Leasehold

How BC law treats it

A leasehold gives the tenant possession for a defined term, while the landlord keeps the freehold and a reversionary interest, meaning the right to retake the land when the lease ends. There is no standard term. Commercial leaseholds are often 5 to 10 years with renewals; ground leases and prepaid leaseholds can run 60 to 99 years or more, and arise mainly on leasehold strata, institutional land such as university lands, municipal land and First Nations reserve land. Leaseholds of more than three years can be registered against the landlord's title under the Land Title Act, which protects the tenant against later buyers and charge holders. A registered long-term leasehold can be assigned and mortgaged, although lenders look closely at the remaining term, the rent and the landlord's consent rights. A leasehold strata plan is governed by Part 14 of the Strata Property Act, in addition to the ground lease. Commercial leaseholds are governed by the lease, the common law, the Commercial Tenancy Act and the Land Title Act. The Residential Tenancy Act does not govern commercial leaseholds. A leasehold is an estate in land; leases of equipment or software are personal property or licence arrangements, often subject to the Personal Property Security Act. Long leases can also attract property transfer tax: under the Property Transfer Tax Act, a lease or lease extension giving rights of occupation for more than 30 years in total, counting renewal options, is a taxable transaction, so the tax position should be checked before a long lease is granted, extended or assigned.

What it means for your business

Leaseholds are common in BC commercial real estate, from shopping centre units to development sites on ground leases. Their value falls as the remaining term shortens, which affects financing, resale price and redevelopment plans. Buyers of a leasehold business or strata unit need to understand the remaining term, rent reviews and what happens at expiry, when improvements usually revert to the landlord. Example: A developer leases municipal land in Vancouver for 99 years under a ground lease, builds a leasehold strata building and sells prepaid units. When the term ends, the land and building revert to the city unless the lease is extended.

Risks and common mistakes

Assuming leaseholds in BC are usually 99 years. Buying a leasehold strata unit without checking the remaining term and ground lease terms. Using the word leasehold for equipment or software leases. Failing to register a long-term lease on title. Overlooking property transfer tax on the grant or assignment of a long lease.