Thursday, June 23, 2011

Parking leases in a nutshell

The manner in which the Developer designates the parking area on a strata plan depends on the structure of the development. The general rules of thumb are as follows:


1) If the project is solely residential and the Developer intends to sell all of the units, it’s most common for the Developer to designate the parking garage as CP, but the individual stalls as LCP such that each strata lot has at least one parking stall designated for its exclusive use.

2) In this scenario, the Developer is required to provide the surveyor with a list of every parking stall that is to be designated to each particular strata lot, and those LCP numbers are included on the strata plan filed in the LTO to raise titles in advance of the first sale. To do this, the Developer must be able to determine in advance of sales, what it wants to do with all the stalls – ie. that it does not intend to retain a handful of stalls for its own use to designate them as a marketing tactic to bigger strata lots in the future, if the sales don’t go well or to sell them to potential buyers (perhaps owners of commercial strata lots close by in the complex etc.) down the road. Once the strata plan is filed and the first sale closes, the Developer has limited means to amend the strata plan without a ¾ vote of the strata corporation.

3) This method ties the Developer’s hands and is generally mostly seen in residential projects only. LCP stalls are designated permanently on the strata plan for the use of the strata lot specified and thus cannot be sold to other owners or outside parties – they run with the sale of the unit, unless a strata plan is permanently amended to change the LCP designation by approval of the strata corporation and an amended strata plan is filed in the LTO (which is rare).


1) In a project that’s mixed residential and commercial, it’s advantageous for the Developer to designate the parking garage and all stalls as CP. Prior to the first sale (as Developer controls strata corporation in the period between the Strata plan filing and the first sale) the Developer enter into a lease agreement with a company controlled by the Developer and named Random Parking Co. (the Tenant). The Developer leases all of the stalls to the Tenant and causes the Tenant to assign each particular stall to the first purchasers, who then assign the CP stall/storage locker to the new buyer of the strata lot upon sale. A term of the lease provides that once all the strata lots are sold the Developer causes the Strata Corporation to assume the rights and obligations of the Developer, and thus the Strata’s job is to maintain the Parking Assignments (and the register of which strata lots were initially leased which stalls – usually a binder with a list) when the units are sold over and over again, and to ensure the Assignments are kept in order etc.

2) The major advantage to this method is that the Developer doesn’t need to tie themselves to a list of which stalls are designated to which units until each strata lot is sold, which can be long after the strata plan is filed.

3) Thus the Common Property area of the parking garage and all of the stalls become SUBJECT TO the lease arrangement, meaning the owners do own the common property as tenants in common, but that ownership right is subject to any contract in place, and therefore subject to the lease agreement and terms of it.

4) The assignment of the lease from the Tenant to each owner grants the owners the exclusive contractual right to use and occupy that particular stall and storage locker. Because the contractual right to use the stall is granted to the owner of the strata lot – that owner could assign their right to use and occupy the stall and locker to another owner in the building by entering into an assignment (and taking payment for the sale of the leased stall/locker) – BUT this would mean that when the strata lot is sold, the owner must advise the new buyer that the unit does not come with a stall or locker - - the Strata Corporation should carefully maintain the Assignment Registry to verify if a stall and locker has not been previously assigned by the owner of a pending sale.

5) Usually there is a term in the lease that restricts transfer so that owners are only permitted to assign the stall/locker to another owner in the building – sometimes though the Lease expressly provides that assignments can be made to owners outside the development (ie. anyone who is willing to pay the developer $20,000 for a stall.. developers commonly reserve a handful of CP stalls for themselves - ie. remember they are the Tenant under the Lease (eg. Onni Parking Co.) so they use this method to be able to sell stalls to neighbouring retailers long after they’ve sold out the strata lots and lost control of the strata corporation.

6) In summary by incorporating a company before the strata plan is filed and entering into this lease arrangement which the Strata Corporation later assumes by stepping into position of “Developer/Landlord” once all units are sold.. the Developer gets out of being the Landlord and having to administer the lease in the future (first they assign all the stalls to the Tenant (themselves) and then causes Tenant to assign the ones it wants to provide to strata lots for new buyers - at least one per strata lot is mandatory by City bylaw) BUT Developer gets to remain as the parking Tenant which allows them to retain control over the stalls they want to keep to later profit from them.

7) Normally in mixed developments there’s a provision the developer has added to ensure that assignment of stalls/lockers can be made to outside parties who are not owners in the strata plan.

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