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 regards 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 two split the question into two and ask:

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

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 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 $16,766 in additional special levies over 10 years, because stratas aren’t saving enough in their CRF to pay for future capital expenditures.

Next week we’ll look at alterations within strata units, as reported on the Form B. If you have any suggestions for other topics you’d like us to cover, please let us know at [email protected].

A little about us:

1. We are a fully licensed brokerage under the BCFSA, and carry Errors and Omissions (E&O) insurance.
2. We’ve been in business since 2017 and have completed over 1,800 strata reviews to date province wide.
3. Our Review Advisors have firsthand knowledge and experience. They’ve all been practicing strata managers.

A little about our services:

FAQs: How do Condo Clear’s services work?
Pricing: How much do Condo Clear’s services cost?

Here is a Sample Buyer’s Review that you can look through. If you have some time, we would love to setup a quick chat, to talk more about our review process and go over any specific needs you might have.

 

Ryan Stenquist & Magurel Mic

Condo Clear Services Inc.

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