Special Assessments/Levies When Selling?
If you have not heard of the term ‘Special Assessment’ or ‘Special Levy’ it’s high time you new what these terms meant. To cut to the chase, people usually associate these terms with an owner paying more money.
Right off the bat, we will point out, these terms only apply to Strata properties. So you townhouses and condos out there should listen up. Houses, you’re good as you deal with all of your own repairs/replacements. Fun fact for you, a Stratified property can be 2 or more properties.
Moving on, what do these terms ACTUALLY mean? Well, there are 3 terms you should know to understand this:
Well that’s all well and good, but how does this affect me when i’m selling my condo unit? Well it’s like this - If a Special Levy is coming, you will fall into one of the following categories:
Already Approved - If a special assessment is already approved, YOU as the current seller will be liable to pay this cost. You will usually see on your Form B or in the bylaws, that as soon as a levy is approved, the current owner is responsible for the entire amount and cannot sell out of the unit and expect the new buyer to pay. If the fee is not paid, a lien may be placed on your unit and the transfer in title (therefore completion of sale) cannot happen until this is paid off!
Being Discussed - if a potential levy/assessment is coming, but has not been agreed upon by council, the new buyer could be responsible for this. For example, at your January Annual General Meeting (AGM), it is brought to the attention Plumbing may need to be reviewed over the next year. If you sell your unit then the contract completes in in June, if a fee is not brought to the table of discussion until October, then the new owner will be responsible for paying.
A Fee is agreed, for work to start later - If your january meeting takes place and a fee is agreed upon, with work starting in August later that year. Regardless of whether you sell your home before or after that work has started, you as the seller will be responsible for that fee. As a rule of thumb, if a fee is agreed upon, at the time of agreeance, the current owner is responsible! This also applies if the fee is due to be paid in installments. From the moment of agreeance, the entire amount is owed by the seller!
These fees are not necessarily something to be afraid of. In fact, you want to buy into a very proactive building that is keeping itself in great condition. If the building is not proactive, that $5,000 fee today, can easily be $20,000 in 5 years time!
We hope that has given you some food for thought, if you have any further questions, let us know and we’ll get these covered right away!
Until next week.
If you have not heard of the term ‘Special Assessment’ or ‘Special Levy’ it’s high time you new what these terms meant. To cut to the chase, people usually associate these terms with an owner paying more money.
Right off the bat, we will point out, these terms only apply to Strata properties. So you townhouses and condos out there should listen up. Houses, you’re good as you deal with all of your own repairs/replacements. Fun fact for you, a Stratified property can be 2 or more properties.
Moving on, what do these terms ACTUALLY mean? Well, there are 3 terms you should know to understand this:
- Special Assessment - if some work needs to be carried out on a Stratified property, such as updated paintwork, general repairs or installation of door kick plates etc. This is usually taken care of by the Contingency Reserve Fund (CRF). We’ll get to that below, but when these repairs are substantial and would use up all, or a vast majority of, the Contingency Reserve Fund, a Special Assessment of the work will be carried out on the basis a lump sum will be charged to handle repairs. This is usually for larger areas of work such as rainscreening, roof replacements and more.
- Special Levy - Once the above assessment has taken place, usually three quotes will be sourced by the Strata Council, and a decision will be made on how to proceed with the work. This decision can be anything from - Is a full replacement necessary? Should it just be a partial repair? What contractor/quote should we go with? Once this has been agreed upon, the cost of the repair/replacement will be assessed. This assessment will lead to a vote. The result of this vote can be one of three ways - Should the cost be taken from the Contingency Reserve Fund, Charged as a Special Levy or a mixture of both? If the Special Levy option is picked, the cost of the quote will be divided based upon unit entitlement (worked out vi square footage of each unit) and dispersed amongst the owners to pay for.
- Contingency Reserve Fund - This is a fund which your monthly maintenance fees will contribute too. As a rule of thumb, there should be $1,500 - $2,000 in the Contingency Reserve Fund for each unit in the complex. This fund is to manage operating expenses in the building, along with repairs required to the building or it’s associated equipment.
Well that’s all well and good, but how does this affect me when i’m selling my condo unit? Well it’s like this - If a Special Levy is coming, you will fall into one of the following categories:
Already Approved - If a special assessment is already approved, YOU as the current seller will be liable to pay this cost. You will usually see on your Form B or in the bylaws, that as soon as a levy is approved, the current owner is responsible for the entire amount and cannot sell out of the unit and expect the new buyer to pay. If the fee is not paid, a lien may be placed on your unit and the transfer in title (therefore completion of sale) cannot happen until this is paid off!
Being Discussed - if a potential levy/assessment is coming, but has not been agreed upon by council, the new buyer could be responsible for this. For example, at your January Annual General Meeting (AGM), it is brought to the attention Plumbing may need to be reviewed over the next year. If you sell your unit then the contract completes in in June, if a fee is not brought to the table of discussion until October, then the new owner will be responsible for paying.
A Fee is agreed, for work to start later - If your january meeting takes place and a fee is agreed upon, with work starting in August later that year. Regardless of whether you sell your home before or after that work has started, you as the seller will be responsible for that fee. As a rule of thumb, if a fee is agreed upon, at the time of agreeance, the current owner is responsible! This also applies if the fee is due to be paid in installments. From the moment of agreeance, the entire amount is owed by the seller!
These fees are not necessarily something to be afraid of. In fact, you want to buy into a very proactive building that is keeping itself in great condition. If the building is not proactive, that $5,000 fee today, can easily be $20,000 in 5 years time!
We hope that has given you some food for thought, if you have any further questions, let us know and we’ll get these covered right away!
Until next week.
Jay Mcinnes
T: 604.771.4606
jay@mcinnesmarketing.com
Ben Robinson
T: 604.353.8523
ben@mcinnesmarketing.com