Understanding the challenges of strata ownership

More than 25 per cent of British Columbians own a strata lot, a reality often driven by affordability constraints rather than preference.

Strata properties, which include condos, townhouses and bare land stratas, offer an entry point into the real estate market but come with unique challenges many owners fail to adequately plan for.

While much attention is given to helping individuals purchase a home, less focus is placed on the financial planning needed to know when—and how—to live financially securely in or even make the decision to transition out of a strata property.

Understanding the challenges of strata ownership

Strata living requires collective decision-making, particularly when it comes to maintenance and repairs. Strata councils rely on owners to vote on key resolutions, including special levies needed to fund major projects such as roof replacements, plumbing upgrades or structural repairs. However, in many cases, these votes fail because owners on fixed or limited incomes are unable or unwilling to contribute to costly repairs.

That dynamic creates significant challenges for strata communities. Deferred maintenance leads to deteriorating property conditions, reducing the overall value of the strata lot. Owners who resist special levies often do so out of necessity, but their decisions can have long-term consequences for everyone involved.

Planning ahead: The role of depreciation reports

Strata owners have access to valuable information that can help them plan for the future. Depreciation reports, which outline the expected lifespan of a building's components and provide cash flow models for upcoming repairs, are a key tool for anticipating future expenses. By reviewing these reports (mandatory in B.C. as of 2024), owners can gauge when significant costs are likely to arise and how much they might be expected to contribute.

Unfortunately, many strata owners take a head-in-the-sand approach, choosing to ignore these reports or dismiss their implications. Emotional attachment to their homes often prevents them from considering alternatives, such as selling or downsizing. This reluctance can lead to financial hardship if a special levy is passed unexpectedly, forcing a sale at a less-than-ideal time when the property’s value is diminished due to deferred maintenance or looming repair costs.

Financial planning for strata owners

Strata ownership is not just about managing day-to-day expenses, it’s about planning for the long term. Owners who proactively engage with a financial planner can explore options and make informed decisions well before a financial crisis arises. Key considerations might include:

• Cash flow analysis: Understanding whether future special levies are manageable within the owner’s current budget.

• Downsizing: Exploring the possibility of moving to a smaller or less expensive property, which could free up equity for other needs.

• Renting or roommates: Generating additional income by renting out the strata lot or taking in a roommate.

• Family support: Discussing options for moving in with family members or receiving financial assistance from relatives.

• Assisted living: Investigating long-term care or assisted living facilities, particularly for older owners whose needs may change over time.

These conversations are critical for ensuring that strata owners maintain control over their financial and living situations. A proactive approach can help them avoid being forced into difficult decisions under duress.

The risks of waiting too long

The consequences of ignoring financial planning are significant. Owners who delay making decisions often find themselves facing reduced property values, strained finances and limited options. If a special levy is passed, those who can’t afford to pay may be forced to sell their units quickly, often at a lower price due to the state of the building or the stigma of pending repairs.

That outcome is particularly concerning for older owners, who will likely need as many financial resources as possible for medical care or assisted living. By the time they are forced to sell, they may have already lost the opportunity to maximize their equity, putting their long-term financial security at risk.

Taking action now

For strata owners, the key to financial stability lies in planning ahead. Reviewing depreciation reports, consulting with a financial planner, and considering all available options can help them make informed decisions about their future. It’s essential to move past emotional attachment and face the realities of strata living with a clear and pragmatic mindset.

Government programs and resources often focus on helping people buy their first homes. However, it’s equally important to provide support for those navigating the complexities of strata ownership.

By fostering awareness and encouraging proactive planning, we can help strata owners avoid the pitfalls of deferred maintenance and ensure they have the resources they need for the next stage of their lives.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.