Are High Strata Fees Bad? Are Low Strata Fees Good?
Updated October 12, 2023 by Mike Stewart Realtor.
When buyers are looking at condos to purchase in Vancouver, the often focus on the maintenance fees or strata fees.
Buyers generally feel that a low strata fee is a good thing and a high strata fee is a bad thing.
In many cases, this is not the correct conclusion. Why?
Strata Fees & Condo Building Maintenance
Condo fees or strata fees are typically used to pay for the maintenance and repair of strata property or the common property of a condo development.
Timely maintenance and repair has a big impact on the value of many things.
This is particularly true of condo buildings, but lets use the example of cars which more people tend to have experience with.
Cars and condos share some similarities, especially when it comes to the relationship between timely maintenance and repairs and how this impacts the condos or cars future value.
Consider the example of two high-end good quality automobiles that were exactly the same and bought brand new.
Car A is never ever taken in for service or maintenance, never washed, oil never changed, fluids never refilled, and nothing was ever repaired on the car including damage and normal wear and tear.
In this example, the maintenance costs would be zero.
Now imagine the same car, we’ll call it Car B.
Car B was bought at the same time and well maintained, washed, serviced, and repaired in a consistent and timely manner by qualified professionals and all the work was fully documented.
The maintenance cost for Car B would have been far higher than for Car A and because it was a high-end good quality car, the maintenance fees may be higher than for other cars that aren’t quite as good.
Which car would you want to buy as a 5 or 10-year-old used car?
Which car would be worth more to you?
Lower Strata Fees Can Cost ME More in the Future?!
Yes, lower condo fees and poor or non-existent maintenance will cost your more than higher maintenance fees!
All condo buildings require maintenance and repairs, especially in rainy Vancouver, BC! If required maintenance and repairs are not done properly in a timely manner they will lead to more and in most cases far more costly problems.
Aside from making life in the building miserable, a lack of proper maintenance and repairs to the building will reduce the value of suites in the building both now and in the future.
Remember the cliche we have all heard a million times – an ounce of prevention is worth a pound of cure.
Higher Strata Fees can save ME Money in the Future?
Yes! Condominium buildings, in order to perform as designed over their predicted lifespan, need to be regularly maintained and repaired by qualified professionals in a timely manner. (INCLUDING brand new condo buildings!)
This work costs money. This money can be raised with either higher strata fees or assessments/special levies (either way the cost to condo owners is the same).
If the work is done correctly, it is at worst the minimum necessary to maintain the value of the suites in the building and will keep maintenance and repair costs lower in the future. At best good maintenance and consistent repairs can result in the building standing out as a good building as it ages that should cause it to be worth far more in future than its less well-maintained neighbours.
How do We Know if Enough is Being Spent on Maintenance?
For both condo buyers and condo owners, the first step is reading the condo’s strata documents. This would include among other things, involve reviewing a depreciation report, any engineering report, and the strata minutes.
A well-maintained condo building will disclose issues and will deal with the promptly and transparently in the document package.
Be wary of buildings that never mention repairs or maintenance in the minutes!
Where is the money going?
Is it being spent on maintenance and repairs? If so, what is being done and what are the issues? For buyers, have your qualified home inspector read the condo documents and relate what they read to what they see physically in the building in terms of maintenance and repairs to ensure the work is actually being done.
For condo owners, be rigorous and ask questions! After all, this is your money that is being spent on your property paid for with your hard earned money!
Other Good Reasons Strata Fees May Be High
Older buildings tend to require more work than newer buildings. Older condos that are not using assessments to raise money for maintenance and repairs may be financing required work with higher strata fees. This is a good thing.
A Concierge is a popular yet relatively amenity in a condo building. For investors, it provides an extra set of eyes on a revenue property and provides many services popular with tenants a landlord would otherwise have to spend time dealing with (Time is money!). For owner/occupiers a Concierge provides extra security, convenience, and accessible contact for building issues and concerns. A pool, sauna, hot tub, bowling alley are popular with tenants and for owner/occupiers may be less costly than membership fees for the same services elsewhere.
Central Air Conditioning, Central Hot Water Heat, and an Internet Connection included in the maintenance fee (Like the Woodwards Building) can also increase a strata fee, but be less expensive for an owner from a total cost perspective.
When Low Strata Fees are Good and High Strata Fees are Bad
Older simple condo buildings without any amenities that have recently undergone major repairs such as rain screening and brand new simple condo buildings very often have lower strata fees. This is because the newer condo building is under warranty and is just newly completed, so maintenance requirements are low as with newly rain screened older condo buildings. For the most part, the lower maintenance fees should be alright as long as there is a budgeted professional maintenance plan and the work is being done properly in a timely manner.
High strata fees are bad when the condo’s Strata Council in a building is paying for expensive Band-Aid measures to avoid an even greater cost to perform far more costly work that is what has been recommended by an Engineering Company or other professionals. Another example of when high strata fees are bad is when certain costs associated with a building may be excessive without a reasonable explanation.
Conversely, be wary of high strata fees used for temporary fixes when more extensive repairs are needed or if costs seem excessive without clear justification.
Factors Influencing Strata Fees
- Building Age: Older buildings might have higher strata fees due to increased maintenance needs.
- Amenities: Features like a concierge, pool, or gym can increase strata fees but also add value and convenience for residents.
- Utilities: Inclusions like central air conditioning or internet can raise strata fees but might offer overall savings for residents.
When to Be Cautious
Low strata fees might be acceptable for newer buildings under warranty or older buildings that have recently undergone significant repairs. However, always ensure there’s a budgeted maintenance plan in place.
Conversely, be wary of high strata fees used for temporary fixes when more extensive repairs are needed or if costs seem excessive without clear justification.
In conclusion, while strata fees are an essential consideration, it’s crucial to look beyond just the amount. Proper maintenance, transparency, and the value offered by the fees are all critical factors to consider when evaluating a condo purchase in Vancouver.
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