Land assembly: Vancouver’s answer to the question of supply
Jul 5th, 2021 | By FCT
What is land assembly?
Land assembly is the joining of multiple adjacent parcels of land to form a single site that can then be used to construct a larger property. Due to the increasing scarcity of land in urban areas, land assemblies have become more and more popular with developers looking to build higher and bigger properties like:
- residential subdivisions
- high rises
- retail complexes
- government use
Why is land assembly so common in Vancouver?
One of the main reasons developers opt for a land assembly—and the extra spend that entails—is scarcity of land in valuable areas to develop. The Greater Vancouver Area is growing while effectively sandwiched between the ocean and the mountains—there simply isn’t anywhere to go.
But Vancouver’s residential core of single detached family homes leaves the option of assembled properties easing the city’s housing supply shortage, and that’s where many developers are looking. While Central Vancouver is already built up with large projects, Kitsilano and much of the West End offer ideal opportunities for land assembly thanks to their regular grid shapes of single-family houses.
How does land assembly work?
Either a developer approaches the owners in the targeted block and makes each of them an offer, often well above their property’s value; or a group of property owners will agree to market all their properties together. Because land price is at a premium in cities, property owners with houses grouped together can command much higher prices than they could by selling individually. Any contiguous group of properties can become part of a land assembly, but most often land assemblies include properties along or near a major transport conduit.
The properties involved in a land assembly deal aren’t always treated equally, depending on the circumstances and groups involved. The sale price could be an equal share for each owner, or might be per square foot; and whether a property would form a corner of the new assembled property can be a factor in sale price.
Can you get left out of a land assembly deal?
Yes. While the property owners in a land assembly deal command their high sale price because the developer can only use the land if they have several adjacent properties, the owners’ selling power has limits. It’s not unheard of for property owners to refuse to join the land assembly or to hold out too long for a better deal.
Land assembly deals take a long time, but once the developer has a few properties together, pressure starts mounting on their end to start construction because of how much they’ve already spent. Delays with a single holdout in the group of owners can motivate the developer to change their plans for the site, simply building around the property instead of waiting for a deal on it.
What challenges does a land assembly face?
A land assembly has many of the same vulnerabilities as any property purchase, with the additional challenge of dealing with multiple owners. Issues that can arise include:
- errors in the legal descriptions
- gaps between the lots being assembled
- encroachments from lots not being purchased
- old easements or rights of way
- old undischarged mortgages or leases
- orphaned laneways
Developers and lenders alike would be well served to invest in insuring the assembled property’s title. On top of the extensive protection a title insurance policy offers, it offers some surprising benefits that can make the land assembly purchase much easier.
- For developers, it speeds up and simplifies the title search process, while offering more protection than a notary or lawyer’s opinion. It also protects against fraud and survey defects*, which can crop up more often in deals involving several properties, and offers gap coverage for registrations.
- For lenders, it protects against super priority liens from the CRA in case the corporation assembling the land goes into default. The CRA can take funds out of sale proceeds to cover back taxes before the lender can start recouping their losses—FCT’s title insurance policies can cover that amount for 10 years after the mortgage is discharged.
Talk with the experts
FCT has a highly experienced team of underwriters who can help you with complex deals. Before proceeding with a land assembly purchase, see how you can get more protection.
*Post-policy fraud and survey coverage is not applicable to vacant land.
Most commercial title insurance policies are provided jointly by FCT Insurance Company Ltd. and First American Title Insurance Company, with the remainder being solely provided by FCT Insurance Company Ltd. Reference should be made to policy documents to confirm the insurer on any individual transaction. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice.
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