If you are a First Time Buyer or thinking of purchasing your first Condo property in B.C. this article is designed to help you with some of the ‘jargon’ you may come across and some of the things you will need to consider.
What is a Strata or Condominium?
In British Columbia the words Strata and Condominium mean the same thing.A Strata Development is a special way of subdividing a building or land into strata lots together with common property.
A Developer subdivides a building, or land, into strata lots and common or shared property by depositing a strata plan at the Land Title Office.There are 2 types of strata plans; those that subdivide buildings and those that subdivide land.
Strata developments often involve buildings. Typically, the Strata Plan divides the building into 2 or more strata lots with common property, and usually the boundary between lots is midway between the structural portion of each wall, floor or ceiling.
Strata Plans that subdivide land are called Bare Land Strata (BLS) Plans. The boundaries of a BLS exist in a horizontal plane by reference to survey markers, as shown in the strata plan. The difference between a standard land lot and a BLS lot is the presence of common property in the BLS plan.A Developer may provide common facilities like recreation rooms, BBQ sites, roads, etc. when creating a Strata or Bare Land Strata. In a BLS these common assets become the responsibility of the owners to maintain.
When it comes to strata fees the standard strata fees are usually more than the BLS, as they use the additional fees to maintain the roof, painting, windows, paying for common utilities and general maintenance of the entire property, whereas in the BLS the owner usually takes care of their own maintenance.What should you consider before making an offer to buy a condo?
1. The type of ownership: “freehold” or “leasehold” – In most condominium developments, people own the freehold to their strata lots. These are called freehold developments – each owner holds “fee simple title”. We are starting to see more leasehold developments in the Central Okanagan, in these cases, the Developer will lease the property as the ‘leasehold tenant’ for a term of 50 years or more from the federal, provincial or municipal government or some other public authority. The landowner is known as the ‘leasehold landlord’ and the Developer leases the land under a ‘ground lease’ (sometimes called a ‘head lease’) that sets out the terms and conditions. The buyer from the Developer then registers their interest as a ‘ leasehold tenant’
2. The Title to the Strata lot – this may limit the use of the strata lot or affect its value. With the assistance of your Lawyer – check for Easements, Rights of Way, Covenants, Liens and any outstanding mortgages on the property. You need to ensure you will be able to receive ‘free and clear’ title on closing.
3. The Strata Plan – You should receive a copy of the Strata Plan as part of the Strata Information Pack for your Agent. Check the location and area of your strata lot and see if any limited common property features are attached to your strata lot.- E.G. Parking and Storage Lockers. (Note -Limited Common Property means common property designated for the exclusive use of the owners of one or more strata lots).
4. The Disclosure Statement – if you’re buying a new condominium in a development with 5 or more strata lots, the developer must supply a Disclosure Statement under the Real Estate Development Marketing Act. Read the Disclosure Statement and any amendments – they have a lot of important information about the project. If you are buying a ‘used’ condo the current owner will provide you with a copy of the Property Disclosure Statement, which they have completed with their Agent, providing details on the property, such as whether there is still Home Warranty available or whether there are any defects to the property that you should be aware of.
5. The Form B Certificate – on making an offer on a property your Agent will ask the Strata Corporation for a Form B. This is a very important document, as it is an Information Certificate regarding the property which will include the Strata’s finances, the money the strata lot owes for strata fees, and other obligations, such as a special levy. It also shows if the strata corporation has adopted any new bylaws not yet filed at the Land Title Office, and whether the strata corporation is involved in any lawsuits or arbitration.
6. Reading the Financial Statements and understanding the Contingency Reserve – these show the Profit and Loss Account and Balance Sheet of the Strata, together with any special levies to cover major expenses such as repairs. They also show how much is in the contingency reserve fund. (Strata corporations must have a contingency reserve fund to pay for common expenses that usually occur less often than once a year; or do not usually occur.
7. Does the property have a Rental Disclosure Statement ( Form J) – if a Developer intends to rent one or more residential strata lots , under the Strata Property Act he is required to file a Form J with the Superintendent of Real Estate. It must state the number of residential strata lots in the development, number of units rented so far and when the rental period expire; the number of additional units which may be rented and if there is a by law that restricts rentals.
8. What are the Monthly Strata fees and are they likely to rise? – all strata lot owners must pay strata fees for their strata lot. The ‘Schedule of Unit Entitlement’ provides a number that is used in calculations to determine the strata lot's share of (a) the common property and common assets, and (b) the common expenses and liabilities of the strata corporation. The strata fees are based on the strata corporation’s annual budget, so check the current budget. Bear in mind that your monthly strata fees will pay your share of the upkeep for things such as recreational facilities – even if you never use them.
9. What do the Strata Fees cover? – It is important to check what is covered within your strata fees. It will typically cover management of the building, landscaping, recreational facilities, snow removal, trash removal, road repairs and insurance. It may or may not include such things as heat and water, so it is important to check.
10. Are the Strata land and buildings in a good state of repair? – the general rule is that every owner must contribute to common expenses, such as repairs. If the development is in poor repair, you will have to pay your share of the cost to fix it, even if the repairs do not involve your strata lot. This may be by ‘Special Levy’ or increased Strata Fees. By reviewing the minutes of the Strata Meetings (usually the last 2 years) you can see if any repairs are scheduled and if so what your share of the costs will be.
11. Review the Strata Insurance Policy – one of the most important questions a Buyer will have when reviewing this policy, is what is the ‘excess’ on the policy. I.E. If you have to make a claim on the Strata’s insurance, what level are you liable for. As there are more and more claims against insurance policies, many Strata’s look to keep their premiums down by making the excess high. There are many cases now where an owner is not covered for the first $25,000 of a claim, and this is something that needs to be factored in to the buyer’s new insurance policy.
12. Applicable Building Warranty - if the building is less than 10 years old, was it built with Building Warranty. It is advisable to keep at least a copy of the warranty certificate, in case you have to make any form of claim.
13. Municipal occupancy permits and / or final inspection permit – make sure the property you are looking to purchase has this.
14. The bylaws and rules – Bylaws set out owners’ rights and responsibilities and control the use of strata lots and common property. They set out the duties of owners, tenants, occupants, visitors, the corporation and the strata council, as well as the procedures at council and general meetings. Bylaws also allow the strata corporation to penalize owners who violate the bylaws.
The standard bylaws (usually the original by laws) can be changed with a custom bylaw, technically called an amended bylaw. To be enforceable, an amended bylaw must first be filed with the strata plan at the Land Title Office.
A bylaw may restrict an owner’s ability to rent a residential strata lot to a tenant. This is of vital importance if you are buying a property as an investment, and should be one of the first considerations when viewing properties.
Bylaws may also restrict pets or certain age groups. Similarly, the bylaws will likely require you to get permission before making significant changes to your strata lot, such as altering walls or making plumbing or electrical changes.
A strata corporation may also have rules. Rules apply only to the use and enjoyment of common property and common assets. Your Real Estate Agent should always obtain a copy of the strata documents from the strata corporation for you to review, including a set of up-to-date, consolidated bylaws, as well as a complete copy of the rules.
Hopefully this gives you a good idea of some of the questions you need to be asking when buying a Condo, however, if you do have any further questions, please do not hesitate to contact me.
Kind Regards
Trish CenciTel 250 864 1707
