How strata affects your finances and day-to-day living

By Cameron McNeill
April 26, 2018

During the hunt for your perfect home, one of the most crucial items to consider is strata and understanding how it will affect both your finances and day-to-day living. When you buy a condo or townhome, you’re investing in a strata corporation and the shared interests and liabilities of all the owners and occupants of that community. To protect yourself from any surprises down the road, one of the most important things you can do is to look into the details of the home’s specific strata agreement.

Plan for the Future

When joining a strata, one of the most vital things to understand is the two separate funds your strata fees are contributing to. In BC, every strata corporation must maintain two funds: an Operating Fund and a Contingency Reserve Fund (CRF). The Operating Fund manages regular up-keep costs that occur frequently during the year, such as building insurance, property manager fees, amenity upkeep and garbage collection. In some stratas, this may even include your utility payments.

By contrast, the CRF is saved to pay for larger expenses in the future like necessary lobby upgrades, a new roof or emergency repairs. Understanding how your strata handles their CRF will give you a greater amount of security in your new investment.

If buying resale, ensure that the existing CRF has a good amount of equity already built – not just a few thousand dollars. A low CRF should be a red flag, indicating that the strata may not be properly prepared for future unexpected repairs. Checking monthly strata meeting minutes prior to purchasing can warn you of any underlying problems.

Lower isn’t always better

Strata fees in Metro Vancouver can vary greatly depending on location, building size, amenities and utilities. While low strata fees may seem attractive, keep in mind that low fees are not always in your best interest. Namely, if strata fees are purposely being kept low and there is no plan in place to help grow your CRF, be prepared to save on your own in case a large upgrade of the building is needed (sometimes suddenly). Reasonable strata fees may help curb this by keeping the CRF healthy and by splitting the cost of large repairs between residents.

Finding your perfect fit

Beyond finances, some stratas may be a better fit for you than others. It’s wise to do the work to understand the stipulations your particular strata has in place. Before purchasing, always ensure you’ve read the bylaws of a strata, which might include limiting or prohibiting rentals, may have pre-established minimum age restrictions for occupancy, or may require pets to be pre-approved and registered with the strata council. Be aware of the details so you can protect yourself from surprise payments and restrictions and ensure that, as a homeowner, you are getting the best value from your new investment.

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About Cameron McNeill

Cameron McNeill is co-president of MLA Canada, a comprehensive real estate service provider in Canada. Partnering with residential developers, MLA Canada offers an unmatched level of expertise in advisory services, market intelligence, project marketing, sales, customer care and administration.

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