In British Columbia, a special levy is a one-time fee that strata owners are required to pay to cover expenses beyond the routine strata fees. Special levies typically arise when major repairs, upgrades, or unforeseen expenses occur that the strata's contingency reserve fund (CRF) can’t fully cover. Common examples include roof replacement, elevator upgrades, major plumbing work, or significant exterior repairs.
Understanding Special Levies in a BC Strata
- When Special Levies Are Issued: These are proposed when the strata council identifies a need for a major project, especially if it can’t be funded with existing reserves. The decision requires a vote among owners, with a 3/4 majority needed for approval. If approved, each owner must pay a proportionate share based on their strata lot’s unit entitlement.
- Amount and Payment of Special Levies: The levy amount is determined by the project's estimated cost. The council may collect this in a lump sum or offer payment in installments. Each owner's share is based on unit entitlement, so larger units usually pay more.
Estimating Potential Special Levies
For buyers, estimating potential special levies can help avoid unexpected expenses and make an informed purchase. Here’s how to assess the risk of future levies:- Review the Depreciation Report: BC strata corporations are required to commission a depreciation report every three years unless they vote to waive it. This report outlines the expected timeline and costs for major repairs and replacements over a 30-year span. Reviewing this can provide insight into upcoming expenses and potential special levies.
- Examine the Strata’s Financial Health: A well-funded contingency reserve fund (CRF) decreases the likelihood of special levies. Check if the CRF has adequate savings for major repairs. Lower savings indicate a higher risk of special levies, as the strata might need to raise funds quickly for big projects.
- Look at Meeting Minutes: Strata meeting minutes from the past two years can reveal ongoing maintenance discussions, upcoming projects, or recently failed votes on special levies. Often, strata councils will discuss large-scale repairs in advance, giving you insight into future levies.
- Ask about Recent Special Levies: Inquire if any special levies were issued recently or are anticipated in the near future. This can help gauge whether the strata is proactive in handling maintenance or if they've had issues meeting expenses.
How Buyers Can Deal with Special Levies
- Ask for Levy Disclosure in the Offer: When making an offer, buyers can request information on any special levies or potential upcoming levies. Including a condition on disclosure in the contract helps prevent surprises.
- Negotiate the Levy Payment: In some cases, a buyer can negotiate with the seller to cover the cost of upcoming or recently approved levies. Sellers may agree to pay some or all of the levy to facilitate a smooth sale.
- Include a Financial Cushion: Buyers should budget an extra amount to handle unexpected special levies if they move into an older or underfunded strata. This avoids financial strain if a levy is issued soon after purchase.
- Consider the Strata Property Act: BC’s Strata Property Act provides buyers with rights to certain disclosure documents, including the Form B Information Certificate. The Form B reveals details about recent levies and the strata’s financial situation.
In British Columbia, a special levy is a one-time fee that strata owners are required to pay to cover expenses beyond the routine strata fees. Special levies typically arise when major repairs, upgrades, or unforeseen expenses occur that the strata's contingency reserve fund (CRF) can’t fully cover. Common examples include roof replacement, elevator upgrades, major plumbing work, or significant exterior repairs.
Understanding Special Levies in BC Strata
- When Special Levies Are Issued: These are proposed when the strata council identifies a need for a major project, especially if it can’t be funded with existing reserves. The decision requires a vote among owners, with a 3/4 majority needed for approval. If approved, each owner must pay a proportionate share based on their strata lot’s unit entitlement.
- Amount and Payment of Special Levies: The levy amount is determined by the project's estimated cost. The council may collect this in a lump sum or offer payment in installments. Each owner's share is based on unit entitlement, so larger units usually pay more.
Estimating Potential Special Levies
For buyers, estimating potential special levies can help avoid unexpected expenses and make an informed purchase. Here’s how to assess the risk of future levies:- Review the Depreciation Report: BC strata corporations are required to commission a depreciation report every three years unless they vote to waive it. This report outlines the expected timeline and costs for major repairs and replacements over a 30-year span. Reviewing this can provide insight into upcoming expenses and potential special levies.
- Examine the Strata’s Financial Health: A well-funded contingency reserve fund (CRF) decreases the likelihood of special levies. Check if the CRF has adequate savings for major repairs. Lower savings indicate a higher risk of special levies, as the strata might need to raise funds quickly for big projects.
- Look at Meeting Minutes: Strata meeting minutes from the past two years can reveal ongoing maintenance discussions, upcoming projects, or recently failed votes on special levies. Often, strata councils will discuss large-scale repairs in advance, giving you insight into future levies.
- Ask about Recent Special Levies: Inquire if any special levies were issued recently or are anticipated in the near future. This can help gauge whether the strata is proactive in handling maintenance or if they've had issues meeting expenses.
How Buyers Can Deal with Special Levies
- Ask for Levy Disclosure in the Offer: When making an offer, buyers can request information on any special levies or potential upcoming levies. Including a condition on disclosure in the contract helps prevent surprises.
- Negotiate the Levy Payment: In some cases, a buyer can negotiate with the seller to cover the cost of upcoming or recently approved levies. Sellers may agree to pay some or all of the levy to facilitate a smooth sale.
- Include a Financial Cushion: Buyers should budget an extra amount to handle unexpected special levies if they move into an older or underfunded strata. This avoids financial strain if a levy is issued soon after purchase.
- Consider the Strata Property Act: BC’s Strata Property Act provides buyers with rights to certain disclosure documents, including the Form B Information Certificate. The Form B reveals details about recent levies and the strata’s financial situation.