B.C. government raising payments for strata contingency reserve funds
Changes will take effect in November
The B.C. government is ushering in changes it says will help protect owners in strata developments at risk of higher insurance costs due to neglected maintenance needs.
As of Nov. 1, 2023, the minimum amount that developers and strata corporations must contribute to contingency reserve funds will be 10 per cent of the strata's annual operating expenses instead of the current five per cent.
Contingency reserve funds are relied on for emergency expenses and maintenance work and are legally mandatory for strata corporations to maintain.
"The value of adequate contributions to the contingency fund and a well-implemented depreciation report for planning is critical in protecting a strata corporation's assets and reducing the risk of future special levies," said Tony Gioventu, executive director of the Condominium Home Owners Association of B.C., Tuesday in a statement.
According to the province's Strata Property Act, owners of strata lots in a strata plan are members of that strata's corporation. The corporation is responsible for managing and maintaining the property and assets, and its powers are exercised through a strata council.
There are approximately 34,000 strata corporations in the province, and according to the Ministry of Housing, Ravi Kahlon, most of them will not be impacted by the change.
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Kahlon said a small number of strata corporations are underfunding their contingency funds and putting owners at risk of surprise fee hikes and insurance costs.
"While the vast majority of strata corporations are already meeting these requirements, we're ensuring that those outliers are taking steps to protect themselves," said Kahlon.
Allyson Baker, a lawyer who deals with strata properties, said stratas under-contributing to contingency reserve funds is a longstanding problem, which causes more issues when important repairs are needed.
She said it's possible stratas may increase strata fees to make those contributions.
"Stratas are already facing a lot of pressure because of inflation," she said.
But she said it could improve the value of buildings because some buyers look at how much money is in the contingency reserve fund when deciding whether to purchase.
The provincial government is also introducing changes to the Form B Information Certificate that discloses information about a strata and is often requested by potential buyers. As of April 1, 2023, that form must include a summary of the strata corporation's insurance coverage.
"Everyone has a role to play in keeping the strata insurance industry in a healthy state, and that includes strata owners contributing enough to their contingency funds to ensure that their buildings are adequately maintained," said Chuck Byrne, chief operating officer of the Insurance Brokers Association of B.C., in a prepared statement.
The B.C. government tabled legislation amending strata laws in 2020 to address the rising costs of strata insurance.
With files from Ali Pitargue
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