Commercial property

How BC law treats it

Ownership of commercial land in BC is registered in the land title system under the Land Title Act, RSBC 1996, c 250, which also records mortgages, leases, easements, statutory rights of way and restrictive covenants. A buyer's lawyer searches title and reviews every registered charge before completion. Commercial strata units are governed by the Strata Property Act, SBC 1998, c 43 and the strata corporation's bylaws. A buyer pays property transfer tax under the Property Transfer Tax Act, RSBC 1987, c 367 when the transfer is registered. Unlike most resale homes, the sale of commercial real property is generally subject to GST under the Excise Tax Act, RSC 1985, c E-15, and a buyer registered for GST usually self-assesses rather than paying the seller. Permitted uses, density and parking are set by municipal zoning bylaws under the Local Government Act, RSBC 2015, c 1 or, in Vancouver, the Vancouver Charter. A use that zoning does not allow cannot be licensed. Under the contaminated sites regime in the Environmental Management Act, SBC 2003, c 53, current and past owners and operators can be responsible for remediation costs, regardless of who caused the contamination, subject to limited exemptions. Commercial purchases are usually structured with an offer, conditions for due diligence (title, environmental reports, building condition, leases and estoppel certificates from tenants), and a contract of purchase and sale. Buyers may also buy the shares of a company that owns the property instead of the land itself, which changes the tax and liability picture.

What it means for your business

Commercial property is a capital decision with long tail risks. Contamination, zoning limits, problem tenants and registered charges can all reduce value or create liability after closing. Careful due diligence conditions, environmental reports and a review of existing leases protect buyers, and lenders will insist on them. Sellers and buyers should also plan the GST and property transfer tax treatment early, since it affects price and closing cash. Example: A Delta logistics company buys a warehouse after a Phase I environmental assessment flags a former fuel tank. It negotiates a price reduction and a seller indemnity for remediation before removing its conditions.

Risks and common mistakes

Removing due diligence conditions before receiving environmental and building reports. Assuming the existing zoning allows the buyer's intended use without checking the bylaw. Overlooking GST on the purchase price or failing to register to self-assess. Buying a tenanted building without reviewing the leases and obtaining tenant estoppel certificates. Ignoring registered easements, rights of way and covenants that limit development.