All housing is unique. Strata housing offers so many benefits to your lifestyle, so don’t get disheartened by the complex nature of the documentation, insurance, and fees. To be able to offer such a great product, Strata Corporations must balance management and maintenance carefully and most do very well in Vancouver.
Soriah is a Strata Superstar and has bought and sold hundreds for her happy clients over the years. So, with all this knowledge it was only right to put together a brief overview of the most important things to look out for when assessing a Strata unit, enjoy!
What is a Strata Corporation?
A Strata corporation is a legal entity that has been formed to divide a building(s) and/or a piece of land into separate parts so that individuals can own their own and common components. Stratas are also formed so that there is a central vehicle with the responsibility to manage and maintain common property and assets on behalf of all of the owners. The BC Real Estate Association (BCREA) notes that there are more than 30,000 Stratas in BC with approximately 1.5 million residents.
The legal incorporation of the Strata means it acts much like a business; it can be sued, enter into contracts and hire staff. The roles and responsibilities of Strata corporations as governed in the Strata Property Act include things such as upkeep, maintenance, repairs, and general aesthetic of the whole Strata property. To be able to do all of this, Strata owners (individuals who own a property, such as a condo, within the Strata) are required to pay monthly Strata fees.
What are the most important documents?
There are a few key things to find within a stack of documents when it comes to Strata unit ownership. Luckily, this isn’t Soriah’s first rodeo, so as well as all of our help in picking these things out, here is a list of the key documents to gather when assessing a unit within a Strata Corporation;
Form B: The financial report for your unit specifically. It lays out the specific details of the unit as well as any outstanding fees owed to the Strata by the current owner.
Depreciation Report: The depreciation report tells strata lot owners how much repair and replacement work is required, what anticipated approximate costs are, and when the costs will likely occur.
Strata Bylaws: These are the rules that each owner and resident in the building(s) must comply with.
Engineering Report: After 2, 5, and 10 years following completion of the complex, Strata Corporations must hire an external engineering consultant to assess any issues that could be covered by their warranty.
Strata Minutes, AGM Minutes, and Special General Meeting Minutes: It is worth looking back through meeting documentation to spot whether any issues out of the ordinary were discussed.
Insurance Note: This covers the details of the Strata’s insurance policy. Most Strata Corporations will be insured to cover the building structure, common areas, and original fixtures – the contents of your individual unit, however, are usually not covered.
Strata Plan: The floorplan and map view of the complex, its units, and common areas.
What information should I look for?
We get it – that is a long list of documents and plenty of homework. If you train your eye to pick out a few key things you can really assess whether the Strata is well managed, or if there are things of concern on the horizon.
All information about the particulars of your unit: In the Form B and Strata Plan, look for the unit’s maintenance fees, any parking or storage, and property square footage. Each of these things should match the listing.
Costs that could affect you in the future: A special levy is money collected from strata lot owners for a specific purpose and for shared common expenses. It is money collected from the strata lot owner in addition to the monthly strata fee and must be approved by ¾ of the Strata Corporation owners. Evidence of these votes can be found in AGM Minutes, Strata Minutes, or Special General Meeting Minutes.
The current and future state of the building: Checking through the Depreciation Report (and checking that it is up to date) is a good start. Your lender may require access to this document too, so ask for one early. In the report, you should see evidence of future repair planning which may also need to be funded by Special Levies. Within Strata Minutes you should also find evidence of persistent problems that are discussed.
Rules that may affect your lifestyle: Read through the Strata Bylaws to spot any rules and regulations that might impact your lifestyle. Are pets allowed? Are guests allowed after certain times of the day? Can you smoke on your balcony? Checking through these items will ensure you find the right fit for you.
Clues that tell you if a Strata is well managed: A Strata operates like a business, so what would you look for in a new job? Clear communication? Well-managed finances? It is very much the luck of the draw when it comes to who’s managing a Strata. Just like managing a business, serving on a Strata council requires financial knowledge, asset management skills, and proactive communication to owners. By looking through the meeting minutes, you can get a sense of the regularity and thoroughness of the Strata Management meetings, as well as their proactivity and competency in managing issues.
Strata Insurance: We will give you an insight into the world of Strata insurance shortly, but be sure to understand what their policy covers and what the deductibles are and share these with your own insurer.
Should I be looking for a low Strata fee?
A high Strata fee isn’t necessarily a bad thing. Maintaining sufficient reserves to update and upgrade buildings is a key component of Strata budget management. The easiest way to manage personal risk and liability to the owners of Strata units is to have a well-forecasted reserve budget. Low Strata fees could signal that there is not a sufficient reserve fund being managed and with insurance and maintenance costs on the up, actively searching for a property with a low strata fee may no longer be prudent.
Why have fees been increasing?
There has been a well-documented increase in Strata fees across the province of BC and this appears to be a localised issue. Several factors are playing into the rising prices, including fewer insurers providing services to Stratas and poorly maintained buildings.
We find ourselves in quite a hard insurance market these days. Some analysts, such as Tony Gioventu, Executive Director of the Condominium Home Owners Association of BC, suggest that this, in part, can be seen as a fallout from ‘the leaky condo crisis.’ This was when a series of issues such as inadequate building design and inappropriate materials for our Vancouver climate culminated in a raft of buildings requiring expensive upgrades. Stratas and developers that did not make required amendments now see the cost of refurbishment quadruple, leaving insurers in today’s market hesitant to provide their services. With less competition and higher risks, the cost of building insurance has increased by up to 500% in some cases.
Add to this the fact that in reality condo insurance has been proportionately lower than detached housing for some time. Condos by nature are in close proximity, so you can understand how a problem, such as water damage, resulting in a claim could easily extend to multiple units. This extended compound risk for insurers is another reason for the high premiums.
What do I need to pay for?
In BC legislation – the Strata corporation insurers are responsible for the restoration. If a unit was flooded or burned out, the only thing a Strata corporation’s insurance would be responsible for would be the restoration of the original fixture. Within high-end buildings, the finishes and fixtures that include hardwood flooring and granite countertops are very expensive to replace, which in turn has a knock-on effect for Strata insurance liability.
BC legislation always allowed Strata corporations to charge back insurance deductibles to owners if the unit owners were responsible for a claim. Such instances could include unauthorised alterations to kitchen or bathroom works that ended up causing a flood.
We hope we have armed you with important information to confidently assess the merit of a Strata property and understand where your fees are going. Please reach out to us with any questions!