Air Space Parcels 101

As an owner in an air space development, understanding the details of the arrangement is extremely important. Being aware of what parts of the development are your responsibility to maintain and insure is a critical part of the ownership and management of a strata. A thorough understanding of potential exposures, usage rights and obligations for repair and costs is necessary for successful maintenance of any building subject to an air space parcel agreement. Insurance can help mitigate these risks, and is often a requirement as part of these arrangements.

In Vancouver, developers frequently aim to combine both residential and commercial space inside the same building. Often, this is seen in the form of grocery stores, offices, and other commercial spaces in the lower levels of a building while the upper levels are reserved for residential apartments or condominiums. An issue which often arises for developers looking to create this sort of a building is the creation of autonomy between the different zones (commercial and residential). One of the most popular ways of organizing mixed use buildings is to utilize an air space subdivision, which creates two separate legal parcels inside the same building. The air space subdivision can allow flexibility for both use and for long-term investment of the commercial parcel.

Typically, this arrangement works as follows: a strata plan is filed with respect only to the residential section of the building and only those owners will be members of the strata corporation. The commercial portion of the building is treated as a neighbour of the residential portion and, thus, not subject to the same rules, resolutions or bylaws. This can be an attractive option for developers who wish to sell strata lots in the residential portion of a mixed-use building while maintaining control of the commercial portion and avoiding the involvement of a strata corporation in their decision making process.

If air space parcels are being utilized in a mixed-use building, they will be outlined in the strata plan on the first page. Searching the common property register also turns up any buildings subject to air space parcel agreements. If such an agreement is in place, it must be disclosed in a statement from the developer who is marketing the sale of strata lots for residential use. Inside the agreement, typically, will be an identification of parties subject to the agreement, an identification of each individual parcel, the extent of rights of use and access, identification of obligations regarding costs, insurance and repair and maintenance.

Insurance and risk management are important components in an air space parcel arrangement. Failure to obtain the right insurance or failure to ensure the other party in the arrangement has the proper insurance could be disastrous. Not only is it important to understand your insurance responsibilities but insurance can also be used as a tool to transfer risk. CMW can help with both the review of the agreements and ensure that you are covered with a compliant insurance program.

Kevin Casey  CAIB
Client Executive, Vice President
CMW

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