Strata fees are a fact of life for condo owners. They are an additional monthly expense you must consider when buying a condo or strata townhouse, on top of your mortgage, insurance and utilities.
What are strata fees?
Strata fees go into a general operating fund for the development. The fund is managed by the strata council to pay for the condo development’s common expenses. These include maintenance of the building and grounds, cleaning of shared areas like the lobby and hallways, garbage collection and the upkeep of amenities such as a gym, pool or guest suite. Strata fees also pay for the building’s general insurance plan, management and caretaker expenses, as well as its utilities.
Strata fees may not cover utilities for individual units. They also don’t pay for your own condo insurance. A portion of your monthly strata fee must also go into a contingency reserve fund. BC law mandates at least 25 per cent of a strata corporation’s annual operating budget must be set aside for this fund. But a strata can exempt itself from having a contingency fund if 75 per cent of owners agree. The contingency reserve fund is an emergency account that can be used by the strata council to pay for unusual or infrequent expenses like a new roof, hot water boilers or exterior painting. Any spending from the contingency fund must be approved by a vote of owners in the strata at a special meeting or at its annual general meeting.
How are strata fees determined?
When you buy a condo, you are also buying a share of the overall development. The size of your share is called the “unit entitlement” and is based on the square footage of your unit. The unit entitlement of your condo is used to determine your share of the strata corporation’s common expenses. The bigger your condo, the higher your monthly strata fees. The strata fee schedule is set every year by the strata council to cover its budget for the strata corporation’s annual operating expenses and contributions to the contingency fund. If the budget goes up, so will your strata fees. The operating budget and strata fee schedule must be approved annually by a majority vote of owners at the strata’s annual general meeting. If you’re buying into a new building, the developer creates an initial budget to cover operating expenses for the strata’s first year that will be used to set strata fees. If that budget falls short of the actual operating expenses, then the Strata Property Act enforces a penalty against the developer.
How much will the strata fees be?
If you’re considering buying a condo, it’s important you read its Form B. It will tell you your condo’s unit entitlement as well as its current monthly strata fee. It’s also worthwhile to examine the minutes of past Annual General Meetings to get an idea of how much those fees have risen every year. Reading a building’s depreciation report will also give you a good idea of any major repairs that are being planned that could impact your monthly strata fees.
Strata fees can be affected by amenities and the management style of the strata council. A building with luxurious amenities like a swimming pool, hot tub or other water features will likely have higher strata fees because they are expensive to maintain. A proactive council may maintain a higher contingency fund to give owners more peace of mind.
When are strata fees paid?
Standard Bylaw 1 of the BC Strata Property Act requires strata fees to be paid on or before the first day of each month. But a strata corporation can pass its own bylaw to set out a different payment schedule. It can also pass a bylaw that sets out fines for failure to pay those fees, as well as interest charges for late or unpaid fees. The interest charge cannot exceed 10 per cent, compounded annually. If an owner persists in not paying their strata fees, the strata corporation can obtain a lien to begin the process of foreclosing on the strata lot. As of June 1, 2013, a strata has two years from the date the unpaid fees were first due and payable to file a claim. As well, a strata council can pass a bylaw that bans an owner with unpaid fees from sitting on council or from voting on resolutions at general meetings.
Are strata fees tax deductible?
If you own a condo or strata townhouse but rent it out to tenants, your monthly strata fee can be deducted as a current expense from your rental income. If you use a portion of your home for business, you can claim a pro-rated percentage of your monthly strata fee as an allowable expense. Condo living removes most of the maintenance and repair stress that often comes with home ownership. But it comes at a monthly price. Doing some due diligence about the strata council’s management style, the building’s maintenance history and its amenities will give you a good indication if those strata fees are well-spent.