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People gather a sell items in an open street market outside The Regent Hotel in Vancouver, British Columbia, Wednesday, July 10, 2019.

Rafal Gerszak/The Globe and Mail

City of Vancouver staff have recommended that council expropriate two dilapidated hotels on the Downtown Eastside and offer the owners $1 for each of the buildings, underscoring the dire condition of the properties and setting the stage for a possible court challenge from the owners.

The Balmoral and Regent hotels once housed hundreds of low-income residents, but both were ordered closed – the Balmoral in 2017 and the Regent in 2018 – over serious health and safety violations, concerns that had been flagged to the city for years. Before they were ordered closed, both buildings had assessed values of more than $10-million.

The recommendation is in a staff report released on Thursday before a council meeting on Nov. 6 at which municipal politicians will vote on a motion to expropriate the buildings. The city announced its plan to expropriate more than a year ago, in July, 2018, so that the sites would remain as low-cost housing.

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Under the Expropriation Act, the owners would have one year to file a court claim for increased compensation.

The report includes an appraisal from consulting firm CWPC Property Consultants Ltd. that concludes the costs of renovating or demolishing the buildings would be prohibitive, with both scenarios resulting in “negative values.” However, as it would not be possible to pay the owners less than zero, the report recommended the figure of $1 each.

The consultant said the buildings were old, in poor condition and that hazardous material would have to be removed.

Both buildings, which sit across from each other on East Hastings Street, have for decades provided low-cost housing to hundreds of tenants, while routinely violating city bylaws related to pests, plumbing and fire safety.

Pal Sahota, one of three siblings who control extensive property holdings that include apartment buildings and several single-room occupancy hotels, did not immediately respond to a request for comment.

Evan Cooke, a lawyer with Eyford Partners in Vancouver, said on Thursday in an e-mail that his firm represents the buildings’ owners, but that he had no comment.

Community advocate Wendy Pedersen welcomed the staff report, saying it sends a signal to the building owners and the community that landlords who flout the law should not be financially rewarded by getting a high value for their property.

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“It sends a message to slumlords that their behaviour is not acceptable – and it sends a message to the community that the city has their back," Ms. Pedersen said, adding that she hopes the staff recommendation will help bring the buildings into city ownership and, ideally, back into the rental-housing market.

“We definitely can’t afford to keep the 325 units that the Regent and the Balmoral represent out of the Downtown Eastside housing market – we need them back," Ms. Pedersen said.

The staff report also recommends that council set aside $350,000 for each of the buildings to provide security systems and patrols.

The report also says the councillors have the option of abandoning the expropriation of one or both of the buildings.

CWPC said it is unclear how much the properties would be worth on the open market.

“It is uncertain as to what the current market value for the subject property is at the present time,” the report on the Balmoral said.

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“It may be reasonable to assume that a potential purchaser would pay $1 for the property with the intention to hold until ... improvements in the market make renovation economically feasible,” CWPC said.

“However, the holding costs, including property taxes and building insurance, risk and other considerations will likely deter most private market participants.”

B.C. Assessment lists the value of both the Regent and Balmoral at about $3.2-million as of July 1, 2018.

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