The $9 Million Dilemma

Jamie:
A few weeks ago, we talked about depreciation reports — what they are, how they’re used, and whether they might be negatively affecting strata owners. Today, we’re revisiting that topic with a specific example: a townhouse complex facing a $9 million building envelope project. We’ll look at what’s happening, how it’s being handled, and what owners should think about when faced with a similar vote.

Over the past few decades, we’ve seen countless stories about leaky condos and water ingress issues — particularly in stucco-clad buildings from the 1970s through the 1990s. These cases have filled news headlines, especially in areas like Vancouver where entire complexes have had to undergo costly rain-screening projects.

Denny:
Yeah, I remember one big example on Broadway a few years ago, one of the worst leaky condo cases in the city. It was a greyish, beige building with massive water stains and visible mould on the siding. It was eventually court-ordered to be fully reclad. That’s the type of project most people think of when they hear “building envelope replacement.”

Jamie:
Exactly. But the complex we’re talking about today is a 1990s-built townhouse development in New Westminster that’s being told it needs a $9 million envelope upgrade. Each homeowner’s share would be about $240,000.

We’ve sold several homes in this complex over the years, and it’s always been a desirable place to live — large three- or four-bedroom townhomes, about 2,700 square feet with two-car garages and walkout basements. Until recently, it was age- and rental-restricted, but those restrictions were removed last year. Since then, families have started buying in, and naturally, the tone of the strata minutes has shifted.

Denny:
That’s a huge cost — $240,000 per unit. And the complex doesn’t even seem to have significant water issues. The engineering reports show that most of the walls are dry, with only localized moisture around balconies and deck areas, typical for homes of that age.

Jamie:
Exactly. The engineering report from March 2024 did moisture probing, and the only wet spots were predictable areas near balconies and doors. Most of the walls were dry. So this isn’t a “leaky condo” situation. It’s more like normal aging where balconies and railings need updates, maybe some patching and painting.

Denny:
Right. And for comparison, plenty of single-family homes built in the early ’90s have similar exteriors and are still in good shape today. They might need balcony repairs or repainting, but almost none are being completely reclad.

Jamie:
What’s strange about this situation is how the strata council has been pushing the full $9 million envelope replacement. The tone of the meeting minutes and engineering updates feels like fear-based messaging — “If we don’t do this now, it’ll cost more later.” That kind of language can make owners panic.

Denny:
It also scares off buyers. If you’re looking to purchase a townhouse and see a potential $240,000 levy in the minutes, that’s an immediate red flag. Young families, the main buyer demographic, aren’t going to take that risk. Even if the price looks good, they’re mentally subtracting that assessment from the listing price.

Jamie:
Exactly. It’s not just the cost either; it’s the disruption. This project would take about 72 weeks, maybe two years, to complete. During that time, units become extremely hard to sell. Lenders often won’t finance properties in the middle of major exterior renovations unless buyers have huge down payments, sometimes 50% or more.

Denny:
That’s right. Even for owners who plan to stay, it’s worth asking tough questions before voting yes. How necessary is the project really? What alternatives exist? What’s the expected return on investment? Because $9 million is a lot, and in this case, it might not even increase property values enough to justify the cost.

Jamie:
Exactly. Let’s look at the numbers. These townhomes were selling around $1.35 million last year. Now, with the $9 million project on the table, units are struggling to reach $1.2 million; and some might fall closer to $1.15 million. So, owners have already lost about $150,000 in value just from the perception of risk.

Denny:
That’s the irony. The message being used is “protect your investment,” but in the short term, it’s actually hurting the owners’ equity.

Jamie:
There’s a more reasonable alternative here. Instead of recladding everything, they could replace the balconies and railings, repair the divider walls, repaint the exterior, and address problem spots. That might cost around $2 million total, roughly $50,000 to $60,000 per unit.

Denny:
That would make far more sense. You’d fix the visible issues without over-renovating. Full rain-screening would be excessive in this case.

Jamie:
And if we talk about resale, there’s unlikely to be a $200,000 difference in value between a fully reclad unit and one that’s simply well-maintained and freshly painted. Maybe $100,000 at most. But spending $240,000 for that $100,000 return doesn’t add up.

Denny:
Exactly. Historically, big building envelope projects in non-leaky buildings might return 50% to 75% of their cost at resale, not 100%. If your $200,000 assessment only increases your property’s value by $100,000, that’s not a great investment.

Jamie:
The danger here is that some owners genuinely believe they’re adding value when, in reality, they might just be maintaining it. There’s a difference between preventing loss and creating gain.

Denny:
Another concern is that not all owners can afford this kind of assessment. A few forced sales could occur, and as long as these discussions appear in the strata minutes, they’ll continue to drag down property values.

Jamie:
And for the project to pass, they’d need a three-quarters vote. Honestly, I’d be surprised if that happens. Some owners will want the upgrade for aesthetic reasons, but many won’t be willing or able to take on that level of debt.

Denny:
Exactly. This isn’t a luxury complex in an ultra-high-end neighbourhood. It’s a well-located but modest New Westminster development. A $240,000 levy per unit is disproportionate.

Jamie:
It’s like over-renovating a condo. You can spend $150,000 making it beautiful, but the market might only reward you half that. There’s always a ceiling to what buyers are willing to pay, especially in a given area.

Denny:
Right. The market in New Westminster simply won’t support $1.8 million townhomes right now, even if they have brand-new exteriors. Buyers at that price point would likely choose detached homes instead.

Jamie:
Exactly. So in this case, the best move might be restraint. Address the real issues, keep the complex maintained, and avoid burdening owners with unnecessary costs. Once this uncertainty clears up, I think prices will rebound closer to where they were before all this started.