When a Strata is first registered with the Land Title Registry, the Developer registers a Strata Plan which, among many things, explains the portion each Strata lot is responsible for within the Strata.

This is called “Unit Entitlement”.

Unit Entitlement is used to calculate your share of a Special Levy as well as your monthly maintenance fees. In most cases that you’d see in Vancouver condos and townhouses; the unit entitlement is based off of habitable area. As in a 600 sqft condo would pay half of the maintenance fees and special levy as a 1200 sqft unit in the same complex. But it can also be divided evenly, with each Strata lot paying an equal share. That situation would be more likely in a side by side townhouse complex where each unit is pretty comparable in size or shared assets.

You can find your share of costs by dividing your Strata lot’s unit entitlement by the aggregate of all strata lots. This chart should be attached to the Strata Plan when you are looking through Strata documents but is also typically attached to any notice of special levy votes or change in maintenance fees in the Council Minutes.
Here is an example of one of those charts showing the unit entitlement for each lot and the aggregate amount at the bottom of the page;

So for this example; Strata lot #1 has a unit entitlement of 758 out of a total of 32,799.
Divide 758 by 32799 and multiply by 100 to get a %. In this case Strata lot #1 would be responsible for 2.31% of the annual budget paid via maintenance fees and any special levies approved while they are the registered owner. ($17,971.80 of that $778,000)..

The unit entitlement can not be changed arbitrarily by the Strata Management or Strata Council. Whatever is registered in the land title office should be relied upon as any legal challenge or change would need to be registered with that Strata Plan as well.

Potential Buyers! 

Forecasting future costs for the time you plan to own a home is a big part of the due diligence necessary before committing to the purchase of a Strata property. If the Strata is expecting a large project (parkade membrane, rainscreen or exterior renewal) most likely the CRF will not have the funds to cover the expense and a special levy will be necessary; knowing your unit entitlement will put those numbers into perspective. A $778,000 special levy that costs you $1500 is a very different conversation than one that will cost you $17,981.80 after you’ve already dipped into your savings for the downpayment and closing costs.

Thinking of buying into a Strata property? 
Click here for more information on Stratas or reach out directly, let’s chat!

-Kade
604-401-9199
kadelacasse@gmail.com 

So the market has shifted in Vancouver and you are planning to sell your home in the next 3-12 months; how you market and present your home will be the difference maker in how stressful and successful your sale is.

The biggest mistake I see in the market today is owners not putting enough emphasis on the staging of their home before listing. Yes homes have been selling high and quick BUT the new "stale listing" is only 15 days on market so if you don't sell in that first two weeks; you'll be fighting an uphill battle.

Now when I say staging I'm not (necessarily) referring to a staging company that you hire to refurnish your home but I do see value in that with some homes, especially those that are currently vacant or in the luxury market. Staging is referring to the process of getting your home ready for photos and showings. Staging can include; renting furniture, painting, small repairs, buying new appliances, and turning a guest room into an office but it most certainly should include deep cleaning, depersonalizing and decluttering.

Staging is scalable and will make an impact on the ease at which your home sells.

Since you are intending to sell this home as fast as possible, use the time preparing your home for sale to start the move. If you're fortunate enough to have more than one home, ideally you would prepare your home and leave it vacant while it's listed so it's always ready to show.

Do

Purge closets and cabinets for anything that can be packed early, tossed or donated.

Declutter your kitchen, seeing your counters full of appliances will only lead the buyers to question the amount of kitchen and pantry storage.

Paint. Fresh coat of white or neutral paint will work wonders.

Depersonalize, you want the buyer to walk through your home and picture their lives here. 

Consolidate your Art collection or add pieces if necessary. This is very important for listing photos but also helps to depersonalize and highlight attractive attributes in your home.

Store excess furniture and optimize the existing furniture in a way that shows off how functional the space is.

Keep the house clean while it is on the market, buyers will want to see your home outside of the open house windows and being able to accommodate that will support your goal of a quick sale at a strong price.


Do Not

Do Not Cheap out on the listing photos; these are the most important marketing your home has. I recommend asking your photographer to have videos and some photos shot in 16:9 ratio so your Realtor can optimize them on social media.

Do Not deodorize or use strong candles. This is a  for buyers and agents as it is assumed you are trying to cover up an unwanted smell.

Do Not shut the light out. This goes for listing photos and showings; you know when your home looks the best and try to showcase it in those windows (pun intended).

Do Not stick around for the showings. It can already be uncomfortable for Buyers to come into someone else's home, having the Seller on site is always awkward. Trust your Realtor will do their job and give the buyers their space.

While Vancouver's Housing Market certainly saw a shift towards balance in the late Spring of 2022, with the amount of interprovincial and international immigration BC has seen in the last 18 months, buyer demand is expected to stay strong and a well priced, well marketed home will sell!



-Kade Lacasse | Vancouver Realtor

We've all seen the headlines of these homes selling for $300k, $500k or more over asking price in Vancouver, Metro Vancouver and other areas of BC. So what's the deal?

First thing I want to say is, in our current market Asking Price is BS 85% of the time.
I tell my clients to ignore it or at the very least, take it with a big dry grain of Maldon.

Where in the past asking price has typically been an indication of the Seller’s expectations; the go-to marketing strategy in the Vancouver market is to use a low asking price as an invitation to treat.

What is an invitation to treat? An invitation to treat is when one party delivers information in order to entice another party to make an offer. The originial party is not, and has no intention to be, legally bound by this invitation.
So when that townhouse is listed for $990,000 depsite an identical unit in the same complex having sold for $1,268,000 3 weeks ago; the seller is inviting buyers to bring their best offer but is not legally bound to accept any of those offers, whether they meet or exceed the asking price.

Something that catches my clients off guard about this? If the seller doesn’t get that $300k over asking they wanted, THEY WILL DECLINE ALL OF THE OFFERS and re-list the day after offers were reviewed, raising the price by $300k. Yes they can do that. That’s often when we get to see the true asking price and one of the reasons I say Asking Price is BS only 85% of the time.

In this example, they list the property at $960,000. The agent and seller decide to hold offers off until the following Tuesday. Buyers with low budgets will think this place is a steal under a million and will want to see it along with the townhouse shoppers that missed out on the neighbour's listing last month. Showing appointments will be booked, open houses will have lineups pouring onto the streets and the agent at the open house will tell every buyer and agent just how busy it's been.

And damn, Vancouver loves a line. Makes me think of a restaurant I used to work at that had an amazing breakfast with waffles (yum) and lavender lattes (not for me but you do you, hon) and they served Mon-Fri with no wait because locals and tourists alike were 3 blocks down the street waiting in line for the other belgian waffle, lavender latte spot because *get this* it was known for how long of a wait it was to get a table.

Back to the towhnouse, we now have the frenzy of activity for viewings and when the home shows well there will be mulitple offers. Tuesday rolls around and they get 12 offers, 9 of which are way under market hoping for a miracle and 3 serious offers at around 1.2 million. The listing agent leverages the 3 top offers against each other and the home sells for 1.3 million. $310k over asking and a new record in the complex.

There we have it, a home sold in market but advertised as $310k over asking.

This technique is certainly seeing results and I can't blame the Seller or listing agent for going this route. These sellers want the best and quickest sale of their home and I'm assuming you will too when you sell your next home. But would that unit have sold for 1.3 million if they listed it at 1.26? Maybe, because there were still 3 buyers willing to pay at least 1.2 million. 

Bottom Line; as a buyer, you can't control how a seller chooses to list or market their home. What can you do?
Don't take it personally! Adjust your expectations, stop believing the over-ask hype and have a chat with your trusty Realtor about whether this home is priced in market and if it will actually sell within your budget.

Happy to answer any questions about this pricing strategy, the buying and offer process or anything else Vancouver Waffle Spot or Real Estate related.
Use the Let's Connect form below or text/call direct at 604-401-9199.


- Kade Lacasse | Vancouver Realtor

In the first three weeks of working with new clients in the Vancouver market, like clock work; they'll send me an amazing property that popped up in their budget. "Is this place for real? Ideal location, 2 balconies and we'd have a guest room! Tell us this is for real!"

Short Answer: Let’s jump on a call.

Long Answer: It is for real but it may not be for you…

When you purchase a leasehold strata; you do not own the land or the building but are purchasing the rights to exclusively occupy your unit or home through a lease granted by the landlord. The initial length of the term can vary but is typically 99 years and can be bought or sold like any other home up until the expiration date. The landlord could be the City of Vancouver like the publicly owned land in South False Creek and the River District or privately owned land.

The lease may be pre-paid or not pre-paid and due monthly along with your monthly maintenance fees. Upon expiration of the lease, the leaseholder and landlord will either renegotiate a new term or an end to the tenancy depending on the details of the lease.

The positives; Leasehold properties are valued below Freehold properties giving buyers with smaller budgets the opportunity to avoid a commute, stay close to the neighbourhoods they’ve previously rented in and afford a home that is bigger with room to grow for a family. Also, if rentals are allowed then, depending on the area and your downpayment, you may be able to turn a leasehold into a cash-flowing asset*.

The negatives; Leasehold properties will not appreciate at the same rate as Freehold. Where Freehold properties in Vancouver have doubled since 2015, some Leasehold properties with longer terms have seen appreciation from 20-50% while those nearing their expiration in False Creek have seen modest appreciation and even a possible loss with the uncertainty of renewal and the cost of renewal. Leaseholds are also harder to sell as not every buyer is interested in that product.

Barriers; financing is more difficult with leaseholds than freehold. Your lender may have different minimums for downpayment as well as maximum amortization terms (the length of your mortgage) equalling higher payments. Chat with your Mortgage Broker about whether your finances line-up for a Leasehold **


With the above in mind, buyers with a healthy budget that are looking for a way into the market to move up the property ladder or investors looking to leverage credit for equity short-term instead of long term cash-flow should stick with Freehold. But, Buyers with a tighter budget who have location and size as the top priorities should take a serious look at leasehold properties. Your mortgage payments are contributing to your principal and your equity is growing year-over-year even with modest appreciation so they are still a much better alternative to renting.

As always, get a hold of me with any questions by filling in the Let's Connect form below or text/call me directly at 604-401-9199 and let's talk freehold vs. leasehold.

- Kade Lacasse | Vancouver Realtor

* A Cash-flowing asset is one in which the revenue (rent) exceeds the expenses (mortgage+fees)

** If you don’t have a great broker that you can ask about how leaseholds may or may not work for you financially, send me a text at 604-401-9199 and I’ll get you connected Because You Deserve a Knowledgable Mortgage Broker!

Let’s set the stage; you see a stunning listing on REW.ca, you send it to me (your reliable and responsive Realtor), we go view it and you decide YOU WANT IT. Exciting, let’s get to work!

It’s a 35 year old building with 60 units spread out over 4 floors so we have some due diligence to do in order to ensure this purchase would be a sound investment.

Why? Because when you buy into a strata, you own;

The strata lot which is defined by a strata plan. (Usually a strata lot’s boundaries are at the center of walls, ceilings and floors, but these boundaries will be different if the strata plan shows a different boundary.)

AND a share of the common property and assets (which includes any liability) of the strata corporation that is based on their unit entitlement which is based on the square footage of your unit vs. the total square footage of the strata plan.

It is almost as if you're buying a business as well as your strata lot so the structure and the finances are very important to consider. 

Strata Maintenance Fee 

Due monthly, at minimum this fee funds the annual operations budget by way of the operations fund but should also have an amount set aside to contribute to the Contingency Reserve Fund (CRF). Very rarely will this amount go down and you should prepare for this to increase by at least 1 or 2% annually.

While a low Strata fee may seem attractive, this is only part of the overall financial picture and a low fee may mean below average contributions to the CRF. A 'pro-active Strata' will use the maintenance fee to be diligent about building maintenance and make healthy contributions to the buildings CRF over time which will mean less out of pocket for owners in the long-run. 

Operating Fund

The operating fund is used to run the building including scheduled repairs and maintenance, shared utilities, insurance premiums, etc. and is funded directly by the monthly maintenance fees based on the annual budget proposed and passed by vote at the Annual General Meeting. An older low-rise building’s annual operating budget is about $6/sqft.

Contingency Reserve Fund (CRF)

The CRF is like the strata corporation’s savings account and is used to fund any unexpected or large expenses and projects. By law, this account needs to be at least 25% of the Annual budget (otherwise there may be a drastic increase in maintenance fees or a special levy in order to reach 25%)

Each Strata will have a spending restriction that caps the amount the council may spend on unexpected expenses and amounts above that will require a majority vote at a General Meeting to approve.

The CRF may also be used to bump up the operating fund if that Strata is over budget for the year and the operating fund is inadequate for operating expenses.

An average CRF of an older low-rise building is 97% of the annual operating budget.

Special Levy or Assessment 

This is a payment owed by each owner based on their unit entitlement. A special levy needs to be voted by a 3/4 majority at an Annual General Meeting or a Special General Meeting. This is used to fund necessary projects that either the CRF will not cover or that the owners vote to pay out of pocket to maintain the level of the CRF. The person who owns the strata lot when the vote is passed for a levy is the person responsible for paying that levy, even if they sell the strata lot before the payment is due. Although you may not have to pay a special levy that was recently passed, it is important to note that a special levy was either needed OR was the preferred method of funding a project by the majority of the building because you will be responsible for any special levies passed while owning the lot (whether you vote for it or not).

To determine the above, we are given access to the finances, budget, any recent engineering reports, and Council minutes from the meetings in the last two years of the Strata Corp. When possible we do this before we write an offer or we write it in the offer as a condition, meaning we need to receive and approve these documents before you as the buyer are under legal obligation to fulfill the contract (firm deal).

We also want to evaluate the age of the most substantial items;

Elevator, Parking, Roof, Plumbing and Envelope. 

If the CRF is healthy but none of these have been replaced recently or there is mention in the minutes about upcoming work on these big ticket items that has yet to be voted on; PAY CLOSE ATTENTION.

On the other hand, if the CRF is depleted due to recent upgrades and the big ticket items are in good condition, the strata is contributing over 10% of the annual operating budget to build it back up then this building and Strata may still be a sound investment.

This is just the tip of the due diligence iceberg; another great reason to work with a knowledgable Realtor.

If you found this helpful, send it to a friend who also needs a little Strata Finance 101.

Let's talk Strata bb.

Kade Lacasse

More Information; Government of BC-Understanding Stratas

When a Strata is first registered with the Land Title Registry, the Developer registers a Strata Plan which, among many things, explains the portion each Strata lot is responsible for within the Strata.

This is called “Unit Entitlement”.

Unit Entitlement is used to calculate your share of a Special Levy as well as your monthly maintenance fees. In most cases that you’d see in Vancouver condos and townhouses; the unit entitlement is based off of habitable area. As in a 600 sqft condo would pay half of the maintenance fees and special levy as a 1200 sqft unit in the same complex. But it can also be divided evenly, with each Strata lot paying an equal share. That situation would be more likely in a side by side townhouse complex where each unit is pretty comparable in size or shared assets.

You can find your share of costs by dividing your Strata lot’s unit entitlement by the aggregate of all strata lots. This chart should be attached to the Strata Plan when you are looking through Strata documents but is also typically attached to any notice of special levy votes or change in maintenance fees in the Council Minutes.
Here is an example of one of those charts showing the unit entitlement for each lot and the aggregate amount at the bottom of the page;

So for this example; Strata lot #1 has a unit entitlement of 758 out of a total of 32,799.
Divide 758 by 32799 and multiply by 100 to get a %. In this case Strata lot #1 would be responsible for 2.31% of the annual budget paid via maintenance fees and any special levies approved while they are the registered owner. ($17,971.80 of that $778,000)..

The unit entitlement can not be changed arbitrarily by the Strata Management or Strata Council. Whatever is registered in the land title office should be relied upon as any legal challenge or change would need to be registered with that Strata Plan as well.

Potential Buyers! 

Forecasting future costs for the time you plan to own a home is a big part of the due diligence necessary before committing to the purchase of a Strata property. If the Strata is expecting a large project (parkade membrane, rainscreen or exterior renewal) most likely the CRF will not have the funds to cover the expense and a special levy will be necessary; knowing your unit entitlement will put those numbers into perspective. A $778,000 special levy that costs you $1500 is a very different conversation than one that will cost you $17,981.80 after you’ve already dipped into your savings for the downpayment and closing costs.

Thinking of buying into a Strata property? 
Click here for more information on Stratas or reach out directly, let’s chat!

-Kade
604-401-9199
kadelacasse@gmail.com 

So the market has shifted in Vancouver and you are planning to sell your home in the next 3-12 months; how you market and present your home will be the difference maker in how stressful and successful your sale is.

The biggest mistake I see in the market today is owners not putting enough emphasis on the staging of their home before listing. Yes homes have been selling high and quick BUT the new "stale listing" is only 15 days on market so if you don't sell in that first two weeks; you'll be fighting an uphill battle.

Now when I say staging I'm not (necessarily) referring to a staging company that you hire to refurnish your home but I do see value in that with some homes, especially those that are currently vacant or in the luxury market. Staging is referring to the process of getting your home ready for photos and showings. Staging can include; renting furniture, painting, small repairs, buying new appliances, and turning a guest room into an office but it most certainly should include deep cleaning, depersonalizing and decluttering.

Staging is scalable and will make an impact on the ease at which your home sells.

Since you are intending to sell this home as fast as possible, use the time preparing your home for sale to start the move. If you're fortunate enough to have more than one home, ideally you would prepare your home and leave it vacant while it's listed so it's always ready to show.

Do

Purge closets and cabinets for anything that can be packed early, tossed or donated.

Declutter your kitchen, seeing your counters full of appliances will only lead the buyers to question the amount of kitchen and pantry storage.

Paint. Fresh coat of white or neutral paint will work wonders.

Depersonalize, you want the buyer to walk through your home and picture their lives here. 

Consolidate your Art collection or add pieces if necessary. This is very important for listing photos but also helps to depersonalize and highlight attractive attributes in your home.

Store excess furniture and optimize the existing furniture in a way that shows off how functional the space is.

Keep the house clean while it is on the market, buyers will want to see your home outside of the open house windows and being able to accommodate that will support your goal of a quick sale at a strong price.


Do Not

Do Not Cheap out on the listing photos; these are the most important marketing your home has. I recommend asking your photographer to have videos and some photos shot in 16:9 ratio so your Realtor can optimize them on social media.

Do Not deodorize or use strong candles. This is a  for buyers and agents as it is assumed you are trying to cover up an unwanted smell.

Do Not shut the light out. This goes for listing photos and showings; you know when your home looks the best and try to showcase it in those windows (pun intended).

Do Not stick around for the showings. It can already be uncomfortable for Buyers to come into someone else's home, having the Seller on site is always awkward. Trust your Realtor will do their job and give the buyers their space.

While Vancouver's Housing Market certainly saw a shift towards balance in the late Spring of 2022, with the amount of interprovincial and international immigration BC has seen in the last 18 months, buyer demand is expected to stay strong and a well priced, well marketed home will sell!



-Kade Lacasse | Vancouver Realtor

We've all seen the headlines of these homes selling for $300k, $500k or more over asking price in Vancouver, Metro Vancouver and other areas of BC. So what's the deal?

First thing I want to say is, in our current market Asking Price is BS 85% of the time.
I tell my clients to ignore it or at the very least, take it with a big dry grain of Maldon.

Where in the past asking price has typically been an indication of the Seller’s expectations; the go-to marketing strategy in the Vancouver market is to use a low asking price as an invitation to treat.

What is an invitation to treat? An invitation to treat is when one party delivers information in order to entice another party to make an offer. The originial party is not, and has no intention to be, legally bound by this invitation.
So when that townhouse is listed for $990,000 depsite an identical unit in the same complex having sold for $1,268,000 3 weeks ago; the seller is inviting buyers to bring their best offer but is not legally bound to accept any of those offers, whether they meet or exceed the asking price.

Something that catches my clients off guard about this? If the seller doesn’t get that $300k over asking they wanted, THEY WILL DECLINE ALL OF THE OFFERS and re-list the day after offers were reviewed, raising the price by $300k. Yes they can do that. That’s often when we get to see the true asking price and one of the reasons I say Asking Price is BS only 85% of the time.

In this example, they list the property at $960,000. The agent and seller decide to hold offers off until the following Tuesday. Buyers with low budgets will think this place is a steal under a million and will want to see it along with the townhouse shoppers that missed out on the neighbour's listing last month. Showing appointments will be booked, open houses will have lineups pouring onto the streets and the agent at the open house will tell every buyer and agent just how busy it's been.

And damn, Vancouver loves a line. Makes me think of a restaurant I used to work at that had an amazing breakfast with waffles (yum) and lavender lattes (not for me but you do you, hon) and they served Mon-Fri with no wait because locals and tourists alike were 3 blocks down the street waiting in line for the other belgian waffle, lavender latte spot because *get this* it was known for how long of a wait it was to get a table.

Back to the towhnouse, we now have the frenzy of activity for viewings and when the home shows well there will be mulitple offers. Tuesday rolls around and they get 12 offers, 9 of which are way under market hoping for a miracle and 3 serious offers at around 1.2 million. The listing agent leverages the 3 top offers against each other and the home sells for 1.3 million. $310k over asking and a new record in the complex.

There we have it, a home sold in market but advertised as $310k over asking.

This technique is certainly seeing results and I can't blame the Seller or listing agent for going this route. These sellers want the best and quickest sale of their home and I'm assuming you will too when you sell your next home. But would that unit have sold for 1.3 million if they listed it at 1.26? Maybe, because there were still 3 buyers willing to pay at least 1.2 million. 

Bottom Line; as a buyer, you can't control how a seller chooses to list or market their home. What can you do?
Don't take it personally! Adjust your expectations, stop believing the over-ask hype and have a chat with your trusty Realtor about whether this home is priced in market and if it will actually sell within your budget.

Happy to answer any questions about this pricing strategy, the buying and offer process or anything else Vancouver Waffle Spot or Real Estate related.
Use the Let's Connect form below or text/call direct at 604-401-9199.


- Kade Lacasse | Vancouver Realtor

In the first three weeks of working with new clients in the Vancouver market, like clock work; they'll send me an amazing property that popped up in their budget. "Is this place for real? Ideal location, 2 balconies and we'd have a guest room! Tell us this is for real!"

Short Answer: Let’s jump on a call.

Long Answer: It is for real but it may not be for you…

When you purchase a leasehold strata; you do not own the land or the building but are purchasing the rights to exclusively occupy your unit or home through a lease granted by the landlord. The initial length of the term can vary but is typically 99 years and can be bought or sold like any other home up until the expiration date. The landlord could be the City of Vancouver like the publicly owned land in South False Creek and the River District or privately owned land.

The lease may be pre-paid or not pre-paid and due monthly along with your monthly maintenance fees. Upon expiration of the lease, the leaseholder and landlord will either renegotiate a new term or an end to the tenancy depending on the details of the lease.

The positives; Leasehold properties are valued below Freehold properties giving buyers with smaller budgets the opportunity to avoid a commute, stay close to the neighbourhoods they’ve previously rented in and afford a home that is bigger with room to grow for a family. Also, if rentals are allowed then, depending on the area and your downpayment, you may be able to turn a leasehold into a cash-flowing asset*.

The negatives; Leasehold properties will not appreciate at the same rate as Freehold. Where Freehold properties in Vancouver have doubled since 2015, some Leasehold properties with longer terms have seen appreciation from 20-50% while those nearing their expiration in False Creek have seen modest appreciation and even a possible loss with the uncertainty of renewal and the cost of renewal. Leaseholds are also harder to sell as not every buyer is interested in that product.

Barriers; financing is more difficult with leaseholds than freehold. Your lender may have different minimums for downpayment as well as maximum amortization terms (the length of your mortgage) equalling higher payments. Chat with your Mortgage Broker about whether your finances line-up for a Leasehold **


With the above in mind, buyers with a healthy budget that are looking for a way into the market to move up the property ladder or investors looking to leverage credit for equity short-term instead of long term cash-flow should stick with Freehold. But, Buyers with a tighter budget who have location and size as the top priorities should take a serious look at leasehold properties. Your mortgage payments are contributing to your principal and your equity is growing year-over-year even with modest appreciation so they are still a much better alternative to renting.

As always, get a hold of me with any questions by filling in the Let's Connect form below or text/call me directly at 604-401-9199 and let's talk freehold vs. leasehold.

- Kade Lacasse | Vancouver Realtor

* A Cash-flowing asset is one in which the revenue (rent) exceeds the expenses (mortgage+fees)

** If you don’t have a great broker that you can ask about how leaseholds may or may not work for you financially, send me a text at 604-401-9199 and I’ll get you connected Because You Deserve a Knowledgable Mortgage Broker!

Let’s set the stage; you see a stunning listing on REW.ca, you send it to me (your reliable and responsive Realtor), we go view it and you decide YOU WANT IT. Exciting, let’s get to work!

It’s a 35 year old building with 60 units spread out over 4 floors so we have some due diligence to do in order to ensure this purchase would be a sound investment.

Why? Because when you buy into a strata, you own;

The strata lot which is defined by a strata plan. (Usually a strata lot’s boundaries are at the center of walls, ceilings and floors, but these boundaries will be different if the strata plan shows a different boundary.)

AND a share of the common property and assets (which includes any liability) of the strata corporation that is based on their unit entitlement which is based on the square footage of your unit vs. the total square footage of the strata plan.

It is almost as if you're buying a business as well as your strata lot so the structure and the finances are very important to consider. 

Strata Maintenance Fee 

Due monthly, at minimum this fee funds the annual operations budget by way of the operations fund but should also have an amount set aside to contribute to the Contingency Reserve Fund (CRF). Very rarely will this amount go down and you should prepare for this to increase by at least 1 or 2% annually.

While a low Strata fee may seem attractive, this is only part of the overall financial picture and a low fee may mean below average contributions to the CRF. A 'pro-active Strata' will use the maintenance fee to be diligent about building maintenance and make healthy contributions to the buildings CRF over time which will mean less out of pocket for owners in the long-run. 

Operating Fund

The operating fund is used to run the building including scheduled repairs and maintenance, shared utilities, insurance premiums, etc. and is funded directly by the monthly maintenance fees based on the annual budget proposed and passed by vote at the Annual General Meeting. An older low-rise building’s annual operating budget is about $6/sqft.

Contingency Reserve Fund (CRF)

The CRF is like the strata corporation’s savings account and is used to fund any unexpected or large expenses and projects. By law, this account needs to be at least 25% of the Annual budget (otherwise there may be a drastic increase in maintenance fees or a special levy in order to reach 25%)

Each Strata will have a spending restriction that caps the amount the council may spend on unexpected expenses and amounts above that will require a majority vote at a General Meeting to approve.

The CRF may also be used to bump up the operating fund if that Strata is over budget for the year and the operating fund is inadequate for operating expenses.

An average CRF of an older low-rise building is 97% of the annual operating budget.

Special Levy or Assessment 

This is a payment owed by each owner based on their unit entitlement. A special levy needs to be voted by a 3/4 majority at an Annual General Meeting or a Special General Meeting. This is used to fund necessary projects that either the CRF will not cover or that the owners vote to pay out of pocket to maintain the level of the CRF. The person who owns the strata lot when the vote is passed for a levy is the person responsible for paying that levy, even if they sell the strata lot before the payment is due. Although you may not have to pay a special levy that was recently passed, it is important to note that a special levy was either needed OR was the preferred method of funding a project by the majority of the building because you will be responsible for any special levies passed while owning the lot (whether you vote for it or not).

To determine the above, we are given access to the finances, budget, any recent engineering reports, and Council minutes from the meetings in the last two years of the Strata Corp. When possible we do this before we write an offer or we write it in the offer as a condition, meaning we need to receive and approve these documents before you as the buyer are under legal obligation to fulfill the contract (firm deal).

We also want to evaluate the age of the most substantial items;

Elevator, Parking, Roof, Plumbing and Envelope. 

If the CRF is healthy but none of these have been replaced recently or there is mention in the minutes about upcoming work on these big ticket items that has yet to be voted on; PAY CLOSE ATTENTION.

On the other hand, if the CRF is depleted due to recent upgrades and the big ticket items are in good condition, the strata is contributing over 10% of the annual operating budget to build it back up then this building and Strata may still be a sound investment.

This is just the tip of the due diligence iceberg; another great reason to work with a knowledgable Realtor.

If you found this helpful, send it to a friend who also needs a little Strata Finance 101.

Let's talk Strata bb.

Kade Lacasse

More Information; Government of BC-Understanding Stratas