Strata Life - Repairs, Depreciation and Contigency Reserves

[Mininari]

Strata corporations are now required to commit 10% of their annual budget to contingency reserves.

With so many homes under strata title now, and many of us original 'forumers' getting into our 40s, I think it would be good to have a Strata-related thread going -- especially as more freehold properties transform into multi-unit strata.

https://www.timescolonist.com/homes/...bution-7669472
Condo Smarts: New regulations change contingency-fund contribution

October 13, 2023
"As of Nov. 1, 2023, strata corporations and sections will be required to contribute a minimum of 10% of the annual operating fund to the contingency reserve fund when approving the budget at the AGM...."

Author: Tony Gioventu


Do you live in an older building?
Or one from the late 90's that is starting to see those 25-year projects come due?
Are you experiencing any nightmare projects right now due to skyrocketing rates with plumbers / electricians / insurance?

Are you on a strata council?

Are you in a bareland strata?
I can speak from experience being on council in a 1964-build apartment-style condo building in Port Moody, and a bareland strata in View Royal, Vancouver Island.

[WarrenC12]

Originally Posted by Mininari

Are you experiencing any nightmare projects right now due to skyrocketing rates with plumbers / electricians / insurance?

Are you on a strata council?

I am on council in a newer concrete building. Insurance is absolutely killing us. We've had a minor flood that was a problem a few years back but this seems to be totally independent of that. Premiums are extremely high, as are the deductibles, which is a double whammy on homeowners paying their own policies.

I remember a year or two this was raised in the media and the Provincial government was going to "look into it", but it has been crickets since then.

[jollyburger]

Did the rates stabilize after that initial spike?

Jan 2022

Behind the hard-hit condo insurance market in B.C. and Alberta

https://www.canadianunderwriter.ca/i...ta-1004216539/

Jan 2023

B.C. beefs up strata CRF contributions in effort to address insurance costs

Effective Nov. 1, 2023, the minimum CRF contribution amount per year will be 10 per cent of a strata’s annual operating expenses, up from the existing requirement of five per cent.

According to Gioventu, the majority of stratas are already setting at least 10 per cent of their annual operating expenses. Only a very small number of the roughly 34,000 strata corporations in B.C. will be affected by the amendment, he said.

Developers will also be required to include a CRF contribution to a new building's interim budget that is equal to at least 10 per cent of the building’s operating expenses, according to the Ministry of Housing.

https://biv.com/article/2023/01/bc-b...nsurance-costs

[WarrenC12]

Originally Posted by jollyburger

Did the rates stabilize after that initial spike?

Ours did not really spike when everybody else's seemed to, but they have now. The timing is all over the place.

Over the years our insurance premium has gone from about 9.5% of total budget to 21%. Plus higher deductibles so we're getting less coverage for the dollars.

[whatnext]

At some point this is all going to come crashing down. People keep saying "but condos are cheaper to maintain than a house" but I can tell ya that ain't true when you look at some maintenance fees these days.

[VancouverOfTheFuture]

Originally Posted by whatnext

At some point this is all going to come crashing down. People keep saying "but condos are cheaper to maintain than a house" but I can tell ya that ain't true when you look at some maintenance fees these days.

ive done the math before on this exact topic. SFH maintenance was cheaper vs the strata fees.

not to mention all the other benefits of a SFH.

[whatnext]

Originally Posted by VancouverOfTheFuture

ive done the math before on this exact topic. SFH maintenance was cheaper vs the strata fees.

not to mention all the other benefits of a SFH.

Yes, take this condo listing a 1,200 sq/ft three bedroom and you'll have the privilege of paying almost $1,000 a month in maintenance fees.

https://www.rew.ca/properties/542433...ag&sort=latest

If you bought a small house for $200k more (which you can finance) there is no way you'd be consistently paying $12,000/year on maintenance.

[WarrenC12]

Originally Posted by whatnext

Yes, take this condo listing a 1,200 sq/ft three bedroom and you'll have the privilege of paying almost $1,000 a month in maintenance fees.

If you bought a small house for $200k more (which you can finance) there is no way you'd be consistently paying $12,000/year on maintenance.

Sure but strata fees include things like building management, garbage, water/sewer, heat, hot water, concierge maybe, pool, landscaping, whatever.

And you need to compare property taxes.

No doubt strata fees are expensive, but they come with more benefits (and less work). You can't simply look at a number and make a random judgement.

[Vin]

With more natural disasters (floods and fires), insurance companies are paying off big time to affected properties, especially on woodframe structures in the boonies: many of them SFHs. These high-risk properties are close to rivers, edge of woods, etc. Hence in order to recoup, these insurance companies, many from the US, are targetting condo stratas. Shameful I must say.

[whatnext]

Originally Posted by Vin

With more natural disasters (floods and fires), insurance companies are paying off big time to affected properties, especially on woodframe structures in the boonies: many of them SFHs. These high-risk properties are close to rivers, edge of woods, etc. Hence in order to recoup, these insurance companies, many from the US, are targetting condo stratas. Shameful I must say.

Actually, no.

Concrete stratas are racking up huge water damage claims. I have a friend who lives in a building where an offshore owner left the bathroom fan running when they went back to wherever they lived. Fan caught fire, sprinklers activated and ruined the elevators and caused damage for several floors below as the water rushed down the stairwells onto each floor. Hate to think of what the total damage was in dollars.

[djmk]

Originally Posted by whatnext

Actually, no.

Concrete stratas are racking up huge water damage claims. I have a friend who lives in a building where an offshore owner left the bathroom fan running when they went back to wherever they lived. Fan caught fire, sprinklers activated and ruined the elevators and caused damage for several floors below as the water rushed down the stairwells onto each floor. Hate to think of what the total damage was in dollars.

my mom went to bed with the water running. flooded like four suites.

old people. what can you do

[Coldrsx]

Only the TIP of the iceberg given that many condos are now hitting ages where envelopes, windows, mechanical, electrical systems are needing replacement, let alone balconies or structure.

We were able to get our water loss deductible back down to 50k, but it used to be 10k, then 25k, 50k and was 100k for the last few years.

Water loss is absolutely killing condo reserves and this is only going to get worse, not better.

I am going to call it now that many and I mean many condo corporations will be underwater in the next decade.

Government, industry and management firms are going to have to be significantly involved in policy, bylaw and surety changes to avoid dismantling of stratas.

[WarrenC12]

Originally Posted by Coldrsx

Water loss is absolutely killing condo reserves and this is only going to get worse, not better.

I am going to call it now that many and I mean many condo corporations will be underwater in the next decade.

Government, industry and management firms are going to have to be significantly involved in policy, bylaw and surety changes to avoid dismantling of stratas.

Actually I'm not sure it is killing reserves. Deductibles are going up above all but the most extreme water events, with many buildings having $250k deductibles. It's killing individual owner insurance premiums though, and even more so those who don't understand how insurance works and aren't properly covered.

[jollyburger]

Originally Posted by Vin

With more natural disasters (floods and fires), insurance companies are paying off big time to affected properties, especially on woodframe structures in the boonies: many of them SFHs. These high-risk properties are close to rivers, edge of woods, etc. Hence in order to recoup, these insurance companies, many from the US, are targetting condo stratas. Shameful I must say.

Or not.

“About $4-$6 billion a year is paid in Canada in commercial property claims,” April Pittendreigh, vice president of national claims at Gallagher Canada, told Canadian Underwriter recently. “With respect to water, water claims have more than doubled since 2015. But if it’s a large water damage claim — like in a high-rise building in metro areas — those claims cost numbers have tripled since 2013.”

Putting water claims into perspective, the Canadian P&C industry paid out its highest losses due to severe weather in 2016, when it paid more than $5.2 billion (almost three-quarters of that was because of the wildfire in Fort McMurray, Alta.) Severe weather losses have topped more than $3 billion in only one year, according to Insurance Bureau of Canada.

It’s now common to say, ‘Water is the new fire.’ But it might be more accurate to say antiquated water infrastructure — i.e. water claims that arise from overflowing or burst pipes, etc. — drive up claims costs.

Between 2009 and 2017, the Canadian P&C industry spent $1.8 billion on flood claims alone, Pittendreigh points out. In contrast, the industry spent just $400 million on flood claims between 1983 and 2008. That’s a 400% increase in the last eight years compared to the previous 25.

“The point is, it’s not necessarily that we have more floods, it’s that the cost incurred to us and our current expectations in society far exceeded the premiums allotted for them,” Pittendreigh said.

https://www.canadianunderwriter.ca/i...op-1004196593/

[Coldrsx]

Originally Posted by WarrenC12

Actually I'm not sure it is killing reserves. Deductibles are going up above all but the most extreme water events, with many buildings having $250k deductibles. It's killing individual owner insurance premiums though, and even more so those who don't understand how insurance works and aren't properly covered.

It very much is.

Corps are paying cash for their common water events, eroding reserves at an alarming rate. The other issue is with a 50k max limit for individual exposure from an event (at least in AB) and so corps now have to go to court for the remainder.

[Changing City]

Originally Posted by Coldrsx

It very much is.

Corps are paying cash for their common water events, eroding reserves at an alarming rate. The other issue is with a 50k max limit for individual exposure from an event (at least in AB) and so corps now have to go to court for the remainder.

I don't think there's any limit in BC. Strata owners who don't have their own insurance to cover the possible deductable are likely to have a problem. "A strata owner may be required to pay the strata corporation’s insurance deductible. This could be a significant expense as deductibles of $25,000 are common and can range up to $100,000 or more. Strata owner insurance can cover some or all of this cost.

If an insurance claim for a strata corporation originates in an owner’s unit, then the strata corporation can sue the strata lot owner for the deductible if the owner is deemed responsible for the loss."

[Vin]

Originally Posted by whatnext

Actually, no.

Concrete stratas are racking up huge water damage claims. I have a friend who lives in a building where an offshore owner left the bathroom fan running when they went back to wherever they lived. Fan caught fire, sprinklers activated and ruined the elevators and caused damage for several floors below as the water rushed down the stairwells onto each floor. Hate to think of what the total damage was in dollars.

That happens but not raking up billions that insurers have to pay so much for stratas. We know the wood frames are the main culprit.

How can you seriously compare the compensations on some concrete getting wet versus wood frames getting destroyed by floods, fires or winds?

Originally Posted by jollyburger

Or not.

https://www.canadianunderwriter.ca/i...op-1004196593/

I think we were talking about residential concrete versus woodframe buildings. If commercial water claims have ballooned so much, imagine if these were all woodframe structures.

With Climate Impacts Growing, Insurance Companies Face Big Challenges
https://news.climate.columbia.edu/20...ig-challenges/
Between 1980 and 2021, the U.S. suffered 7 or 8 natural disasters per year, on average, but so far in 2022 there have already been 15. Losses from each disaster—drought and wildfires in the southwest, severe storms in the Midwest, flooding in Kentucky and Missouri, and hurricanes in the southeast—have exceeded $1 billion, with the cumulative cost of disasters over the last five years reaching $788.4 billion.

[WarrenC12]

Originally Posted by Vin

That happens but not raking up billions that insurers have to pay so much for stratas. We know the wood frames are the main culprit.

How can you seriously compare the compensations on some concrete getting wet versus wood frames getting destroyed by floods, fires or winds?

The tall towers you are so fond of are the ones that generate the biggest claims. Water flows down with gravity after all, and major leaks and floods can impact dozens of units.

It's not the concrete structure that gets damaged (or the wood frame, really). Those dry out, but you need to tear out and replace flooring, drywall, insulation, etc. People need to move out and those expenses are often covered by insurance.