Strata fees: How much is enough?
The Vancouver Sun
By Joanne Lee-Young
19 January 2016
Making sense of condominium strata fees — what is reasonable? what is too little? — is a growing challenge.
Lawyers, industry associations and owners are grappling with such
questions at a time when high real estate costs already mean scant
disposable income for most households.
“The short answer is that there is no specific place to look up whether
fees for a strata are sufficient,” says Veronica Franco, chair of the
strata property group at law firm Clark Wilson.
In B.C., strata councils are mandated to set aside 25 per cent of their
annual operating budget so they can deal with both regular and
unforeseen maintenance and repairs. But there is no penalty for not
having a contingency reserve fund (CRF), and a strata can exempt itself
from having one if 75 per cent of owners agree.
And this 25-per-cent amount is very low compared to strata reserve
funds in Ontario, where the average (Reserve Fund) is about three or four times the
annual budget, says Patrick Williams, a partner at Clark Wilson.
(I wonder where he got these figures from? This sounds very high. —CondoMadness)
In 2011, the B.C. government introduced so-called depreciation reports.
Strata councils are supposed to have these completed to provide an
outline of the timing and costs of future building or repair projects.
But the response has been lukewarm. It can cost as much as $20,000 to
have a depreciation report conducted, and once a timeline for future
repairs is set, it can bump up strata fees.
Of the ones that have been filed, “depreciation reports have
reconfirmed or acknowledged what bad shape some CRFs are in,” said
Williams.
He and others worry that without healthy contingency funds, stratas
have to rely on “special levies” to come up with money for maintenance
and unexpected expenses.
“It means owners have to raise cash in a short time or go out and borrow, or lose their units,” Williams said.
the anemic state of some CRFs.
If there are significant repairs needed and there isn’t enough money in
a contingency fund, and if less than 75 per cent of owners agree to a
special levy, there is legislation to order the repairs as long as 50
per cent of owners agree. This is a relatively new law and “we are
beginning to see three or four cases go through based on this,” said
Williams, adding it is a sign of the anemic state of some CRFs.
It is always hard to set aside money for reserve funds, but it usually
costs owners more to pay for repairs and maintenance via special
levies, said Tony Gioventu, executive director at the Condominium Home
Owners Association of B.C.
One owner in a building with 118 residential units recently wrote to
him asking for advice: “At 14 years old, our building now requires some
upgrades and significant maintenance. We have two problems though: We
have very little money in our contingency reserve fund, and we do not
have a depreciation report.
everyone
afraid of what might be in our report
“Here we are with no money, owners fighting against strata fee
increases to pay for maintenance, no depreciation report, and everyone
afraid of what might be in our report. So nothing is getting done. We
are very concerned about our investment and the special levies we could
be facing for our roof next year.”
Gioventu replied: “For some reason, strata owners seem to believe that
it will cost less for special levies than it will if the strata plans
for the long term. There is no evidence to support this, and
substantial anecdotal evidence to the contrary.”
“It’s always contentious if we want a significant raise in fees,” said
Scott Mackenzie, who heads the strata council at a condo tower on
Cambie Street. For his building, the strata fees work out to about 44
cents per square foot. Across the street, at another building, it’s
about 10 cents more.
a revolving door of
volunteers
He and others emphasize that when they compare such fees and
contingency fund contributions, some stratas just make the decision to
charge less in fees and rely more on special levies. He also points out
that buyers looking at past spending and forecasts for a sense of what
is ahead sometimes miss that stratas are staffed by a revolving door of
volunteers with some who are more “proactive and others more reactive”
when it comes to addressing maintenance and repairs.
Williams said: “You can talk to do some due diligence. You can talk to
property managers. There is no registry. No averages to (benchmark).
You get a sense of (what to pay) using your different life experiences.
If I saw a condo in Yaletown with 250 units and a CRF of $200,000, I
would be aghast.”
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