Strata Fees made simple
How do you know if your strata fees are enough ?
It’s a fact of life, buildings need maintenance and upgrades. Strata councils set aside money for these repairs in a special fund called a Contingency Reserve Fund or CRF. In B.C., strata must set aside 25 per cent of their annual operating budget for maintenance and repairs. As an owner you pay for repairs either through strata fees or special levies (also called special assessments). It costs less for owners to pay for repairs and maintenance through strata fees rather than through special levies. It is always unpopular to raise strata fees so some stratas decide to charge less in fees and more on special levies. Most stratas are underfunded and have to rely on special levies. Stratas are either proactive or reactive. The only way to tell is by carefully looking at their history.
What if there is NO Contingency Reserve Fund (CRF)?
There is no penalty for not having a CRF. A strata can decide not to have a CRF if 75 per cent of owners agree. Do not buy in a building that does not have a CRF. If repairs are needed and there isn’t enough money in a CRF, and if less than 75 per cent of owners agree to a special levy, there is a law to order repairs as long as 50 per cent of owners agree.
What is a Depreciation Report?
A Depreciation Report looks at each part of a building: roof, windows, elevators, hot water boiler, plumbing parkade and heating systems, Then it analyzes the expected life span, the current condition, and future requirements.
A strata depreciation report includes:
- an on-site inspection and inventory of common property and building systems
- a schedule of anticipated maintenance, repairs and replacement costs
- a forecast for how the CRF should be funded
There are good and bad Depreciation Reports. The better ones are done by engineers. Engineers get in trouble if they underestimate an expense so will often overestimate a building expense. Sometimes a strata council may decide against a deprecation report because it knows the contents could turn off potential buyers. Sometimes a bank may demand to see a depreciation report before it will allow a mortgage.
What if there is NO Depreciation Report?
Strata councils can decide not to have a depreciation report with a 75 per cent vote against. Such a vote must be taken every 18 months Depreciation reports must be renewed every three years. Avoid buying in a building that does not have a Depreciation Report.
Why are strata fees in new buildings so low?
Developers make fees low to make their prices look more attractive. It takes time before a new building is fully occupied. You can expect strata fees in new buildings to increase significantly. A Depreciation Report for a new building should be completed by 6 monthes after the second annual general meeting.