Avoiding the “Big Hit” to your Pocketbook when Purchasing a Condominium or Townhome

By Jesse Bernhardt
Categories: Blog, Real Estate

The “Big Hit” to a Strata Lot owner’s pocketbook occurs when the Strata Corporation’s Operating Fund and Contingency Reserve Fund are not sufficient to repair, maintain and replace Common Property. The Strata Corporation will be forced to issue a Special Levy to cover the cost of repairing, maintaining and replacing the Common Property. A Special Levy is simply a cash contribution required from each Strata Lot owner to repair, maintain and replace Common Property. Special Levies can be significant amounts if a major element of Common Property needs to be replaced.

Most buyers are familiar with the concept of strata ownership. The Strata Lot (your home) is exclusively owned, used, maintained and controlled by its owner. Common Property (hallways, elevators, building systems, roads, street lights, utility lines) is owned and used jointly by each of the owners of Strata Lots within the condominium building or townhouse complex and maintained and controlled by the Strata Corporation. In addition to the Strata Lot and Common Property, you receive an undivided interest in the Common Assets of the Strata Corporation.

Common Assets include the balance of the Strata Corporation’s Operating Fund and Contingency Reserve Fund, outstanding debts and personal property for the common use of the Strata Lot owners (pool table, couches and gym equipment). The Operating Fund and Contingency Reserve Fund are the Strata Corporations financial means that are available to repair, replace and maintain Common Property. Generally, the Operating Fund is used for expenses that usually occur either once a year or more often than once a year (snow removal, landscaping, carpet cleaning). The Contingency Reserve Fund is used for common expenses that usually occur less often than once a year or that do not usually occur (replacing the roof, siding or roads).

Strata fees payable by the Strata Lot owners are calculated on the basis of how much money is available in the Operating Fund and Contingency Reserve Fund.
Most prospective buyers make their buying decision on whether they like the condominium building or townhouse complex. Savvy buyers do their due diligence on the age and state of the Common Property and the Strata Corporations Operating Fund and Contingency Reserve Fund to ensure that sufficient funds are available to repair, maintain and replace the Common Property by reviewing the following:

  • The Strata Corporation’s Minute Book – The Minute Book will describe any repairs, maintenance or replacements to Common Property that are being discussed by the Strata Council and should include a copy of the Strata Corporation’s budget.
  • The Form B Information Certificate – The Information Certificate is provided directly from the Strata Corporation and describes the current balance of the Contingency Reserve Fund.
  • The Depreciation Report (the best option when available) – A Depreciation Report is an independent review of the Common Property that states whether the Strata Corporation has or will have sufficient funds to repair, maintain and replace Common Property as the different elements of Common Property reach the end of their expected service life.

Too often home buyers and home owners are surprised with a Special Levy for the repair, replacement or maintenance of their condominium building or townhouse complex. Do what you can to protect yourselves when making a major investment.


This article is provided as information only; it should not be construed as legal advice. For more information, please contact Jesse Bernhardt at 250-869-1191 or bernhardt@pushormitchell.com