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Learn about Strata v Freehold, How a Strata Works & Where the Fees Go

Freehold Strata

A strata home can be a detached house, a condo/apartment or a townhouse. When you purchase a strata property you own your property just as you would with a detached house. Buying and selling your strata home is just the same as well. A strata property can either be a freehold or leasehold. Most strata homes in British Columbia are freehold. With a freehold strata, when you buy the strata lot you acquire a fee simple title. In other words, you own the property just like any other conventional home until you decide to sell it.

Leasehold Strata

The other type of strata property is a leasehold. In this case, the developer leases the land from the government for a period of at least 50 years and builds on it. When someone purchases a leasehold property, they are buying the right to live in that property until the lease expires. At that point the landlord needs to purchase the property back from the buyer. Leasehold properties have a diminishing value because if you buy it 100 years left on the lease, it’s more valuable than when you sell it with only 20 years left.

Strata Corporation & The Strata Council

The strata corporation is the legal entity responsible for managing, maintaining and insuring the common property by using the strata fees collected. The strata council is the body governs the strata corporation and they are voted in by the owners. Anyone that owns a property in that strata can get voted in to be part of the strata council. Any owner can be elected whether they live in their unit, it’s vacant or rented out. Big complexes usually hire a management company to sit in on strata meetings to give their professional advice.

The council typically meets once a month to go over budgets, review any issues that might have arisen and give out fines to units that didn’t adhere to the bylaws. The most common reason for a fine by strata council is a noise complaint.

Strata Fees

Almost every strata property will come with a monthly strata fee that needs to be paid to the strata corporation. This strata fee insures that the strata corporation has the money to do what they are responsible for. You will have access to the common areas which could include a pool, hot tub, gym and a theatre room.

Some other things your strata fee can cover are elevator maintenance, onsite caretaker, landscaping, garbage pickup, heat and hot water among other things.

Contingency Reserve Fund

Part of your strata fees will go to cover the above expenses and the rest will go into a contingency reserve fund to cover potential future expenses such as a new roof, to repaint or maybe to buy new equipment for the common areas. This fund will be spent at the discretion of the strata council. If it’s over a certain amount then the strata council can’t spend it without having a vote first among all the other owners.

Special levies

The money paid into the contingency reserve fund will be used for planned updates and in case of emergencies. Sometimes though there’s not enough money in the fund to cover the expense or the strata council will decide not to deplete the fund and will issue a special levy. That can range from a few hundred dollars to tens of thousands. The special levy is the responsibility of the owner and can be passed on to the new buyer. If the owner doesn’t pay the levy then the strata can file a lien against the property and force a sale.

This is why it's important to look thru the strata minutes when you're considering buying a place. You want to make sure that the strata council is staying on top of maintenance and also that there is a healthy amount of money in the contingency fund to cover a big expense such as a roof. Your realtor’s job is to go thru the minutes as well to make sure that the figures are healthy. Last thing you want to do is buy a place then be surprised with a large levy. And don't be concerned that a new development won't have a healthy fund. BC law says that when a developer puts up a new condo or a townhouse complex, they have to put a certain amount of money in the fund. You’re also covered by a 2-5-10 year warranty on any unit from the time it was built.

Responsibilities & Restrictions

Being part of a strata also means there are rules you need to adhere to. This is the strata's bylaws. A newly founded strata has a set of standard bylaws that it comes with and some of those can’t be changed because they are BC law. There are others that can be changed and depending on how the rule affects the owners and how much is going to be spent, it could be done thru the handful of strata council members or it might be necessary to have a vote among all the owners. This will happen at the annual general meeting or at a special general meeting.

Something that a strata can do is restrict your use of the property. The most common restrictions are not allowing pets or limiting the number allowed as well as size and weight, restricting rentals, or putting a minimum age to live in the complex. It’s very common in White Rock to have an age restriction of at least 19 years. Many of the buildings in Uptown White Rock have a 55+ age restriction. There’s an exception to rental restrictions which permits rental to the children and parents of the owner and their spouse.

Being part of a strata means your property has to be uniform among the other units and because of that your strata can restrict you from changing the exterior look of your unit. For example, you can’t change the color of your blinds, paint the outside a different color than the original ones and if you have a tree in your backyard it’s your responsibility to keep it alive and healthy. And your strata can fine you if you don't follow the rules.

Pros & Cons

There are many great benefits to living in a strata complex and like anything else those benefits can have their down sides too.

Pros

More secure because of close proximity to neighbours
Less exterior maintenance
Can have access to a gym, pool, sauna, tennis court...
Typically lower cost per square foot compared to detached home

Cons

Less privacy
Lack of options for exterior updates
Need to pay monthly strata fees
Usually no option to tear down and rebuild
Cooperative Corporation

A cooperative Corporation, or a coop, is another form of property ownership and it’s quite different from strata. When you purchase a strata property, you own that specific lot whereas with a coop, you purchase a share of the whole complex which gives you the right to occupy one of the properties. The coop has a blanket mortgage for the whole complex and you pay into that. As the blanket mortgage decreases the value of the properties increase. Most banks won’t mortgage you for a coop because there is nothing tangible for them to obtain in case of a foreclosure. Instead you will have to give them personal collateral as security.


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Note added at 51 mins (2016-09-20 21:33:09 GMT)
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The term Strata was first adopted in Australia as a means to designate a new form of building ownership we now commonly refer to as Condominiums. On the other side of the hemisphere British Columbia was also experiencing this new type of ownership and adopted much of the same legislation and terminology as their Australian counterparts. Unfortunately this terminology would not catch on with the rest of the world. [1] Australia and British Columbia are the only two locations that utilize the term Strata. Everywhere else refers to them as Condominiums. Cooperatives are another form of a Strata though have different conditions involved. Please refer to the links for more information.

The official term for strata is Freehold Strata. Though just as condominiums are often referred to as condos for simplicity, Strata is more commonly used in place of Freehold Strata for the same reason. Strata is defined in the Province of British Columbia, as a form of ownership governed by the Strata Property Act (1998).