Have you been notified of an upcoming special levy? Understanding special levies is imporant so as an owner, sign up to obtain a free Eli Report on your community.
As a new buyer you have probably heard about ‘special levies’…but what are they and how can they affect you?
A special levy is money collected from every owner of a strata building to pay for a specific, shared expense. Levies, or special assessments, can be approved for a surprising number of purposes, such as new roofing, window replacement, HVAC system upgrades, a rain screen, membrane replacement, renovation to the common facilities, etc.
In today’s market, we are even seeing special levies called to pay for a strata’s insurance premium. This is an unusual scenario where a special levy is funding an operating expense of the strata corporation. If your insurance premium has risen significantly, you can obtain an Eli Report to see how your community compares – just sign up for your free report.
What comes as a surprise to many new owners is that a special levy is in addition to their regular monthly strata fees and can sometimes be significant (i.e. tens of thousands of dollars per unit!)
But I pay strata fees already! How is this possible?
Special levies generally occur when a building doesn’t have enough cash in its contingency reserve fund (essentially cash reserves – but known as a building’s CRF) and when an expense has not been included in the annual budget. Typically, this means it was not anticipated or it is an infrequent, major expense.
Who approves special levies?
A supermajority of owners is required to approve a special levy. In British Columbia, a ¾ vote is required to pass a special levy, and the vote must occur at a general meeting or special meeting where the resolution to approve a special levy is required to state:
- the purpose of the levy
- the total amount of the levy
- the method for determining each strata lot’s share of the levy
- the amount each strata lot must pay, and
- the date(s) by which the levy must be paid
How is my share of a special levy determined?
As an owner in the building, you share the burden of keeping it in good condition. Like strata fees, the pro-rata determination of a special levy is based on unit entitlement, not on whether a particular item affects your unit. It also doesn’t matter whether you make use of a facility that may be getting renovated. Every unit has their own “unit entitlement”, which is listed in the building’s official strata plan and is usually included in the minutes of each annual general meeting. Essentially, unit entitlement is your unit’s size as a percent of the size of all units in the strata.
The only exception to this would be when a unanimous vote approves ‘fair division’ of a particular expense that doesn’t align with unit entitlement.
What if I can’t pay?
If you don’t have the money, this means taking out a loan or mortgage. Not paying a special levy on time will lead to interest charges plus facing a lien being placed on your property by the strata corporation. A lien could allow a strata corporation to start a process to foreclose on the property. Unfortunately, you must find a way to pay or you’ll eventually be forced to sell.
How can Eli help?
At Eli Report, we know that special levies can be a great financial burden for new condo buyers and owners alike. Our platform helps real estate professionals uncover any potential discussion that could indicate an upcoming special levy, enabling them to better inform their clients. As owners, an Eli Report helps understand historic and current issues occurring in the community. We also assist owners in understanding how their strata corporation’s budget compares to similar communities.
Understanding special levies is important, so sign up to obtain a free Eli Report on your community – it may shed some light.