Strata property owners in stratas which have been neglecting maintenance and risking higher insurance costs, will have new protections starting November 1, 2023.
Amendments to the Strata Property Act will raise the minimum amount developers and strata corporations must contribute to the contingency reserve fund (CRF), ensuring there are adequate finances for maintenance.
Increasing the CRF
Strata corporations in BC are required to have a CRF to pay for infrequent common expenses, such as maintenance work and emergencies.
These new rules will increase the minimum amount that developers and strata corporations are required to contribute to a CRF, to at least 10 per cent of the annual operating expenses from the previous five per cent.
Developers are required to include a CRF contribution in a new building’s interim budget to be equal to at least 10 per cent of the operating expenses.
Under the BC Financial Services Authority’s Policy Statement 1 (section 3.8), developers must:
“Disclose who is responsible for paying the cost of utilities and other services. Attach a copy of the estimated operating budget of the strata corporation as an Exhibit, including a schedule showing how the budget will be allocated amongst the individual strata lot owners. If the strata corporation has approved a budget at an annual general meeting, attach a copy of its most recent budget as an Exhibit, including a schedule showing how the budget is allocated amongst the individual strata lot owners.
The goal is to prevent developers from advertising unrealistically low strata fees to prospective buyers and avoid unexpected increases in strata fees in the building’s first years.
The new minimums were set with the advice of strata managers and homeowner representatives.
The majority of the approximately 34,000 strata corporations in the province exceed this minimum amount and won’t be affected by this change, according to strata industry experts.
Mitigating risk
BC Financial Services Authority advised in a Report on the State of Strata Property Insurance in British Columbia, that improved maintenance and risk-mitigation practices are needed to reduce more pressure on premiums and deductibles.
For the small number of strata corporations that need to contribute more funds to their CRF to meet the new minimums, this will reduce their risk of strata insurance claims and premium increases, and significant special levies on short notice.
Form B changes
The province is also enacting changes to the Form B Information Certificate.
A summary of the strata corporation’s insurance coverage must be included in the form, effective April 1, 2023. This will make it easier for prospective buyers and strata owners to know whether the property is adequately insured, and the amount of insurance individual owners need to purchase.
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