June 11, 2012
Do Your Due Diligence Before Purchase
BY PEDRO ARRAIS
Condominium living isn’t as simple as paying a monthly fee and assuming everything is going to be taken care of. Condo living has its benefits, but it also has a number of pitfalls that purchasers need to be aware of before they close the deal, experts say. One non-profit group that assists strata owners and advises potential purchasers is the Vancouver Island Strata Owners Association.
“Buying a strata is like going into business with a bunch of people you’ve never met,” says Derek Norton, the association board chairman. “You have to educate yourself on the strata and do your due diligence to ensure you know what you are getting into.” Here are a few areas that he says can impede happy condo ownership:
It is common to get two years’ worth of a strata’s minutes as part of the real estate sales disclosure. But Norton says one has to take them with a grain of salt. “A lot of minutes are laundered,” he says. “Some stratas don’t like to put anything controversial in the minutes. People should be aware it’s not what the minutes say, but what they don’t [say].”
It all comes down to deferred maintenance. A council may be aware of a problem, an aging roof, for example, but unwilling to deal with it because it is costly. Legislation is in place that would require a strata corporation to complete a depreciation report, but they have until December 2013 to do so.
It’s generally accepted that every condo owner contributes monthly fees to pay for common expenses, such as maintenance and repairs. While low strata fees can seem attractive to new buyers, Norton advises caution. “Low strata fees could mean neglect of maintenance of common property,” he says. “This usually results in a huge special levy in the future.” The problem is that some owners are unable to afford to pay a large, lump-sum levy and are forced to sell their unit to do so. Stratas which don’t put enough money in a contingency fund are more likely to impose special levies from time to time.
“Special levies have become very common,” says Norton. “They can be contentious. The only way to ensure there will be funds to cover major expenses is to ensure strata fees are sufficient to contribute to a robust reserve fund that can soften, or completely remove, the blow [of a big bill].”
Although owners purchase their condominium, what they can do with it is subject to bylaws determined by different stratas. “It may not be a good idea for a person who owns a dog to purchase a condo that has a no-pets policy,” says Norton. “People should read a strata’s bylaws before they close the deal.”
He says buyers should take the time to examine a strata’s bylaws and rules. This will give them an insight as to what the place will be like to live in. Bylaws are akin to the fourth level of government, says Norton. They spell out what the norms and expectations of its inhabitants and the penalties for non-compliance.
Most strata councils try to do the right thing, Norton says, but all too often strata council members are either unaware of or ignore strata law, leading to strife among owners.
“The strata council has a legal duty to deliver a standard of care to the rest of the strata owners,” Norton says. “Unfortunately, most new councils are inexperienced and have to learn by their mistakes. The challenge for many owners is to find a council that is up to the job. Everybody wants to ensure their investment [in the condo] is taken care of.”
Victoria Times Colonist