They look like an incredible deal. But what's the catch?

It’s Friday night, so you know what that means: get that music blasting (cool jazz, because you can’t figure out how to get Alexa to play anything else for you), slip into your best Korean snail-mucus mask and open up an incognito tab for an indulgent night of browsing real estate you can’t afford. But things soon get more heated than you bargained for: there’s a 10-bedroom mansion with an in-house bidet network listed for $400,000.

A quick series of calculations reveals you spent more on SoulCycle classes this month than you would have on monthly mortgage payments. Have you beat the system?! You’re flush with excitement, or maybe that’s just an allergic reaction to the snail mask—but either way, this is a once-in-a-lifetime opportunity. 

But of course there’s a catch, like when someone gives you a smart-home device for free and then you discover it’s just a cool-jazz machine that also spies on you. This mansion is a leasehold property, so yes, the physical house will be all yours, but you’ll have to lease the land it’s on, typically from the city or a First Nation band and usually found in the West End, UBC’s Endowment Lands or False Creek.

Most of the time, leased land is rented out for 99-year loans, and often the leasing fee is baked right into the property cost, though sometimes you’ll pay a monthly fee. “Ninety-nine years?!” you might say. “Our AI overlords, led by Alexa, will have turned humans into a nutritious paste by the time I get to that expiry date!” If you’re getting that leasehold property fresh, yes, you’ll likely be with that home till death do you part, but if a leasehold property has been bought and sold during the course of the original lease, you might find yourself with a place closer to its expiry date... and you don’t really want to be anywhere near it come renegotiation time. And it turns out land prices typically go up over the course of 99 years.

Even a master negotiator like me, who can sometimes get Alexa to play HOT jazz if I threaten to put her in the microwave, would have trouble finding an edge with a landowner in this sort of situation. You want it, they’ve got it, and also inflation and land value has gone up approximately 4,000 percent over the course of a century. When the Musqueam Band raised payments for their west-side properties in the ’90s, the average monthly payment jumped from $400 to $2,000. So you’ll want to ditch it before that, but who wants a plot of land that’s about to become more expensive? There’s also a chance that your lease might not be renewed at all.

That’s why you’re going to find fire-sale pricing on leasehold properties about to enter renegotiation. Buying a leasehold property probably works out to be a better deal than paying rent in the long run, but these are not great investment properties (banks usually don’t finance leaseholds) unless you want to haul the house itself to somewhere you can own the land, like a series of kickboards you’ve lashed together into a floating mass in your mom’s pool, or Chilliwack.

Got a question for City Informer? stacey.mclachlan@vanmag.com