Strata Fees in Victoria, BC
When buyers are looking to invest in a condo or townhouse, one of the most popular questions is regarding strata fees, understanding what they are, why they’re necessary, and more importantly how much they cost. Many first-time buyers who have only previously rented may find strata fees to be high and thus need a full explanation of what they cover.
How much do I pay?
There are many factors contributing to the total cost of a unit’s strata fee, making it more complicated than a set amount that everyone in the building is required to pay. Most strata’s use what is called “unit entitlement” to determine how much each unit’s strata fee should be. The number is calculated from the livable square footage of each unit. Thus, the larger square footage of your home, the bigger the fee. Simple right? For example, comparing a 400 sq ft studio to a 1200 sq ft two bedroom, the strata fees of the studio would be a third of the two bedroom.
Another factor to take into consideration is any amenities that the building offers to its residents. While it may seem very luxurious to have a pool and sauna down the hall, you must take into account the expenses for heating and maintenance that will be evident in strata fees. However, there can be perks found in amenities offered – such as building insurance or heat/hot water included in the monthly strata fee.
One of the main advantages of living in a condo is the hassle-free lifestyle so many people choose. Living in a condo, you don’t have to worry about specific garbage pick-up days or setting up hydro bills, water bills and gas accounts. When looking for a condo, it’s essential to make note of what is included that may make your monthly strata fee so high yet also realizing the pressure it will alleviate when paying other monthly bills.
A vital factor in understanding strata fees is knowing that the age of the building plays a role. A 10 year old building is still fairly new, however may need some updates including painting the outside building & balconies. Doing this kind of maintenance requires taking a chunk of money from strata funds allocated for such purpose. Taking into account the age of the building is necessary as when looking to buy, you should check whether updates were done recently or not as that can greatly affect your monthly strata fee (Depreciation Reports are the perfect tool in helping you do this!).
Where does my money go?
Strata fees from each unit in a building get allocated by the strata council and management company. There are two major funds where your fees will end up: the Operating Fund and the Contingency Reserve Fund (CRF). Each fund serves its own purpose and are equally important for maintaining a building.
The Operating fund is the money that is used to pay for common expenses, general maintenance on a building that happens more than once every year. This could be anything from paying property manager’s salary, garbage pick-up fees, or general cleaning and repairs. The CRF is used to pay for expenses that happen less than once a year, for example if the roof needs updating or the gutters replaced. Both funds are important for strata fees to feed into, as maintenance cannot be avoided.
Ideally, buildings build these funds to save for future work needing to be done, in hopes that they won’t have to ask the owners to pay any special assessments. Especially the CRF, as it puts money aside to prepare the strata for these uncommon expenses, so that when the 10 year anniversary rolls around owners don’t need to fund the painting bill!
We have noticed that sometimes new developments set their strata fees low in hopes to lure in buyers and keep monthly costs lower, which is great for the short term, however isn’t sustainable for the future. Many expenses such as insurance, gas, or water, costs that the strata typically covers, increase and thus owners need to pay for. As a result, we sometimes see a rise in new development’s strata fees in the first few years.
Another note: be cautious about older buildings with low strata fees, normally this is an indicator that the strata council isn’t thinking about or prepared for the roof that will need replacing or other random inevitable expenses as a building ages. Meaning owners of strata lots could get a nasty bill in the end to fund the necessary upgrade. If you see an unusually low strata fee in any building, pay close attention to the Depreciation Report to dig deeper. Even though a lower strata fee seems appealing at first, remember to assess your options and know that sometimes making a small sacrifice to pay the higher fee can help you in the long term!
If you want to learn more about strata fees or have any questions about buying or selling a condo, please feel free to contact us at The Condo Group Real Estate at 250-382-6636 and we’d be glad to help!