Strata Tip of the Week – Most Stratas Are Not Saving Enough for the Future

When buyers and owners look at the expenses that come with strata living, it’s natural to focus on unit prices and monthly strata fees. But what those fees don’t always reveal is whether the strata is setting aside enough in its contingency reserve fund (CRF) to pay for major repairs and replacements. If CRF savings fall short, owners often end up facing special levies to cover the shortfall.

1. What Do We Mean by “Having Enough Funds in the CRF”?

Having “enough” in the CRF means more than just meeting the minimum legislated contributions. It means the strata is saving enough to cover major capital projects without relying on special levies. In British Columbia, strata corporations are required to contribute a minimum of 10% of their annual operating fund to the CRF each year. However, minimum contributions alone are rarely sufficient to avoid the need for additional funds through special levies.

2. How Much Can Owners in BC Expect to Pay in Special Levies?

At Condo Clear, we have reviewed thousands of strata corporations across BC and gathered meaningful insights. Based on the last 2,434 reviews completed by our team, strata owners can expect to pay on average:

• $19,676 in special levies over the next 10 years because most stratas in BC are not saving enough in their CRFs to fund their upcoming projects

3. Why Averages Only Tell Part of the Story

It is important to recognize that each strata is unique, so individual circumstances always need to be considered. Our estimate is based on:

• Projections included in each strata’s latest depreciation report, and
• For strata corporations:
  • Of various sizes
  • Of various ages
  • In different areas of BC
  • With different types and numbers of assets and amenities, and
  • Of various construction types

When comparing any individual strata with the “average BC strata,” it’s important to put the information into context and be aware of individual differences.

For example, at Condo Clear we have reviewed many strata corporations that are saving enough so owners are not expected to face any special levies over the next 10 years. In contrast, we have also reviewed many stratas where each strata lot is anticipated to face over $100,000 or even $200,000 in special levies over the same period.

4. Flexibility in How Stratas Choose to Save

Stratas in BC have flexibility in how they can choose to save for future projects. As long as a strata contributes at least the minimum legislated amount of 10% of the annual operating fund to its CRF each year, it has met its legal obligation. Beyond that, it’s up to the owners, together, to decide how much to save in the CRF.

Some stratas choose to build larger reserves in their CRF so money is available when major projects arise. This usually requires higher monthly strata fees, but it reduces the need for large special levies later on.

Other stratas contribute only the minimum to the CRF and plan to use special levies when projects come due. This approach keeps monthly fees lower but can create financial stress for owners if they are not prepared for additional costs.

There is no single right or wrong approach. Each strategy has its pros and cons, and it is ultimately up to the owners to decide how they want to save for the future and pay for projects.

5. Why This Matters for Buyers and Owners

Understanding the likelihood of future special levies helps:

• Buyers make more informed decisions about the true cost of ownership before purchasing into a strata, and avoid surprises that could affect affordability down the road
• Owners plan ahead by setting aside funds for expenses that may arise in the future, which helps reduce financial stress when a levy is approved

By being aware of potential future costs, both buyers and owners can budget more realistically and protect themselves from unexpected financial pressure.

At Condo Clear, we review strata documents every day and share these insights to help buyers and owners feel more confident in navigating strata living. Sign up for our Strata Tip of the Week Newsletter today to stay up to date with the latest strata news and articles.

That’s it for this week. If you have any suggestions for other topics you’d like us to cover, please let us know at info@condoclear.ca.

Author: Mugurel Mic

Disclaimer: The information provided is for general purposes only. It is not intended to provide legal advice or opinions of any kind. No one should act, or refrain from acting, based solely upon the materials provided, any hypertext links or other general information without first seeking appropriate legal or other professional advice.

A little about Condo Clear:

They are a fully licensed brokerage under the BCFSA, and carry Errors and Omissions (E&O) insurance.

They have been in business since 2017 and have completed over 3,000 strata reviews to date province-wide.

Their Review Advisors have firsthand knowledge and experience. They’ve all been practicing strata managers.

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