Everything you need to know about a Special Levy

If you are buying a strata property in Greater Vancouver understanding a Special Levy is very important.
Special levies can put you in a very tough financial situation if you are not aware of what they are or when they are coming. It’s important to know the details when you are buying and selling strata properties in Greater Vancouver.

This blog post explains in detail what documentation you will need to spot a special levy as well as whether or not one will be coming up in the next few years.

What is a Special Levy/Assessment?

The definition of a special levy is money collected from strata lot owners for a specific purpose and for shared common expenses. It is money collected from the strata lot owner in addition to the monthly strata fee. A special levy must be approved by at least a 3/4 vote of the strata corporation owners. The money from your monthly strata fees is used for the buildings operating fund as well as the Contingency Reserve Fund (CRF).

A special levy/assessment is needed when the buildings operating fund and contingency reserve fund have insufficient money available to finance a special project. Examples of a special project could be a failing roof, rotting balconies, new pipes etc. The list goes on but some of these projects can be very expensive.

What is an Operating Fund?

The operating fund is what is used to pay the yearly common expenses that maintain the building. This includes property manager fees, gardening, garbage collection, water, building insurance, maintaining common property, upkeep of amenities, repairs, cleaning and more.

What is a Contingency Reserve Fund?

The Contingency Reserve Fund (CRF) is typically used to pay expenses that occur less than once a year. This might include things like elevator repairs, a new roof, lobby upgrade, paint work etc. The operating fund and the reserve fund or directly related as the money left over after the operating budget is in place goes to the CRF. The larger the reserve fund becomes the more money is available for say a rainy day.

How can I avoid paying a special Levy?

The first thing you should do is hire and experienced real estate agent that can represent you on the transaction. The real estate agent will request documentation from the Seller. The documentation that you are going to need in order to spot a special levy is 2 years of strata minutes including Annual General Meetings and Special Meetings, Form B, Financials, Depreciation Report and a Property Disclosure Statement.

Strata Minutes – 2 years of strata minutes will give you a true understanding of the building. Anything from noise complaints, leaks, rodents will all be included. The minutes take some time to read over but this is all a part of the process. Your real estate agent will also look these over as well as a good home inspector.

Form B – The form B is loaded with valuable information. The most important information you can take from it regarding levies is up to date contingency reserve fund total. Knowing how much is in the reserve fund can help you calculate upcoming costs and if the building is properly funded. The form B also has a Special Levies approved and due line. This will tell you how much the current owner owes as well as open the door to more questions. You will want to dig deep as to why a special levy was approved vs whatever it is being funded by the CRF.

Depreciation Report – The depreciation report is an estimation of what the future of a building is going to look like. It outlines the key components of the building, the life span and replacement costs. The engineers that put together the report cross reference it with the CRF and come up with funding models on how to get the building in a good standing financial position. The deprecation report is used as a guideline. It’s not an exact science but is a very important tool to learn about the inner workings of a building and spot red flags early. 

Financials – The financials of the building are also really important to go over. Most importantly with special levies you can find out how much is being contributed to the CRF fund here. If you cross reference this amount with the depreciation report you will be able to determine if the older components of the building can be properly funded with out paying special levies. Taking it a step further if you determine the unit entitlement of the place you are looking at you can figure out exactly how much that unit might owe in special levies over a period of time.

Property Disclosure Statement (PDS) – This document is mostly to determine information on the home specifically. One of the questions though asks about the history of Special Levies in the last 5 years. If you can see that they have paid several special levies it might be a sign of things to come.

How are special levies/assessments approved?

Special levies will be presented at the annual general meeting or at a special meeting. A case will be presented to the owners and a ¾ vote is needed to approve it. Not everyone will pay the same amount. The unit entitlement basically the size of the unit will determine the amount paid as a percentage of the total.

An example of this would be a special levy of $100,000. If the total building is 50,0000 units of entitlement and your unit is 1000 the equation would be as follows:

Unit Entitlement 1000/ Total Building Entitlement 50,000 =.02 X Special Levy $100,000 = Unit Owes $2000
So in this example the special levy would cost this particular unit $2000. Typically speaking the payments are broken up over several due dates.

Most importantly use an experienced Realtor?

With many years of experience in the North Vancouver Real Estate Market, The Wallace Green Real Group has worked with clients to buy strata properties including condos, townhomes duplexes and more. We are North Vancouver Real Estate Experts and we have in depth knowledge representing buyers on strata properties.

See what our clients are saying about us on Google and interview us to see if we are good fit to help you to buy your home.

For more information on the North Vancouver real estate market contact your North Vancouver real estate experts today.