Strata Contingency Reserve Fund Reports Affect Your Property Value

Every owner is affected.

Why you need to be concerned about your strata council's contingency reserve fund.

It is quite surprising that many home owners inside strata complexes are not as concerned with the legislative need for strata councils to engage the services of qualified reserve fund analysts (a special type of strata maintenance inspector).

As the owner of a strata property in a strata complex, you actually own a percentage of the whole complex, not just the inside of the apartment you live. You pay strata fees for the upkeep of the buildings and any repairs.

Their purpose is to produce a 30-year report projecting the costs of proper upkeep and maintenance of the strata complex.

A further requirement of the legislation requires each strata complex to create a financial plan on how they will cover the costs projected in the report. This information must be disclosed to property owners, potential buyers and real estate agents for example.

The legislation has allowed for strata councils to delay the engagement of a reserve fund analyst and production of the reports as long as there is a 75% majority vote each year. If this majority vote is not met, then the strata council has 18 months to produce the reports.

This is where market forces will come into play over the coming years...

With an estimated 30,000 strata properties in BC and only 30% of them currently engaging this process, market forces will soon come into play. Don’t forget, it’s nearly 2014. There is little room to keep delaying the process. Those 30% of strata councils already engaged are already getting their first of their updated reports (required every 3 years).

Think about this for a moment...

It’s really this simple.

As an individual owner of a strata property, the value of your property is tied to the proper operations of your strata council.

All Strata Properties' Value Influenced

Think of the case of a perspective of a buyer.

That buyer doesn’t even need to be interested in your strata property in your complex. The buyer could be looking at another property in the same complex. The buyer, the real estate agent, the mortgage lender, and the insurance company, want to see the strata complex has a strata contingency reserve fund report, and they want to see the financial planning that is currently required.

One interested party in one condo in your complex will greatly influence the value of every condo in that complex. If that information (maintenance reports, 30 year costing projections and the financial planning required) is not available, there’s no doubt there are only several possible outcomes:

  1. The buyer isn’t interested and the value of the property is indirectly reduced (including all properties in the complex).
  2. The buyer uses the fact that reports and financials don’t exist to negotiate a lower price -- there is little a condo owner will be able to do to fight back (including all condos in the complex).
  3. The buyer’s mortgage lender refuses to give the potential buyer a mortgage on the property, and therefore, the buyer can’t buy your condo -- and the value of your condo goes down (including all properties in the complex).

What to do?

If you are an owner of a strata title property inside a strata complex, you need to speak with your strata council and see what is being done about your complex and ultimately, your own wealth. If you would like to ask C4U Inspections more information about the implications of strata council contingency reserve fund reports and the financial planning requirements, please don't hesitate to ask C4U Inspections.

Apart from being a registered Reserve Fund Report Analyst, C4U and Lloyd's industry membership and certification includes: Consumer Protection BC • InterNACHI • CMHC & SCHL • ASTTBC • IAC2-RADON-MOLD • • CHAO


Need more information and have questions? Contact C4U Inspections today

*Lloyd doesn't break the rules for anyone and as a leading chief home inspector in BC, that means he follows industry requirements, government regulations and licensing codes of conduct to the letter. Unbiased, ethical and professional home inspection and building consulation services.

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