer, which party generally absorbs the cost of the community amenity contribution assessed due to rezoning, the strata owners or the developer? We are currently undergoing this process and have been told by our realtors to expect 100% of our current assessment plus only 20-30% of the increased value created by rezoning due to the CAC.

Answer: That’s a good question and one that I’m sure lots of condo owners are pondering as they listen to pitches from developers, realtors and lawyers about the pros and cons of selling.

If the developer has any brains at all, it is the owners who pay. That’s because if the developer pays the owner the full price of the new, rezoned value of the land, the city’s attitude is “That’s your problem” when it comes to assessing how much in CACs should be “contributed.” Some buyers on Cambie Street did pay very high prices for some of the early lots that were redeveloped and then had a rude shock when they went to the city and were told that it was their problem if they overpaid for land.

In the later sales along Cambie, buyers smartened up and only paid, as you say, 20 or 30 per cent of the increased value, knowing that the city has a pretty standard rule that it will take 75 per cent of the land lift for community amenities.

Of course, the hard thing to figure out in all of this is what the land lift actually is (and therefore, what 20 to 30 per cent of that is). To tell you the truth, I’m not quite sure how that is worked out. Certainly, there have been disagreements between the city’s real-estate department (who calculates these things) and developers about that number.

  • Michael Geller

    This question raises a number of questions. Normally, I would expect the developer to agree with the strata owners on a price for their building, and then he/she would negotiate with the city. However, I also know that some deals are being structured subject to rezoning, in which case the amount of the CAC will affect the price that is most likely paid.

    What this question does reinforce is the need for the city to end the practice of determining CACs based on some presumed value at some time in the future, and established fixed, CACs calculated on a sq.ft. basis, which can be determined before the detailed planning and rezoning process advances. The city did this for Cambie street and while I thought the amount was excessive ($55 a foot when I last checked. That adds about $84,000 to the cost of a 1000 sq.ft. condo) but it is still better than the let’s make a deal approach where, the amount paid is dependent on which appraiser or real estate consultant is involved, how good a negotiator you are, and who’s in charge at City Hall!

  • Lysenko’s Nemesis

    Michael, if it’s $55 a foot how is that $84,000 on a 1,000 sq’ unit. Is that not $55,000? Where does the other $29,000 come in? Is that from the common strata areas and assets, like corridors, lobby, amenities, etc.?