Spouse #1: I don’t know why we spend this $500 for strata fees. It feels so high. Where does it go? Would we be better off having a detached home?
Spouse #2: A lot of people feel like you do and ask the same questions. We were talking about this at work as several of us live in stratas. It turns out Jerry has been serving on his strata council for several years. As he’s a curious person, he researched the topic of fees, took some courses at CHOA (Condominium Home Owners Association of BC). And he formed his own opinions after years of dealing with his strata budget. Here’s what he shared with us.
In a nutshell, strata fees cover the cost of operating and maintaining our building, and part of the fees go to a Contingent Reserve fund for future big expenses like replacing our roof. Our strata council does its best to operate and maintain our building as efficiently as possible and they determine how much we need to put aside for the future.
The reserve fund is based on what the Province calls a Depreciation Report. This is done by professionals who determine when big items like the roof will need to be replaced. If not enough money is saved, then the strata will ask for a special levy to fund the repairs.
Jerry explained that it’s always a delicate balance between keeping fees low and having enough in reserve to avoid being surprised with a big levy.
Remember when our friends Paul & Julie had to pay a special levy of $32,000 and how distressed she was. They had to give up their cruise to pay for the levy. What do you prefer? Pay a little more every month or pay a big amount every few years?
Spouse #1: I don’t like bad money surprises.
Spouse #2: I agree. But Jerry explained that the challenge is to find the middle ground between people who want to spend as little as possible each month, either because their income is low or they don’t plan to stay for the long term, and people who believe in protecting the value of their home by keeping it in top condition.
Jerry added that he looks at his portion of the Contingency Reserve fund as an added value to their home. It’s like if you had a savings account for repairs. It makes sense to have money put aside for repairs but few people do this on their own. The strata fees are a good way to force savings if you will, like we put money aside in our pension plans.
He also said: imagine there’s 30 strata units and the Reserve fund is $600,000, look at the value of your home as the market price plus your share of the reserve fund. If the market price is $500,000 you can picture an extra $20,000 of value in the reserve fund.
Spouse#1: It makes sense. I like the peace of mind of not having bad money surprises.
At Strata Fund Track Solutions, with our associates Allester Engineering and Wayfinder Electrical, we deliver depreciation reports that add what we call predictive analysis, a more detailed review of all building systems (envelope, structure, electrical, plumbing etc) to plan precisely when these systems will need replacement to help stratas be more specific about their reserve funds planning.
