This is a very recent change!!!
I found this very strange and having been in the industry for many years I decided to find out why. In the past these were not an issue.
Some background on these types of properties. Although strata duplexes are not rare, they are not abundant. I have seen some strata four-plexes as well in the past. As these complexes are small (usually only 2 owners) many do not follow the rules and regulations of the B.C. strata property act (holding meetings, having bylaws, collecting monthly strata fees, etc.). This is called a “non-conforming strata”. Why would they when there are only such a small number of owners? The owners would just have an informal agreement to do what needs to be done.
Apparently, this is the problem and has caused the recent change by the insurers. With no “formal” structure I was told there have been instances of “litigation” between owners in a few complexes. Ultimately this involved the lender and thus the insurers. The insurers do not want to be involved in such incidences and thus are now not insuring such properties.
This is a big problem as this means a minimum of 20% down if you wish to purchase such a property. Ultimately, our client could not make the purchase. They were upset and so were the real estate professionals involved.
I have been told by one insurer that they are working with their legal department to see if there is a remedy and get these properties okayed again. However, in the meantime the only way they will approve loans on such properties is if they fully comply with the B.C. strata property act. This mean to hold meetings, keep minutes, implement bylaws, etc.
Thus far I am not aware of any lenders not approving mortgages on these properties if the client has more than 20% down (bypassing the insurance regulations).
I would love to hear your comments. Are you planning to buy or sell one of these properties? Have you encountered this problem?