Most Strata condominium owners in B.C. have been subjected to special levies at one time or another. Special levies are assigned when repairs or replacement costs cannot be paid from the council's annual operating budget or their existing capital reserve fund. The fact is, many routine repairs to exterior walls, roofs, piping, etc., can easily exceed $100,000. This can quickly empty the strata's capital reserve fund, and result in levies against current owners to complete the work.
From a REALTOR's perspective, the threat of upcoming special levies can be a deal breaker for a buyer.
In fact, there is no need for condominium owners to continue paying special levies, only the need for some long-term capital budget planning, also known Contingency Reserve Fund Study (CRFS). A CRFS is designed to establish appropriate strata fund contribution levels for a condominium's future maintenance, repair and replacement expenses.
A CRFS is a tremendous tool for strata councils who are faced with uncertain capital expenditures, lack of technical knowledge about a building's maintenance requirements or repair history, a revolving door of strata members, and an established fee schedule that is difficult to alter without sound justification.
However, as a REALTOR, I was recently faced with the challenge of selling a condominium where the Strata Council had hired and engineering company to produce a CRFS.
A CRFS is developed by taking a complete look at the property from an economic standpoint, to reduce the owner's long-term financial burden. Engineering professionals review options to defer component replacement by considering specialized maintenance programs and localized repairs, providing a balanced approach to managing the condominium's finances. The CRFS includes advice on measures to help prevent deterioration, and will also prolong the building component's service lives. This further reduces the owner's exposure to special levies. The CRFS should have the flexibility to balance the owner's present and future needs (or the present owners and future owners' needs!). By using a plan, a condominium may be able to realize an increase in property values.
As you can imagine, because the report is comprehensive in nature, seeing the estimated capital cost of every single building component for the next thirty or sixty years can be extremely intimidating. Most people, truthfully, do not give much thought to what is behind the walls, let alone what is holding them up. As such, it can easily scare buyers away.
What buyers need to realize is that before any work can be started the strata council is obligated under the Strata Property Act to bring major expenses to a vote before assessing individuals living in a building. The act of doing a CRFS does not in itself 'make work' for the strata, it merely identifies what may need to be addressed in a manner that allows the strata to plan adequately for it.
Furthermore, a CRFS also serves as a maintenance plan for stratas, allowing them to prevent replacement and prolong the life of building components.
"A Contingency Reserve Fund Study is a tool that gives the strata council the ability to make educated decisions on when each part of the building may need work."
I look at these studies in a positive light. As a REALTOR working for a buyer, and as a Developer, I would rather understand what could happen in the future than pretend that buildings do not need to be maintained and "hope for the best."