The potential for special levies are an important consideration for any Strata buyer, and is something that should be considered when it comes to your expectations as a future owner as you’re reviewing the strata documents for any building. A special levy is defined by the BC Government here:
A special levy is money collected from strata lot owners for a specific purpose and for shared common expenses. It is money collected from the strata lot owner in addition to the monthly strata fee. A special levy must be approved by at least a 3/4 vote of the strata corporation owners. Sections can also have special levies. Strata lot owners must pay special levies when:
- the expenditure has not been included in the annual budget because it was either not anticipated or because of the infrequency of the expense
- there are insufficient funds in the contingency reserve fund (CRF) or a decision is made not to use money from the CRF
Special levies are used to pay for major or unexpected building maintenance in buildings, for instance, the roof, plumbing, exterior, windows, balconies, parkade membranes, elevators, etc.
No building has enough money in their Contingency Fund (CRF) to cover the entire cost of major projects. BC Strata Bylaws state the Strata has to maintain a certain amount in the CRF, so the building wouldn’t be allowed to deplete the fund too much anyways (without replacing the money ASAP).
The need for a Strata to charge a Special Levy to Owners is typically discussed in regular Strata Meetings, with the Strata Council doing research to determine what repair is needed, who will be hired to complete it and how much it’ll cost. The decision regarding the amount of the Special Levy and the timeline as to when it’s due is voted on an Annual General Meetings (AGMs) or Special General Meetings (SGMs) which are meetings where owners are given advance notice of the date and topics to be voted on. Owners can vote no to a Special Levy, though that isn’t positive for the maintenance building or the value of your investment. If too many people vote no (more than 25% of Owners voting), the Strata Council would have to reconfigure their plan and present different options to Buyers at a future AGM or SGM (this may mean getting further quotes or decreasing the size of the repair, which isn’t always a good thing). Special Levies are often due within a few months of being voted on, and can be split into multiple payments to reduce the burden on owners. Each owners share of the Special Levy is determined by the amount of sqft each owner owns in relation to the total building (otherwise known as Unit Entitlement – this amount is detailed in the AGM or SGM Notice).
Special Levies can be anything from a couple hundred dollars to over $100,000 (seriously!) depending on what needs to be done in the building.
What if you can’t afford a special levy?
Unfortunately, you’ll have to find a way to pay it. Whether that’s taking out a loan, borrowing from family, selling the unit or re-mortgaging, these funds are due. If the Strata doesn’t receive your levy funds, they can fine you and eventually force a sale to recover the funds.
Be prepared for special levies
Every building will see a Special Levy at some point, so you want to make sure that you’re prepared for it. I always tell my clients to keep a few thousand dollars set aside every year so that it’s not a shock to your bank account when a special levy is required. Some Strata’s are raising their monthly strata fees to help mitigate future Special Levies, but even then, you’ll have to be prepared for a higher monthly condo fee and the increased Strata fees won’t be enough to cover all major maintenance projects.
Check out my other post for more information about What to Look for in Strata Docs.