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Leaky condos part III – a problem risen from the dead

I’ve told you about our experience with leaky condos.  And how the leaky condo catastrophe came about.  But the question now is “Why is this a problem NOW?”

LeakyCondo2

It’s ba-ack!

Because until now, strata councils who run condominium buildings could avoid submitting depreciation reports.  As this story in the Vancouver Sun succinctly puts it:

Lax maintenance has been a long-standing issue for stratas, according to Tony Gioventu, executive director of the Condominium Homeowners Association of B.C., “hence the evolution of the introduction of depreciation reports.”

The province made a depreciation report a requirement of the Strata Property Act in 2011. It contains a detailed assessment of a condo building’s condition, and a schedule for when major components, including its exterior, would need repair.

“Depreciation reports are forcing strata corporations to acknowledge what they have, and forcing them into planning (for repairs),” Gioventu said in an interview.

The requirement was enacted in 2011, but wasn’t put in force until last December to give B.C.’s 30,000 strata corporations time to commission the reports.

When we left our condominium last year the strata council was preparing to create a depreciation report.  It would cost time and trouble, and of course, money, but they knew what the report would say — that the building was well-maintained and had undergone rain screening in 2000, that it had a new roof and would last for many years.

Many, many condo buildings were updated and repaired and will, with proper maintenance, provide safe and comfortable housing for decades to come. And depreciation reports are necessary for all condo buildings, regardless of whether they have had leaks or were repaired and kept up.  It provides a good background on the building, and if you are hoping to sell your condo it is a great asset to show the prospective buyers and their mortgage provider.

According to this story from Daphne Bramham in the Vancouver Sun,

By Dec. 14, 2013, strata corporations must have 30-year depreciation plans that indicate when major infrastructure will need to be replaced, what the maintenance schedules are and the expected cost of each item. The plans must be updated every three years so that owners and potential buyers will have a realistic glimpse of what lies ahead.

So it appears that the problem is solved.  Those condo building who have not kept up their regular (or emergency) repairs will quickly fix everything, and the home owners and future buyers will be sure that the building is sound.

Nope.  Not quite that easy.  There are several reasons why this is a crisis for some condominium owners.

1. Playing by the old rules

When you live in a strata building you pay maintenance fees every month.  These pay for the general upkeep of the building, the shared costs for the gardening, garbage, etc.  But a portion of those fees go into a contingency fund — money set aside for big expenses.  Repairing the garage.  Replacing the boiler.  Stuff that comes up once in a while that you really can’t budget for.  But until 2009 there was a restriction on how large a contingency fund could be.  So even if you convinced the owners to pay an extra, say, $300 a month in maintenance fees to pay for a new roof that would be needed in 20 years (and good luck with that), you simply weren’t allowed to.  So to pay for these really big repairs you need a special assessment.

2. The 3/4 rule

You need three-quarters of the owners of the suites in any strata corporation to agree to any special assessments.  In our old strata building, these special assessments passed rather easily.  A new roof costs this much.  Your share is this much.  Vote.  And we all agreed that we wanted the building to be maintained and we voted yes.  Then we coughed up our share.  I thought that was the way all stratas were run.  But it’s not.  There were 14 suites in our building.  If just four owners voted against the assessment we would not have gotten a new roof.  We were lucky that everyone was on the same side in this issue.  That there were no internal feuds that played out, that people had enough money to contribute.

But if you lived in a strata where people did not want to fix the whole building, where they tried to patch up little problems that turned into big problems, or where they just could not afford to pay those large assessments, your day of reckoning is at hand.

3. The money

At one time, leaky condo strata corporations could avail themselves of an interest-free loan run through the B.C. Homeowner Protection Office.  That program ended in 2009 after 11 years.  So if your problems didn’t show up until after then, or you couldn’t convince your neighbours that they needed to fix the entire building, you will have to find another way to finance that big, big repair bill.  Now.  Before the depreciation report.

4. The market

The insane Vancouver housing market applies to all condo owners — not just those in Coal Harbour luxury penthouses.  For what it costs to move into a two-bedroom 25-year-old condo in the area you could have a very nice detached home in Edmonton or Saskatoon.  So that often means people in those 25-year-old condos are already paying hefty mortgage payments, plus their monthly maintenance payments.  Some people are on fixed incomes, retired or on disability.   They simply cannot afford the extra costs those repairs would require.   And all these people will be quite hooped, one way or another.

They have to repair their homes, but can’t afford to repair their homes, but can’t sell their un-repaired homes and move anywhere else.

So there you have it.  A problem we thought had just gone away was hiding, like that nasty piece of mould on the inside of a wall, just waiting to spread and eat up your life savings.

 

 

About ladywholivesdownthelane

Starting the adventure of building a laneway house in the real-estate jungle of Vancouver, BC

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