So you have decided it’s time to move! Whether you are a first-time buyer, preparing to leave renting behind, or a long time homeowner thinking of downsizing you have likely been looking at strata style properties,
but what is all of this about common property and maintenance fee’s you may be wondering?
Well, there a number of things for you to consider before making the decision to buy your first strata property.
What is a Strata?
There are many types of strata properties including, residential, commercial and industrial.
There are also several different styles of strata properties that fall under the category of residential; from low rise condos to high-rise condo, townhouses, duplexes or even detached homes built on a bare land strata lot. This article will discuss residential strata properties, with a focus on condos and townhomes.
In a residential complex, owners own their unit within the complex and are collective owners of the common property. Common property includes areas like hallways, stairwells, elevators, fitness centres, clubhouses, parking lots and roadways within the complex.
How does a Strata work?
Strata’s in British Columbia are regulated under the British Columbia Strata Property Act and then furthermore through the bylaws and rules which are set in place by each individual Strata Corporation. A Strata Corporation operates the strata and is run by a “Strata Council” comprised of owners of that strata. Strata’s can be self-managed and fully run by the council and owners. Alternatively they may hire a management company to carry out some or all of the duties of the strata corporation.
A Strata Corporation may set out bylaws that affect the lots owners’ right to use and responsibility. Additionally, a Strata Corporation may also have a set of rules. Bylaws usually differ between each Strata Corporation depending on the needs of the complex and its owners.
So why Strata?
By having a unified building that follows bylaws and rules it makes for a high level of continuity amongst the building owners.
Additionally, by sharing of the responsibility for repairs, on-going costs and paying into a reserve fund to be used for future projects or emergencies eliminates some risk for individual owners. A huge benefit of living in a strata is that having a responsible and a proactive Council there is a level of peace of mind that important maintenance and improvement work is being taken care of in your complex.
Often times many strata style properties are “lock up and leave”. This means that you can simply shut off your lights and lock you door and have peace of mind that your building maintenance, garden tending, lawn care, and sidewalk plowing as a few examples, are all being taken care of in your absence. Furthermore the element of security from living in a community gives many people peace of mind.
However, prior making your purchase, several essential documents should be reviewed before finalizing a contract of purchase and sale. There is nothing worse than a unexpected surprise after purchasing a new home.
What should I review before buying a strata property?
Below are some of the critical documents a buyer should be aware of and review. Every property is different and a thorough investigation into the state of the strata is always recommended before committing to a purchase.
Form B
The Form B is an information certificate issued by the Strata Corporation. This document reflects the current status of the individual strata lot. The Form B will show on-going financial commitments of the strata lot (monthly maintenance fees), any parking spaces and storage lockers assigned to the lot, any special levees or charges against the lot. The Form B will also show information on the entire Strata Corporation including the current up to date balance of the contingency fund.
Depreciation Report
The depreciation report is a financial report that shows inventory and evaluation of the common property and strata assets. The depreciation report is an important tool to show lot owners the ongoing expenses and expected future financial obligations to maintain and replace aging and failing building components. For example, the report will show the expected remaining serviceable lifetime of building components including the roof, building envelope, common area components such as paint, flooring, elevators and amenities as well as when the next expected replacement is required and the expected cost. This report then allows for the council and owners to make educated decisions regarding future budget planning and maintenance fee amounts to ensure a sufficient contingency is in place for future projects.
Title to the Strata Lot
Before acquiring any property checking that the title is free and clear of any surviving encumbrances or liens is vital. This is something a REALTOR should do.
The Bylaws and Rules
These set out owners’ specific rights and obligations, giving you a good sense of how rigidly the Strata Corporation controls owners. Look carefully for any pet, age, and rental restrictions and whether they will be a problem for you. Also, additional rules may restrict what you can do within your strata lot like having a BBQ or limitation on use.
Financial Statements
Reviewing the financial health of the strata corporation is imperative before making the decision to purchase. At a minimum, a prudent buyer will want to see what that annual operating budget is and whether the strata corporation is able to stick to that budget as well as the on-going contribution to the contingency fund and the current balance of the contingency fund. This is where working with a REALTOR experienced in dealing with strata complexes can be of great assistance.
Minimum 2 years of Meeting Minutes and any Annual General Meeting or Special General Meeting minutes.
Reviewing the past 2 years of meeting minutes is one of the best ways to get a glimpse into the nitty-gritty details of the complex. Meeting minutes will detail any issues that have been raised by lot owners, major building maintenance that has happened, and updates to the going on’s of the strata. One can often find details of, for example, re-occurring noise complaints, rodent activity in the past or other issues that could affect your use and enjoyment while living in your new home that might not have been apparent from just viewing the property.
The Bottom Line
With the cost of entry being lower than a detached home and having the ability to lock up and leave knowing ongoing maintenance will be taken care of, as well as the security of having many owners pay into contingency funds to cover building expenditures with oversight from the Strata council, strata homes are an excellent option for many. However, buying into a strata that has been poorly managed or that has pending litigations could prove to be a very costly investment.
Its good practice to work with a licensed REALTOR who will help guide you through this process and help you understand the vital documents easier.
We are here to help with any of your strata related questions! Get started looking for your new home today!