New Strata Rules

There are new strata regulations in BC, here’s the PDF and here’s an article with an overview:

In October 2009, the B.C. government passed the Strata Property Amendment Act, Bill 8. Under the act, many of the changes taking place were to be introduced by implementing regulations. Unlike Bill 8, which required the approval of the legislature, regulations are approved by provincial cabinet as an order in council. Within Bill 8, there were provisions that affected long-term planning and information certificates. Part 15 of the bill, applied to long-term planning, has just been adopted through the regulations as mandatory depreciation reports.

A depreciation report is basically a planning tool used by property owners (the strata corporation) to clearly understand what the strata is responsible for maintaining and repairing as part of its building system (a physical component inventory); the age of the building system; the projected life expectancy; when it should be planned for renewal; what it will cost when the time comes to renew the component; and how the strata will pay for it.

The new regulations provide a two-year window for strata corporations to comply with the mandatory requirement – by Dec. 13, 2013. Strata corporations of less than five units will be exempt, and strata corporations of five strata lots or more that wish to be exempt from the requirement must essentially pass a ¾ vote at an annual or special general meeting for each one-year period the depreciation report is required to be obtained.

Read the full outline in the Province newspaper.

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crabman
Guest

It's about time! Compared to most cities in North America, the strata fees for Vancouver condos are pretty low. (The last two buildings I've lived in had special assessments of $20k to replace building membranes and $120k to replace exterior walls). If the strata is forced to keep a reasonable contingency fund, you can be sure strata fees will go up significantly. Maybe this will be the straw that breaks the camels back?

patriotz
Member

I think the primary motive for condo ownership, for both owner-occupiers and investors, is speculative, i.e. selling at a capital gain. Even more so than for houses.

Increasing condo fees puts more maintenance expenses up front and eliminates the opportunity to unload them onto the greater fool, i.e. next purchaser. So this would make condos less attractive to speculators and give the unwinding another nudge, as crabman says.

space889
Member
space889

@crabman: Isn't there a law that said contingency fund can't exceed 1 year operating cost?

Personally I think that's pretty stupid and it guarantees special assessments for regular capital maintenance but that could be the idea, keep the strata fee low and stick it to the next buyer since hey, they are the ones getting the benefit of the new systems/repairs right?

This new rule will probably make it a lot harder for older units nearing the end of the major components useful to sell, unless the buyer is ignorant of this and don't request s copy of the report.

However I really wonder if the government passed this for the benefit of condo owners and buyers or really to generate more revenue for their construction industry buddies.

Patiently Waiting
Member
Patiently Waiting

Back then=2008

"Back then, businesses were charged more than six times the rate that homeowners were.

The ratio is now 4.3 to 1.

However, Vancouver homeowners still pay among the lowest rates in the country, at $4,180 in 2011 total property taxes for a million-dollar house, compared with the $7,930 a Toronto homeowner would pay on the same house, or the $13,960 a Winnipeg homeowner would pay."

http://www.theglobeandmail.com/news/national/brit

Now we know why most jobs seem to be linked to real estate while other industry suffers. Both strata fees and property taxes are set too low, ultimately at the expense of everyone else.

M-
Member

@space889: IIRC, BC strata laws say that if the contingency fund is less than 100% of the annual operating budget, the strata corporation has to set aside at least 10% of the annual budget to build up the contingency each year.

Assuming, of course, that the strata corporation is capable of making reasonable budgets…

M-
Member

@Patiently Waiting: [i]"Both strata fees and property taxes are set too low, ultimately at the expense of everyone else."[/i]

Another way of looking at it is that our home prices are too high– a million-dollar house in Winnipeg is a heck of a lot nicer than the average million-dollar crackshack in Vancouver…

patriotz
Member

@Patiently Waiting:

"However, Vancouver homeowners still pay among the lowest rates in the country, at $4,180 in 2011 total property taxes for a million-dollar house"

But that's to be expected under BC's assessment system where municipal spending is determined first and rates are set to raise this money from the assessment base. In other words, the high prices necessarily mean low rates.

A million dollar house in Vancouver is something altogether different from a million dollar house in Windsor (assuming there are such houses).

What really matters is the tax rate against the economic value of the property, i.e. its rental value. I think on that benchmark Vancouver still comes in on the low side, but not all that low.

Troll
Guest
Troll

http://www.theglobeandmail.com/report-on-business

Merrill joins the fray…

Canada’s housing market shows the “classic signs of over valuation, speculation and over supply,”

Mainstream commentary has become decidedly more bearish and alarmist over the past year. This is contrast to contrary indicator Garth who has a sore neck from all the backpedaling on his repeated failed predictions.

Anonymous
Guest
Anonymous
Having lived in strata for 20 years (now renting) I have found the problem with stratas is they use contingency reserve funds for non essential things. For example a place I used to live redecorated the party room with new furniture, etc using a large chunk of the contingency reserve fund. The previous year they did the lobby and used the contingency reserve fund. Then once all funds were depleted the building needed envelope work and a special assessment was put in place for repairs. I found a similar pattern with all stratas. Like most people they have difficulty saving and like to spend. Personally I think strata councils should be paid to get the best members on board. Most strata councils are made of of fools with little or no experience in managing a building. Think about your average… Read more »
registered
Member
registered

8 Troll Says: "This is contrast to contrary indicator Garth who has a sore neck from all the backpedaling on his repeated failed predictions."

Short to medium term predictions are a fool's game in this environment. Its current state is determined by government stimulus and interference. Second guessing what a politician or bureaucrat decides tomorrow is a much different and harder game than trying to predict natural market directions. The only thing you can know for certain is they can't keep it up forever.

Anonymous
Guest
Anonymous

@patriotz: ….A million dollar house in Vancouver is something altogether different from a million dollar house in Windsor (assuming there are such houses)….

I'd go one further than that: Put up two pictures – one of a Vancouver dump (that limits the choice to about 80% of the homes in the lower mainland) and one of an equivalent Windsor dump. I guarantee the taxes on the Vancouver dump will be much higher.

jesse
Member

@DEFAULT NAME: The contingency fund is more meant for capital replacement. Furniture or redecorating could be considered a capital expense but that does not absolve proper allocation for the other stuff.

It isn't a ton of work to make a half-decent usable capital plan but I'm sure most strata don't have one.

Alum
Guest
Alum

U.S. 10-Year Yields May Fall to 1.5% in 2012, Deutsche Bank’s Konstam Says

Good news for people willing to take a mortgage. It is now cheaper than ever.

http://bloom.bg/vv9n0f

Alum
Guest
Alum

U.S. Homebuilder Confidence Rises a Third Month to Highest Level This Year

Confidence among U.S. homebuilders rose in December for a third consecutive month, a sign of stabilization in the housing market.

http://bloom.bg/sUIuy9

Troll
Guest
Troll

@Alum: Locally, Can 5yr bond yields down to a record low 1.17%. 5 year fixed mortgages down about 25bps in the past couple of months.

Early this year I made the prediction that rates would march slowly upwards, from the then current 2.5%. It was the only time BPOM ever agreed with any of my posts. Funny that he agreed with the only time I've been wrong.

For those who said "Rates can't go any lower" when they were 2.5%, wow.

Troll
Guest
Troll

@fixie guy:

Short to medium term predictions are a fool’s game in this environment.

You should put that disclaimer on all your posts.

cico
Guest
cico

Bubble! , Bubble!, what Bubble?

Canadian housing market showing signs of a classic bubble: Merrill Lynch.

http://www.calgaryherald.com/business/real-estate

jesse
Member

@Troll: At this point Canadian households are near the cusp of an unsustainable debt spiral. With lower rates that makes the job of the government to rein in credit even more difficult to pull off.

In my view a lower 5y rate portends more lending restrictions in the coming months to counteract the "affordability" improvement. I'm starting to think Carney is taking the whole "price-rent" thingy seriously!

Yalie
Guest
Yalie

@jesse:

What the government really wants is the "Goldilocks" scenario of flat prices for the next few years until rents and incomes catch up to prices. Unfortunately that's tough, if not impossible, to engineer. They were clearly too loose with their last few rounds of mortgage restrictions, since prices just kept going up.

Right now I'm not sure they're going to do anything, since there's a good chance prices have peaked anyway. So reducing amort durations or increasing down payments at this time might make the "problem" of falling prices even worse.

If I had to guess I'd say they've already decided to do nothing this spring in the hopes that the continuing easy money will cause prices to flatline rather than dive. And maybe that will actually work, though I doubt it.

Devore
Member
Devore

@Troll: Funny you should mention Garth. I was just thinking of him as a real estate contrary indicator. Can't remember the last time he used "vulching" in a sentence.

Devore
Member
Devore

Can't really argue with these new strata rules. They're essentially enforcing better strata management. Inventory your systems, their condition, life span, and maintenance and replacement costs. And since you know these, also how you're going to pay for them. For buyers, it's like having a house inspection report with a 10 year maintenance budget. I wonder how accurate and up to date these will be, and what we'll see in terms of enforcement. How do you pursue under the strata act? Private action? Government?

patriotz
Member

@Yalie:

"What the government really wants is the “Goldilocks” scenario of flat prices for the next few years until rents and incomes catch up to prices."

As we know, incomes are already falling and that's before TS has HTF in earnest in China and Europe.

I think the bears are going to have Goldilocks for dinner.

I agree that the Cons are probably going to ignore the debt problem and just hope it doesn't blow up in earnest before the next election. That strategy has worked before.

Anonymous
Guest
Anonymous

@patriotz:

I agree that the Cons are probably going to ignore the debt problem and just hope it doesn’t blow up in earnest before the next election. That strategy has worked before.

Is that like playing russian roulette and the first spin of the chamber resulted in a click? Time for another spin…

jesse
Member
@Yalie: "If I had to guess I’d say they’ve already decided to do nothing this spring in the hopes that the continuing easy money will cause prices to flatline rather than dive" There are big risks with such a position. If debts increase in the face of lower rates in 2012, it may be game over. I think the government will act to mitigate that risk: pay a lot now or pay a lot more later. Despite all the problems in the US, they are slowly deleveraging and absorbing previous speculative excesses. That will run its course, even if it takes a few years. If they are successful at this and construction employment starts returning to normal, rates are going to rise and Canada could be caught significantly short. In my view Canada best to try to reduce debt loads… Read more »
registered
Member
registered

@16 Troll Says: "You should put that disclaimer on all your posts."

Given your consistent history of useful and informative posts, I'm humbly chastised.

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