What Are Strata Levies
If you purchase a strata-titled property, you’ll be investing in a property with shared features and common areas that require upkeep and maintenance.
Compared to purchasing a freehold house, owners of strata properties have responsibilities that are shared with others to ensure that everything goes smoothly and that each person’s property is well taken care of. Various fees ensure that strata's have enough money to fund the expenses associated with running the property.
Strata levies are important in ensuring that necessary repairs and improvements can be funded. For property owners, developing a solid understanding of what strata fees you could be responsible for is an important part of financial planning and could impact your decision on whether to invest in a strata property.
What is a Strata Property?
You may be wondering what the accurate definition of a strata is and how strata's may differ from condos. The answer is that strata housing is any property type where owners own their individual units while common property and assets are owned and organized cooperatively by a strata corporation.
The term “strata” is more commonly used in British Columbia than in other provinces and can refer to condos, duplexes, and townhomes. There are even circumstances in which single-family homes are strata properties because they have been set up as strata subdivisions.
You can’t tell just by looking at a property whether it operates as a strata or not. For example, townhomes can be either freehold or strata properties. For freehold townhomes, owners do not pay strata fees or special levies, and they are responsible for maintaining the exterior of their properties. Meanwhile, the upkeep of the exteriors of strata townhomes is generally managed by the strata corporation. Freehold townhomes offer more freedom and responsibility, whereas strata townhomes tend to be easier to maintain but involve more fees.
What are Monthly Strata Fees?
In addition to mortgage payments and other bills, those living in strata properties will pay a monthly strata fee, largely to cover the regular maintenance that any building needs to stay in good condition.
Monthly strata fees tend to be calculated by dividing the building’s total expenses by the square footage of each unit. That means that the larger an owner’s strata property is, the higher their monthly fees will tend to be. Strata corporations will recalculate strata fees each year based on what the operating budget of the building was in the previous year.
There are several variables beyond square footage that can affect the amount of a building’s monthly strata fees. The age of a building can impact fees, as older buildings may require more maintenance and upgrades. On the other hand, newer buildings sometimes have more special amenities or design elements that may make repairs and upkeep more costly.
Another variable that affects monthly strata fees is how intensive the building’s management style is and what range of tasks and upkeep is deemed necessary by the strata council. Typically, strata fees in the Vancouver area can range from $0.30 per square foot per month up to $1.00 per square foot per month.
The building’s contingency reserve fund will also affect the monthly fee. A contingency reserve fund is funded by the monthly strata fee and is saved to cover expenses that occur yearly or less. Examples of expenses a contingency reserve fund could cover could include a new roof, repaving an area, or fixing the elevator.
How Are Strata Levies Different From Monthly Strata Fees?
The word levy can refer to any charge, tax, or fee. In the case of strata properties, strata levies differ from monthly strata fees in that they are not collected at a regular monthly interval. Instead, strata levies are requested when unanticipated expenses emerge or when the contingency reserve fund cannot cover an expense. They are often referred to as a “special levy” because they arise out of unforeseen necessity.
In the case of strata levies, it’s common for a substantial majority of property owners to have to approve any strata levy. In British Columbia, a resolution for a special levy has to be submitted for approval by all owners. The resolution will tend to need to describe details that include the levy’s purpose, its amount, how each person’s share of the levy will be calculated, the levy amount per person, and the required payment date.
A strata levy will need to be approved by three-quarters of the owners at a general meeting. When a majority of the strata’s owners but not three-quarters agree of a levy—and the levy is necessary for the safety of the property or to prevent damage—then the strata corporation may ask the BC Supreme Court to approve the levy instead. Once the levy amount has been spent, the strata council is responsible for informing all owners of where the money went.
What is a Strata Council?
A real estate investment tends to be among the most significant investments many make in their lives. Those who own strata properties tend to find it important to have their voices heard about decisions that will affect their property and its value. A strata council is an elected group that acts on behalf of the strata corporation to govern the strata on behalf of the owners.
It’s the job of strata councils to ensure the Strata Property Act is adhered to, to make daily decisions in line with the strata corporation’s goals, and to hold strata council meetings that take place in between the general meetings that all owners attend.
Strata council members tend to be responsible for running meetings, preparing budgets, collecting regular fees and any other necessary fees, paying the strata’s bills, providing a point of contact for owners with concerns, and a long list of other duties.
Typically, a strata council is elected each year at an annual general meeting, and each strata council will tend to have between three and seven members. If a strata has less than four owners, all of them will be required to be on the council. While members of a strata council will tend to be owners, tenants may be given rights to sit on strata councils in special circumstances.
Being a strata council member tends to be reasonably time-consuming—and can even be stressful. Strata council members may be compensated for their work if three-quarters approve such compensation by vote and if the bylaws and budget allow for it.
How Are Strata Levies Stored?
Every strata in the province is responsible for operating both a regular operating fund and a contingency reserve fund. While the operating fund will tend to be used regularly to offset the building’s expenses, the contingency reserve fund will often spend more time unused, as its purpose is to cover irregular yearly or less frequent expenses.
For this reason, contingency reserve funds are commonly stored in interest-producing savings accounts or in investments approved by the strata corporation. Similarly, special levies can be held either in insured savings accounts or investments, permitted that they are stored separately from other funds and that any interest generated is accounted for.
Can Strata Levies Be Returned?
At times it may be the case that a repair or improvement that necessitates a strata levy runs under budget or becomes unnecessary. In these circumstances, the strata corporation is responsible for returning the levy amount paid by each owner to the owner.
The Strata Property Act specifies that all funds should be returned to strata owners if the amount due to at least one owner is more than $100. When the amount owed to strata owners is less than $100 for each owner, the corporation may choose to deposit the extra money into the contingency reserve fund. In the rare circumstance that a strata levy return is due, but the former owner of the property has sold the property, the return will be made to the property’s new owner.
Pros and Cons of Living in a Strata
Pros of Stratas
When they run smoothly, a strata is a testament to the power of human collaboration. After all, strata's are self-governing organizations. They are bound to the province’s Strata Property Act, but each has its own sets of bylaws and regulations for each strata corporation.
Each strata has its own atmosphere based on the preferences and personalities of the owners that make it up. For those who enjoy making decisions about how the property they live in is managed, becoming a member of a strata council can be empowering. Upgrades and maintenance are crowd-funded in a strata, and those who are passionate can rally like-minded owners together to make real changes to their surroundings.
Common types of bylaws that strata corporations may choose to implement include a building’s quiet hours, restrictions on the types/size of pets allowed, restrictions regarding long and short-term sublets and other rentals, and even aesthetic considerations such as window covering styles.
Strata corporations have the power to fine owners who don’t comply with a strata’s bylaws. Bylaws can also be overturned by either a developer or a three-quarters majority vote by the strata’s owners. The provincial government has set the limit for fines that strata corporations can impose on owners at $1000 per day.
Familiarizing yourself with how a particular strata operates. Understanding its bylaws is an important part of considering the purchase of a strata-titled property. For some buyers, bylaws that include pet ownership clauses or rental restrictions can be a dealbreaker, and you’ll want to be aware of any strata property you’re considering investing in’s rules ahead of time.
If you’re looking at purchasing strata titled property, it can be a good idea to request the minutes from recent annual general meetings to get a sense of the issues and concerns associated with the building. By reading the minutes of these meetings, you’ll be able to understand how effectively issues in the building are addressed and what regular maintenance is covered by the monthly strata fees.
You can also request any strata building’s depreciation report, which will give a complete history of the building and its important shared aspects, including the roof, the shared windows, the utilities, and more. Familiarizing yourself with a building’s depreciation report is a way of helping yourself anticipate what fees and levies could be on the way.
Cons of Stratas
More than 1.5 million people across the province live in strata properties, and there are around 30 000 total strata corporations operating in British Columbia. Compared to non-strata single-family homes, a strata property can offer a carefree style of living, as individual repairs and maintenance aren’t as big of a worry. Many strata residents also enjoy the sense of community that the meetings and shared decision-making entail.
Of course, one of the downsides of strata properties compared to a freehold property is the strata fees and strata levies. Some property investors prefer to have more of a say in how this money is spent, particularly if strata fees are used to fund amenities that an owner doesn’t find necessary, such as pools, gyms, and clubhouses.
Shared decision-making always includes the possibility of conflict, and strata's contain the possibility of disagreement with other owners about how the building is managed. Strata owners may also find that other owners' decisions impact their property value. These strata pitfalls can be mitigated by understanding the culture of a strata and how past conflict resolution has unfolded.