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Strata Tip of the Week – Understanding Surpluses and Deficits in Strata Corporations

In British Columbia, strata corporations must hold an annual general meeting (AGM) each year, at which owners must approve a budget for the upcoming fiscal year. The operating budget covers the strata’s regular expenses, such as utilities, cleaning, insurance, landscaping, and routine maintenance. It also includes planned contributions to the contingency reserve fund (CRF).

Even with careful budgeting, actual expenses rarely align perfectly with the approved budget. As a result, it’s not unusual for a strata to end the year with:

A surplus, which occurs when a strata has spent less than it budgeted for the fiscal year
A deficit, which occurs when a strata has spent more than it budgeted for the fiscal year

What Stratas Typically Do With a Surplus

When a strata ends the fiscal year with a surplus, the owners decide how it will be handled, usually at the annual general meeting. Common options include:

Keeping the surplus in the operating fund to maintain cash flow for day-to-day expenses
Applying the surplus to the next fiscal year’s budget, often to reduce the need for a strata fee increase
Transferring the surplus to the contingency reserve fund (CRF) to support future repair and replacement projects

Each option affects future budgets and long-term planning in different ways. How surplus funds are used can provide useful insight into how a strata approaches financial planning over time.

What Happens When a Strata Has a Deficit

When a strata ends the fiscal year with a deficit, section 105(2) of the Strata Property Act requires the deficit to be eliminated by the end of the next fiscal year. This means the owners must decide how the shortfall will be addressed. Common options include:

Incorporating the deficit in the next fiscal year’s budget and recovering it through strata fees
Approving a special levy to pay off the deficit as a one-time amount
Using funds from the contingency reserve fund (CRF), with owner approval
Using funds from the day-to-day operating fund, with owner approval

How a deficit is resolved can affect future strata fees and reserve planning. Reviewing financial statements and meeting records helps owners, councils, and buyers understand how these decisions were made. This is a common focus when we review strata documents at Condo Clear, particularly when looking at how short-term decisions affect longer-term planning.

The Risks of Using CRF Funds to Pay Off Operating Deficits

Using CRF funds to eliminate an operating deficit is permitted, but it changes the strata’s financial position. When CRF funds are used this way, less money remains available for future repair and replacement projects.

If this approach is used repeatedly, it can lead to:

Reduced Reserve Funds for Major Projects – Less money available in the CRF when major repair and replacement work is required
Increased Likelihood of Special Levies – A higher likelihood of special levies when those projects arise
Less Clarity Around Budget Sustainability – Greater difficulty assessing whether the operating budget is realistically funded

In the short term, strata fees may appear stable. Over time, however, the underlying costs often resurface through higher strata fees, depleted reserve funds, or special levies tied to major repairs.

Reviewing strata documents over several years, rather than in isolation, often makes these risks much easier to see. Comparing year-end financial statements, AGM minutes, and annual budgets together can reveal whether CRF use was a one-time response to an unusual expense or a recurring way of addressing operating shortfalls. This is the type of multi-year review we routinely help clients work through at Condo Clear.

Understanding how surpluses and deficits are handled provides valuable insights into how a strata manages its finances and plans for the future. Whether you’re an strata owner, council member, buyer, Realtor, or real estate professional, reviewing budgets, financial statements, and meeting records together helps put these decisions in context and reduces the risk of surprises.

At Condo Clear, we review strata documents every day and share these insights to help buyers and owners feel more confident navigating strata living. Sign up for our Strata Tip of the Week Newsletter to stay up to date with the latest strata news and articles.

That’s it for this week. If you have any suggestions for other topics you’d like us to cover, please let us know at [email protected].

Author: Mugurel Mic; Last Edited: January 23, 2026

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.

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