Strata Insights | Most Stratas in BC Are Not Saving Enough for the Future
Did you know the average BC strata owner could face nearly $18,000 in special levies over the next decade? For most, this financial burden comes as a surprise, but it doesn’t have to. By taking a proactive approach to evaluating and managing the Contingency Reserve Fund (CRF), strata corporations and strata owners can avoid unexpected costs and ensure long-term financial stability.
At Clarity Management Group, one of the most common questions we get from strata owners and council members is:
“Is my strata’s CRF healthy?”
It’s a straightforward question, but the answer can vary significantly depending on what’s being asked. To get a clearer picture, it’s helpful to break this question into two parts:
1. Is my strata contributing enough to the CRF to meet the minimum legislated requirement?
2. Will the current CRF balance, combined with ongoing contributions, be sufficient to cover future capital expenses without needing special levies?
It’s important to note that answering “yes” to the first question doesn’t guarantee a “yes” to the second.
Minimum Contributions vs. Long-Term Savings
In British Columbia, strata corporations are legally required to contribute at least 10% of their total annual operating expenses to the CRF. While meeting this requirement is essential, it often falls short of ensuring that the strata will have enough to cover all future capital expenses. For most strata corporations, contributing the minimum is unlikely to be sufficient in the long run.
Evaluating Your Strata’s CRF: Key Factors
The best way to assess whether your strata is saving enough is to review key factors, including:
- Current Savings: How much is already in the CRF?
- Annual Contributions: How much is added to the CRF each year?
- Future Expenses: What are the estimated costs outlined in the strata’s most recent depreciation report?
- Adjustments: Do assumptions in the depreciation report, like the estimated inflation rate, align with current economic conditions? Have there been any new findings, completed projects, or updated cost estimates that might affect the report’s projections?
Reviewing these factors is essential for understanding potential future special levies more accurately.
How Does Your Strata Compare to the Average?
Through our partner company, Condo Clear Services, we’ve analyzed data from strata corporations across BC. The findings show that most BC stratas are not saving enough in their CRFs, leaving the average strata owner facing over $18,000 in special levies over the next 10 years.
Every Strata is Unique
While this data highlights general trends, every strata corporation is different. Factors like location, size, age, construction type, and the number of assets and amenities, among others, all play a role in determining a strata’s financial needs.
Comparing your strata to the “average” provides useful context, but it’s critical to evaluate your strata’s unique situation. Understanding anticipated expenses and potential shortfalls allows owners to better prepare for the financial realities ahead.
What Can You Do if Your Strata Isn’t Saving Enough?
If the current balance in your strata’s CRF, combined with annual contributions, isn’t sufficient to cover future expenses, consider setting aside personal savings to cover potential shortfalls. Taking a proactive approach now ensures you will be financially prepared if special levies are needed in the future.
How Clarity Management Group Can Help
At Clarity Management Group, we specialize in helping strata corporations navigate their financial challenges with confidence. Through expert guidance and innovative management solutions, we ensure your strata is financially prepared for the future.
Visit us at www.claritymg.ca or call us at (778) 488 – 9498 to learn more about how we can help your strata succeed.