Escaping the WTC
Condominiums: A Social Experiment
By Stephen Hynes

Presented to Archus, the UBC Architecture Student Society, February 24, 2006

What I am talking about here today is a very real and ongoing problem for me, that I am trying to make sense of, and that I need help with. I try to design buildings with the social agenda of encouraging or even creating urban communities that feel like friendly villages. And I am concerned that the kind of strata organizations prescribed by current law may undermine these efforts and represents significant obstacles to overcome. I want to describe in some detail where these organizations come from and how they operate today, before engaging you in a discussion about them.

There are two distinct topics in understanding the strata form or property ownership: equity and rules of association.

The concept of equity is a product of the history of the freehold lease, in which ownership and right of occupancy are separated. Freehold leases date back to the late eighteenth century in England and Europe . They were traditionally measured in multiples of a decade, running from ten to 50 years. As finance grew more sophisticated and mortgage debt became available to what we would now call the consumer market, the concept of freehold leases developed into an asset that could be pledged for debt financing.

This created an equity interest in property that becomes less valuable over time. As the expiration date approaches, the right of occupancy becomes less valuable to the leaseholder, and as the time approaches when ownership and right of occupancy are reunified, the value of the property increases for the freehold owner. This creates a problem for the lessee, who never participated in the capital appreciation of the property, and whose financial power and ability to negotiate with the freehold owner diminishes to zero. And nineteenth century English landlords were not famous for their unwillingness to take advantage of those of diminished means.

Horrors compounded over the next century, and were met with a variety of methods intended to protect the lessor, initially dealing with transitional rights and extending to much broader protections, varying profoundly within and between countries. The extremes are the relatively minimal protections, until very recently, afforded by English law to the effective expropriation of freeholder rights to apartments in 1940s New York . Leased units in buildings afflicted with this regime continue today to be “handed down” between generations with lease payments that do not meet maintenance expenses and taxes, and represent negative present value.

The expropriation of the freehold interests of landlords provided a powerful impetus for the creation of titled multiple ownership associations in the United States . Early residential associations, comparable to gated communities, represented primarily a method to create exclusionary rules of association that were intended to prevent racial integration. These associations developed into Common Interest Developments with the very different focus of allowing developers to provide individually titled apartments in large urban areas, where leaseholder protections and rent control made the development of traditional lease hold apartments impossible.

The acceptance of this form of title grew in core urban areas, fueled by important economic factors, such as easily developed land becoming scarcer and rising home construction costs. Interestingly, acceptance of what we call condominiums also appears to have been concurrent with increasingly large scale and highly uniform urban developments.

It is in the 1970s that Common Interest Developments started to become commonplace. The number of units represented in this way in the US rose from about 700,000 in 1970 to nearly 17 million in 1998. British Columbia was the first province in Canada to recognize this phenomenon with the 1966 introduction of the Condominium Act, and it now represents about half of all housing in Vancouver .

NEXT PAGE: What is a Strata Development?

 

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