As a Vancouver Strata Management company, we see this same scenario again and again! Owners who are new to strata living buy into a new condo development, lured in by cheap strata fees. Only $120/ month, we can afford that!
The Developers strata budget is not an accurate budget
What some newbie strata owners don’t realize, is that you are buying into a development with a budget created by the developers…the same guys that are selling you the property!
How accurate do you think that this budget is going to be? Is the developer concerned more with having an accurate budget, or about doing everything in their power to sell condos?
Add to it that the market for new condos and strata developments has been superheated over the past few years, and this has forced many buyers into making rushed decisions, not really taking all of the numbers into careful consideration.
Now there is some legislation to protect homeowners from this scenario, but it doesn’t really go far enough as it only covers the time period up until the first AGM.
The legislation states:
During the period beginning one month after the first conveyance of a strata lot until the first annual general meeting, if the actual strata corporation expenses exceed the estimated expenses set out in the interim budget, the Owner Developer must pay the difference to the strata corporation within eight weeks of the first meeting.
Owner Developers who seriously underestimate the interim budget must pay additional amounts to the strata corporation. If the actual expenses are more than that set out in the interim budget by:
- 10% to under 20%, the Owner Developer must pay an additional amount which is equivalent to the excess multiplied by two
- 20% or more, the Owner Developer must pay an additional amount which is equivalent to the excess multiplied by three
Well, this is fine, except many of these budget deficiencies don’t present themselves until years 2 or 3.
How we generally see this scenario play out is that eventually the homeowners realize that their budget is insufficient to meet their needs, but not before countless meetings, arguments amongst owners, and often the turnover of management companies. This simply creates lots of unneeded stress and aggravation that could have been avoided if the budget had just been accurate in the first place.
In many cases, the strata fees need to double in order to fulfill the requirements of running a strata corporation.
Don’t get lured into a strata based on the developers budget!
The moral of the story here is don’t be one of those strata buyer’s who gets lured in by cheap strata fees in a new condo development. Do your homework first!
Looking for some help with your strata budget? Reach out to our property management company here!