Are you thinking of buying or investing in a strata property? Whether it's a condo, townhouse, or duplex, strata documents are critical to understanding your property and its governance.
Strata Documents Matter
What can you learn about a property from a review of strata documents?
- Strata Fees: How much will you have to pay each month towards common expenses, including for building operations and management, repair and maintenance work, and contributions to the contingency reserve fund?
- Common Property: Which areas within the development are shared among all owners, including amenities (such as fitness facilities and communal patios) and structural elements? What is the general condition of the common property?
- Unit Entitlement: What is your proportionate share of the strata corporation's common property and common assets?
- Operating and Contingency Reserve Funds: How much money is available for management, repairs and maintenance – without having to resort to special levies? Compare these funds to the budget; is the strata corporation able to meet its financial obligations and pay for anticipated common expenses, and how are the funds allocated and prioritized?
- Governance Issues: Are there repeated bylaw infraction complaints for issues such as undue noise, short-term rentals, pets, smoking, or harassment?
Key Documents
What key documents should you request and review before removing subjects?
- Form B Information Certificate: Contains a snapshot of the unit's financial standing, including monthly maintenance fee and amounts owing; alteration agreements; bylaw amendments that have not yet been filed; court proceedings involving the strata corporation; allocated parking stalls and storage lockers; and insurance coverage.
- Strata Plan: The layout and dimensions of your unit, distinguishing between strata lot, common property, and limited common property. Compare this with the listing and marketing information to confirm what specific property is included in the purchase price.
- Bylaws and Rules: Use of property (does the strata allow pets, short-term rentals, barbeques?); permission requirements for alterations and renovations; repair and maintenance obligations; council and general meeting requirements; and more. Bylaws and rules shape the community lifestyle as well as your home life.
- Depreciation Reports: The overall condition and anticipated service life of major components (e.g. roofs, elevators, plumbing, windows, doors, cladding etc.), projected future costs for renewal, and long-term funding scenarios.
- Engineering Reports: Detailed assessment of the building's critical systems and structure. Carefully review any consultants' reports, including end-of-warranty reports which identify defects that require repair or replacement work.
- Strata Insurance: Stratas often have multiple insurance policies that provide coverage for things like property damage to common property and original fixtures. These documents will help you understand the insurance protection available, including deductibles that may affect your personal insurance needs.
- Meeting Minutes: Insight into strata council operations, ongoing issues and disputes, upcoming projects, and community engagement. You should request at least two years' worth of strata council meeting minutes as well as annual and special general meeting minutes.
- Financial Statements: Summarizes the strata's financial condition over the previous fiscal year including a summary of assets and liabilities.
- Annual Operating Budget: Shows how funds are allocated and gives a sense of the strata's priorities and upcoming projects. An effective annual operating budget allocation covers present and future needs, with contingency fund contributions to ensure long-term stability.
- Disclosure Statement: Describes the development, explains how parking stalls and storage lockers will be allocated, and identifies contracts that will bind the strata corporation.
- Long-Term Lease and Assignment Agreements: If parking stalls and storage lockers are designated as common property, a lease and assignment agreement will confirm which stalls and lockers have been allocated to the unit being sold.
- Air Space Parcel Easement Agreement: Sets out rights of access and use of shared property that falls outside of the strata plan; describes obligations to maintain, repair, inspect, insure, and service shared property or assets; and includes cost-sharing formulas for repair and maintenance of shared use areas and equipment.
- New Home Warranty "2-5-10" Insurance Policies and Claims History: Indicate what systems and components are still under warranty, what claims have been submitted to date, and the status of each warranty claim item.
- Lawsuits involving the Strata: Legal actions involving a strata corporation can arise because of a variety of disputes and unresolved issues. Lawsuits are identified and described in the Form B Information Certificate.
Red Flags
What "red flags" should a buyer note for further investigation?
- Significant, deferred work maintenance, repairs or renewals.
- Budget overruns or persistently low contingency reserve fund.
- High insurance policy deductibles.
- Strife between owners, internal politics, and unresolved disputes.
- Unresolved construction defects.
- Legal claims by and against the strata corporation.
- Amenities or shared areas that are costly to repair and maintain.
- Frequent special levies.
How to Obtain Strata Documents
Speak to your realtor about which documents to request from the
strata manager or a council member if the strata corporation is
self-managed. Certain documents may be ordered from the Land Title
Office for a fee.
Legal Review
Buying a home or investment property is a significant financial undertaking. To ensure you have a fulsome understanding of what you are getting into, consider having the documents reviewed by a strata lawyer.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
