Strata Tip of the Week - Does The Strata Have Enough In Its CRF?

One of the most common questions we get from our clients in regard to the strata corporations they are considering purchasing into is:

Does this strata have “enough” in its Contingency Reserve Fund (CRF)?

What a lot of people don’t understand is that, depending on what is being asked, this question can lead to two significantly different answers. It is therefore better to split the question in two and ask:

1. Does this strata have enough in its CRF to meet the minimum legislated requirement?

AND

2. Does the strata have enough in its CRF to pay for all its future capital expenditures, without having to ask the owners for additional funding via special levies.

Answering “Yes” to the first question does not guarantee a “Yes” to the second. Just because a strata has enough in its CRF to meet the minimum legislated requirement does not necessarily mean that it has enough to pay for all future capital projects, often called the “future capital expenditures”.

To best way to determine whether the strata has enough in its CRF to avoid future special levies is to:

• Evaluate the strata’s current CRF savings
• Determine the amount of regular contributions the strata is making towards its CRF, and
• Review the estimated expenses, provided in a strata’s most recent depreciation report

Only by evaluating these three variables, can we determine whether the strata is likely saving enough to avoid future special levies.

To enable our clients to make more informed decisions about their purchases, we calculate the estimated amount of special levies, specific to the unit, that may occur over the next 10 years, in all of our strata document reviews. These are always based on the estimates provided in the strata’s depreciation report.

Because we have the opportunity to evaluate so many different strata corporations all across BC, we are also able to provide our clients with various market averages, which enable them to better evaluate how the strata corporations they are looking to purchase into compare with others around the province. Based on hundreds of reviews we have completed:

• Buyers can expect, on average, to pay about $18,349 in additional special levies over 10 years, because stratas aren’t saving enough in their CRF to pay for future capital expenditures.

Disclaimer: The information provided is for general purposes only. It is not intended to provide legal advice or opinions of any kind. No one should act, or refrain from acting, based solely upon the materials provided, any hypertext links, or other general information without first seeking appropriate legal or other professional advice.