Strata myths debunked

As both a condo owner and council member, I have learnt a lot on strata living over the last couple of years. I  noticed people definitely have some misconceptions about condo living. Some of them could be very costly!

  • The strata’s insurance covers everything. This is by far the biggest myth around. Your belongings and furniture will never be covered, as well as any improvements you or a previous owner made. Most corporations also have a deductible to lower premiums. If you cause significant damage to common property, strata has the right to charge the deductible back to you. Take your building’s insurance document to your own insurance broker, so that you can have the adequate coverage.
  • Strata will fix everything. This is very unlikely. Both owner and strata responsibilities are spelled out in the by-laws. Check them! Usually, strata is only responsible for maintaining and repairing common property, and limited common property to a certain extent.
  • It is my unit and I can do whatever I want to! This line of thinking could be very costly too. The key work in strata living is “communal”. There are by-laws and rules you must follow. You will also need authorization from Council if you want to do any renovations such as changing the floors or taking a wall down. You will also need approval if what you want to do impacts the common property. Failure to do so could result in strata asking you to restore the property to its original state.
  • My unit has 2 parking stalls and I can rent them out. Do you have written confirmation from strata? Have you checked the by-laws? Since 2014, Form B requires all strata corporations to disclose parking and storage allocation.
  • I can rent my unit. Council will give me an exemption, if it turns out I couldn’t rent it. Once again, check your by-laws for rental restrictions. An illegal rental is very costly. Strata has the right to fine you on a weekly basis until your tenants move out. Council has no authority to give any exemption, other than the one(s) stated in the by-laws.
  • If strata receives a settlement from a lawsuit or if a special levy has a surplus, I will receive a refund, even if I sold my unit. Reimbursements are made to the current owner of the unit.
  • I am selling my unit; I don’t have to pay for this special levy. Yes, you do! Levies always have a due date. You could be charged interests and strata can also put a lien on your unit as well as start foreclosure proceedings. If you sell before the due date, the levy is payable at the time of conveyance.
  • Of course, pets are allowed. Have you checked the by-laws?
  • Of course, there is no age restriction. Repeat: have you checked the by-laws?

When it comes to strata living  never assume anything or go by hearsay. Always get everything in writing and check the current by-laws. It will save you a lot of headaches…and money.

Numbers to look at when condo-buying

Condo-living has become increasingly popular in Vancouver. It is not surprising when the price of a single, detached home is close to $1 million in the city.

If, like many, buying a condo is your only option, you need to look at more than the contents of the minutes when making a decision. In British Columbia, strata corporations are under no obligation to give more than 2 years of minutes to prospective buyers. In my (humble) opinion, this time frame is not enough to get a real sense of a building’s history.

For being a council member in my strata, I can also tell you a number of items never make their way into the minutes….

Here are a few financial pointers:

  • Strata fees: low strata fees are never a good thing, including in newer buildings. They need to reflect the actual cost of maintaining the building, as well as future repairs. The fees should be around 30 cents per condo square feet outside of Downtown Vancouver, and around 45 cents Downtown and in North/West Vancouver.

 

  •  Strata fees, part 2: Each month, a portion of the strata fees is transferred into the Contingency Reserve Fund or CRF. The CRF is a savings account for bigger repairs such as replacing the roof. Check the amount that is transferred. If it is too low, it is a red flag. It means owners are not planning ahead.

 

  • Financial statements-deficit or surplus: Strata financial statements are pretty basic, and you don’t need to be an Accountant to understand them. However, you need to look at the number at the bottom of the page, after all income and expenses have been entered. If it is negative, the strata is in deficit, meaning there were more expenses than income. Obviously not an ideal situation.

 

  • Financial statements-Accounts Receivable: this account is what owners owe to the building. The amount needs to be as low as possible.

 

  • Financial statements- CRF account: This account has 2 components, the trust accounts and the reserve. The trust accounts held monies collected for special projects and major repairs. The reserve is what you need to look at, as it indicates the available savings. The amount should be as high as possible. If it is not, check if major repairs have recently been done, or look for a major expenditure. If it is not the case, it is an indication of poor planning and management.

 

As an Accountant, I believe it is way more difficult to manipulate the numbers than it is to manipulate the minutes of a strata corporation. When it comes to condominium, numbers (usually) don’t lie.