As “shareholders” within a Strata Corporation, each owner must pay Strata fees in order to support the operations and maintenance of the common property. This money is managed under two separate headings.
The first is the Operations account and the funds are used for the day-to-day functioning of the Corporation’s business. Some examples would be grounds maintenance, electricity for exterior and common area lighting and property taxes. Like any other business, annual budgets are developed for the various expenditure categories and approved by the owners at the Annual General Meeting.
The second heading is the Contingency Reserve Fund (CRF) and the Strata Property Act (SPA) has a number of specific rules governing the collection, accumulation and use of these funds. As the title implies, the CRF has traditionally been used for emergency or unforeseen expenses not anticipated in the Operations Budget.
Until the present Act became law in 1998, Strata Corporations found it very difficult to set aside funds under either heading for the most critical part of sustaining any property’s value and physical health: Major maintenance, repair & replacement projects.
Those Corporations, who recognised the need for funds to address these long term maintenance requirements, had to go to great lengths to set them aside in such a way as to not break the law. Many others having made little effort to do so, are forced to apply a Special Assessment to all the owners, often for several thousand dollars each year over and above the regular fees, to address major repair and replacement work.
Fortunately, the latest Act allows Strata Corporations to plan for, and set aside specific funds within their CRF to address major projects such as roof replacement, exterior painting, common area carpet replacement and many others that can cost significant amounts.
In future columns we will discuss the planning process for major maintenance projects and strategies for developing annual and long term property maintenance plans.
John Grubb is a Property Maintenance Consultant serving Strata Corporations and building owners on Vancouver Island.
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