Situation · Owners
My building needs major repairs: fix, sell or sell as-is?
The BC Financial Services Authority (BCFSA) regulates real estate services in BC. A capital repair is a big one-time cost, like a roof or a boiler, that keeps a building working. Whether to fix it before selling often comes down to one question: might it add more to the price than it costs? Either way, BCFSA says sellers must disclose known material latent defects.
For: Owners
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Plain-English definitions with BC sources, from the encyclopedia:
General information only. This page is not legal, tax, accounting or financial advice, and it isn’t an opinion on your situation. Laws, rates and figures change, and examples are illustrative. Get advice from a lawyer, accountant or other qualified professional before you act. Reading this page doesn’t create an agency or client relationship. Cam Appleton is a Commercial Real Estate Agent licensed by the BC Financial Services Authority (BCFSA RE611549) with Coldwell Banker Prestige Realty. Terms and disclaimer.
Get the facts first
Get the number first. A real quote is usually more useful than a guess, for you and for the buyer. Get a building condition assessment or contractor quotes, how long the work takes, and what the building is worth fixed vs as-is.
Your three paths
| Path | When it fits | Watch for |
|---|---|---|
| Fix, then sell | The repair adds more value than it costs | Delays and cost overruns |
| Sell as-is | You don’t want the project or the risk | Buyers price in the unknown |
| Fix and hold | You plan to keep the building | Cash flow while the work happens |
Buyers tend to price risk, so an unknown repair may cost you more than a known one. Buyers who like a project are covered in buying distressed property.
Can leases recover it?
Some leases let you recover part of a capital cost, often spread over time, and many don’t. Have your lawyer check each lease before you count on it. See triple net leases.
Disclosure
BCFSA’s consumer page says a material latent defect includes a hidden defect that makes the property dangerous, unfit for its purpose, costly to fix, or lacking required permits. Under BCFSA’s guidelines, the seller’s agent must disclose known material latent defects in writing before an agreement is signed. The consumer page is written for homes, and the guideline is written for licensees, so ask your lawyer how disclosure applies to your sale. Buyers will run their own due diligence too.
How buyers will treat the repair
- Buyers subtract repairs, often generously
- Expect a buyer to take the cost of short-term repairs off the price. Your own quotes mean the number is yours, not theirs.
- Raise the hard stuff early
- A known repair raised up front with a quote is a negotiation. Found in due diligence, it can become a price cut or a dead deal.
- Keep a record of what you handed over
- Give buyers the reports and keep a record of what you gave and when.
- Who is it worth the most to?
- A building that needs work may be worth more to a builder or developer than to an investor. Matching the property to the buyer matters.
- Check who the lease makes pay
- In BC commercial leases the landlord’s repair duties generally come from the lease itself rather than being implied, so reading each lease before planning the capital budget helps.
- Disclosure if you sell
- Under BCFSA’s guidelines, a seller’s agent has to disclose known material latent defects in writing.
Seller disclosure duties apply. Ask a lawyer, and check BCFSA guidance, on what has to be disclosed. Ask your accountant whether repairs are a capital or current expense.
Cam is a licensed real estate agent, not a lawyer or accountant, so take the legal and tax questions to them.
Deciding
Put the repair cost, the value fixed and the value as-is side by side. Sell or hold covers the rest.
Common mistakes
- Getting one quote and treating it as the cost.
- Assuming every lease lets you recover the repair from tenants.
- Waiting until the repair becomes an emergency.
- Not disclosing a known problem to a buyer.
Building condition, CapEx, and the price
A building condition assessment (BCA) turns “the roof looks tired” into a capital expenditure (CapEx) schedule. Buyers and lenders will impute those reserves even if you have been patching year to year.
Separate true repairs from upgrades. Like-for-like replacement is often treated as a repair in lease recoveries; a bigger upgrade may be capital. On a sale, the honest move is to show the report, cost the near-term items, and adjust the ask—or fix the worst items before listing.
If you will finance work, let the lender order the property condition report when you can, so you are not paying twice for a report they will not rely on.
Questions people ask
Should I fix the building before selling?
It depends. Some owners fix first when the repair may add more to the price than it costs and they have the time and cash. Get quotes, and talk to your advisers.
Will buyers discount repairs?
Buyers often price in the risk, and an unknown cost may get a bigger discount than a quoted one.
Do I have to disclose known problems?
BCFSA says known material latent defects have to be disclosed. Questions for your lawyer: Is this a material latent defect? How should it be disclosed?
In practice
How I help with a building that needs major repairs
This page is for you if your building needs a roof, mechanical, seismic or envelope work you weren't planning for.
- Happy to help you understand which repair costs your leases let you recover from tenants and which you'll carry.
- We can compare repairing and holding with selling as is, with the repair cost priced in.
- I’ll connect you with inspectors and contractors for the reports a buyer or lender will ask for.
What to watch for
- Buyers will budget for a building condition report and price in what it finds.
- Some leases exclude capital repairs from operating costs.
- Delaying work can turn a repair into a replacement.
The steps, in order
- Get a building condition report so you know the real scope.
- Get contractor bids.
- Decide on fix-and-hold or sell, with the numbers side by side.
Good questions to ask
- Can any of this be recovered through operating costs?
- How will a buyer price this?
- What's urgent and what can wait?
Lease and property law has BC-specific wrinkles, so for anything legal, check with a BC real estate lawyer before you rely on it. This page is general information, not legal, tax or financial advice. Cam Appleton is a licensed real estate representative with Coldwell Banker Prestige Realty.
Next step
Big repair coming?
Send me the quotes. I’ll give you an opinion of value fixed and as-is, so you can weigh the decision with your advisers.
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