RE/MAX Central

Depreciation planning likely answer to strata's troubles

 

 

By Tony Gioventu, The ProvinceJanuary 23, 2011

 

 

Dear Condo Smarts:

I am the executor for an estate that includes a condo. To wind up the estate, I wish to sell the condo. However, I have encountered a problem that precludes doing so.

The condo is on the top floor of a high-rise in Vancouver. Engineering reports detail a number of deficiencies requiring rectification at significant cost. Among the problems is the need for a roof replacement, elevator upgrades, siding water repairs and waterproofing, membrane failures, window and patio seals and waterproofing. The total estimate for the maintenance and upgrades is about $6 million.

The strata council has twice unsuccessfully proposed a five-year plan to owners. Today nothing is being done. Based upon the current engineering report, the levy would be around $45,000 for all repairs. My problem is that under these circumstances, the condo is not saleable.

Moreover, as it is a top-floor unit, the roof leaks, causing extensive damages to the unit. Realtors are unwilling to show the unit to prospective buyers. Until this is resolved, the estate cannot be wound up.

My question is: What are the legal responsibilities, if any, of council and owners?

KTR, Vancouver

Dear Every Condo Owner in B.C.:

Was it only yesterday there were long lists of buyers vying for any opportunity to bid on a listing, and the seller rarely had to worry about maintenance issues in a building. A slowing economy, tight restrictions on lending and mortgages, a credit crunch, and a high inventory of units for sale has quickly and dynamically changed how consumers look at what they are buying.

For the average condo buyer, the operational history of the strata, and the financial planning, maintenance and reserve planning, are all becoming crucial elements in the final decision on whether or not to buy.

Changes anticipated to the Strata Property Act and the Regulations that apply to depreciation reports will also have a significant impact on the industry. Strata corporations will have to disclose whether they have commissioned a report or not, and if so, what the impact of the report will be on the strata.

The buyer will be looking at the asking price, and then considering a variety of other implications such as: How much will my unit cost me in the next five, 10 or 20 years in additional fees or levies? Does the strata corporation have a maintenance, renewal and financial plan implemented to meet those obligations? Do the bylaws or 3/4 resolutions of the strata corporation support those future plans?

In KTR's strata, they are no longer experiencing just routine maintenance and renewals. They now have building-system failures, causing damage to other areas, including strata lots. At this time, because the owners have refused to pass special levies to do any of the repairs, an owner or group of owners has no choice but to make an application to the courts to force the repairs to be done. As a result, the strata corporation will not only be facing major repair costs, but also unnecessary legal and court costs. Their building has over 200 units, is 18 years old, and now they are faced with major assessments from $37,000 to 53,000.

The whole point of depreciation planning is to avoid this disaster. For example if they had added just $40 a month to strata fees over 18 years, they would have met half of their financial costs of renewals, likely avoided the major costs they are facing today, and met their basic obligations under the act.

It's never too late to start for your strata.

Tony Gioventu is executive director of the Condominium Home Owners' Association. E-mail tony@choa.bc.ca.