Kelowna Strata Fees - Everything You Need to Know
If you’re considering buying a condo or townhome, it’s important you understand a little bit about strata (condo) fees. You’ll obviously want to know how much they’ll cost you (before making a purchase), but you should also understand how they’re determined and exactly what they’re for.
But first, to gain a good understanding of strata fees, it’s helpful to understand a little bit about strata properties.
What is a Strata?
A strata usually signifies an ownership type. In strata’s, there are single units owned individually but then sections of the overall property that are shared.
Imagine you own a house. You walk down the hallway and notice significant damage to the wall.
If anything needs repairing in a single-family home, the responsibility and cost fall on the shoulders of the homeowner, right?
Imagine the same scenario inside a condo building. Imagine walking down the hallway and noticing damage as you walk to the door of your suite. While the responsibility and cost aren’t necessarily yours to bear, even though a repair is certainly necessary. This is the distinct difference between strata properties and single-family dwellings.
In the case of strata properties, the shared spaces, often called ‘common property’ (and sometimes called ‘limited common property’), are maintained and repaired by the strata council (an elected group) who act on behalf of the strata corporation (made up of the people who live within the strata).
So, each month you pay your strata fees, the money helps to maintain the integrity of the shared (or ‘common’ spaces) included in the strata property.
In the case of condos, the maintenance and repair of areas like the driveway, the underground garage, the elevators, the lobby, the shared hallways, the roof and more are the responsibility of the strata. In the case of townhomes, the driveway, windows, and exterior structures like the roof are also often the responsibility of the strata.
How Much Do I Pay
Strata fees are generally paid once per month and are determined by the annual strata budget for that year.
The budget takes into account the revenue and expenses of the strata. Now, while the strata fees are often the biggest source of revenue for strata’s, there might be other forms of revenue too. Revenue from things like guest suites, parking and storage rentals, late fees, move-in fees and more.
Expenses considered in the budget include things like property management, janitorial services, hydro and gas (for the common spaces), garbage and recycling, window cleaning, snow removal, elevator maintenance, rec facilities and more.
Essentially, the goal of the budget is to ensure the revenue covers (or exceeds) the cost of the expected expenses.
Imagine $1,000,000 in strata fees (annually) is required to support the budget of a 200 suite building. While you might think you divide the $1,000,000 by 200 suites, the calculation isn’t that simple.
In most cases (but not all), owners pay their strata fees by ‘unit entitlement’.
Essentially, each owner pays an amount proportional to the size of their dwelling.
In other words, those in a 3 bedroom 1,500 square foot condo would pay more than someone in a one-bedroom 600 square foot condo.
What do they Cover
- Heat and water for the condo units as most buildings have centralized heat and water systems
- Heat and electricity for the common area and operation of the common property throughout
- Insurance for the overall structure and common property
- Reserve fund contributions to replace common property as required
- Management company fees for the overall management of the corporation
- Landscaping & snow clearing for any greenery, sidewalks or driveways
- Exterior maintenance and cleaning for the overall building
- Caretakers and live-in managers as required
- Security personnel as required
Are Low Strata Fees a Good Thing?
Not necessarily, no.
Strata fees should be set at a rate meant to cover the overall operation of the strata and contribute a set amount to the reserve fund for future expenditures.
When strata fees are too low, homeowners may face larger one-time costs called ‘special assessments’.
What is a Special Assessment?
Though the strata corporation must save up money (in a special account called a ‘contingency reserve fund’), there are cases when large unexpected expenses arise that cost more than the amount saved up or planned for by the strata. Special assessments also become necessary when strata's fail to save enough money.
Imagine the strata saves up $10,000 (a really small amount for the sake of this example). Then, there’s a roof leak, and the strata learns the roof needs redoing at a cost of $60,000. The strata would have to ask each owner to contribute a set amount to make up the $50,000 shortfall.
Special assessments are possible in any strata, but those run well with realistic budgets and healthy reserve funds do their best to avoid unnecessary special assessments.
Will My Strata Fees Go Up?
Strata budgets include costs like Hydro (electricity), gas, and property management services, and these costs rise over time.
Well run strata corporations tend to have moderate increases year over year and they usually follow a 5-year plan.
Though it’s tough to predict exactly the expected increase, it’s a good idea to expect a slight increase each year.
What to Look for When Buying a Strata
Buying a condo is very similar to investing in a company in the stock market. In both cases, you are buying shares in a Corporation.
The strata corporation is much smaller in size but still has a board of directors, regular meetings, voting opportunities, an operating budget and cash on hand.
When buying into a strata corporation, it's important to understand this.
Would you buy stock in a company that was in terrible shape, had no money in the bank, no future financial plan and fighting at every meeting? Probably not!
Well, this is exactly the same when buying a property in a strata. You need to review all the documents you’re provided BEFORE you commit to purchase it. These documents will give you the history for the last two years.
The goal is to buy into a well-run strata and take advantage of years of good planning and proper financial management. This will make your condo ownership rewarding and enjoyable.
If buying a Kelowna condo is in your future, reach out to the Kelowna Condo Experts now. Condos are Complicated, Hire an Expert!
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