MORTGAGEBROKER mbabc.ca summer 2014 | 23
stratafinancing
Financing
Strata Corporations
THERE IS GROWING INTEREST IN, and
awareness of, the ability of strata corporations
to borrow to fund repairs or improvements to
common property.
e strata corporation is a democratic
entity operated by the strata council, a group
of owners elected by the owners at an annual
general meeting. In most cases a professional
property management company implements
the decisions made by council or if required,
by the owners voting at an
AGM or special
general meeting (SGM).
Any decision requires
a resolution to be passed by a three-quarter
vote, defined as a majority vote at a meeting
with 75 per cent of owners in attendance.
is voting structure presents a major hurdle
in the decision-making process of the strata
corporation and in the business of financing
strata corporations.
To carry out its responsibilities, the strata
corporation collects monthly maintenance
fees. ese fees fund the recurring expenses of
the property as a whole, such as fire insurance,
gardening, garbage collection and minor
repairs and maintenance. e monthly fee
also has a portion that goes to the contingency
reserve fund (
CRF). e CRF is intended to
be a 'rainy day' savings account, however, in
trying to keep their monthly fees as low as
possible most strata corporations are guilty
of underfunding this account. When the
'rainy day' arrives in the form of major repair
or replacement, such as roof replacement,
balcony repair or replacement, or building
envelope replacement, the
CRF is invariably
insufficient to fund the work. Historically, in
this situation the strata corporation will look to
its owners, proposing a vote on a special levy
resolution at either an
AGM or SGM. If passed,
the special levy requires the owners to pay
their share of the cost to complete the project
based on the unit entitlement of each strata
When the contingency reserve fund is insufficient for major repairs or maintenance,
there are other options for cash-strapped strata corporations
BY BRIAN CHATFIELD
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