How Strata Corporations finance building maintenance
Strata Corporations are responsible for maintenance and repairs to common property, including the overall building. Repairs inside condos (for example, replacing a faucet) are typically the responsibility of the owner of the condo. My previous blog post, What Do You Maintain in a Condo Building. provides a more detailed overview of building components.
Strata Corporations have two main revenue sources to finance the work: monthly maintenance fees and special assessments. They also utilize this money to strengthen a contingency reserve fund.
Monthly maintenance fees
Each owner pays a monthly maintenance fee to cover the annual operating budget (foreseen expenses that occur at least once per year) and to increase the contingency reserve fund as required. The services financed by these fees vary by building and will include some of the following:
- concierge, live-in caretaker, security guards
- general building repairs and maintenance
- landscaping and gardening
- hot water
- garbage removal
- insurance for the overall building
- amenities (for example, a fitness centre, theatre or pool)
The fees are based on the upcoming annual budget and each owner pays according to the interior square footage of their condo. Unlike municipal taxes, the value of your condo is not a factor. For example, if an owner of a 500 square foot condo pays $200 per month, the owner of a 1000 square foot condo in the same building will pay $400 per month.
Contingency reserve fund
Strata Corporations are required to maintain a contingency reserve fund as per the Strata Property Regulation to pay for maintenance and repairs that occur less often than once per year or do not usually occur. Replacing the roof, water pipes, and garage membrane fall within this realm.
Usually, part of each owner’s monthly maintenance fee is allocated to build up the fund with the goal being to reduce the likelihood of special assessments. However, owners will pay a special assessment if the fund is insufficient or if they choose to do so rather than deplete the fund. While infrequent, owners can also choose to pay a special assessment to boost the contingency reserve fund.
Special assessments (also called special levies) are payments by owners in addition to monthly maintenance fees. They are typically used to pay for large and infrequent expenses of the Strata Corporation when there is not enough money in the contingency reserve fund or owners choose not to deplete the fund.
No one likes paying special assessments but they are sometimes necessary to protect your investment. Owners need to vote to approve a special assessment at an annual general meeting or special general meeting. Be aware that declining or even postponing a special assessment may cause the issue to worsen and you may face a larger assessment in the future.
As with monthly maintenance fees, your portion of the special assessment is based on the interior square footage of your home. Owners may vote to allow owners to pay the assessment in a series of instalments rather than one lump sum payment.
In my next post, I’ll discuss how you can assess the financial health of a Strata Corporation.
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