Doing Repair and Maintenance Work in Strata Properties, on Vancouver Island

Doing regular repair and renewals work and having a good preventive maintenance program needs to be a priority for all strata corporations, big or small.

Strata corporations on Vancouver Island must maintain and repair shared common property and assets. In some strata corporations, sections and types also have repair and maintenance responsibilities. For bare land strata corporations (“strata subdivisions”) repairs and maintenance for common property can include private roads, water, and sewage pipes, and other infrastructure.

Strata corporations and strata lot owners with home warranty insurance could also risk limiting their coverage because of negligent or improper maintenance.

Renovating my condo: What can I do?

We often see home renovations as a necessity and not as a luxury to improve our environments and protect our investments. Because many strata corporations have not provided sufficient funding for long-term repairs, owners often tap into their resources for special levies and leave their units unattended. Every strata home at some point will need some renovations and upgrades and while it may be the next owner who takes up the paintbrush and starts improving their space, doing the renovations in a way that keeps you in line with your strata bylaws and neighbors are just as important as the renovations you are considering.

The Plan-Do-Check-Act model

The “Plan, Do, Check, and Act” (PDCA) model can be useful for strata councils and section executives to approach maintenance, repairs, and renewal work. The PDCA model is also known as the Deming model or the Deming wheel. 

Planning: the strata council knows who is responsible for what maintenance and renewal work (strata corporation, sectionstypes, strata lot owners), prioritize the work, assign responsibilities for getting the work done, budgets, and communicates with owners.

Doing: the strata corporation approves funding and the strata council hires contractors and ensures the work is done.   

Checking: the strata council ensures that the condition of common property and assets is checked, and maintenance and renewal work is inspected.

Acting: the strata council acts to revise plans and budgets, update documents, communicate with owners, and continue repair, maintenance, and renewal work.

Planning

The depreciation report, a maintenance manual and other documentation are very helpful tools for the strata council in planning repair, maintenance and renewal work.

The strata council (or section executive) will need to:

It is also invaluable to get advice from knowledgeable professionals. Developing ongoing relationships with contractors who have worked on the strata corporation’s common property and assets is very helpful.

Timing considerations 

Maintenance, repair and renewal work may be presented as individual tasks. The strata council (or section executive) will want to:

  • Organize tasks in a logical order.
  • Are there opportunities to group activities together to save money and/or minimize disruption to owners and residents?
  • Develop a list of maintenance and renewal work to be conducted over the next year, the next two years, the medium term and the longer term.

Budgeting

The depreciation report and maintenance manual will be very helpful in planning and budgeting. The strata corporation will need to plan for both types of common expenses: operating fund expenses for work done once a year or more often and contingency reserve fund expenses for work done less often than once a year. 

The depreciation report may identify certain “peak years” for maintenance, repairs and renewals – years when many items will need replacing at the same time. That may be because standard lifespan estimates are often multiples of four or five. Or it may just be the way the numbers add up.

If these peak years lead to temporary shortfalls, consider “flattening the peaks” by spreading out the work over several years.

For example, the strata corporation could get full value out of carpets that are in good shape by replacing one-fifth of hallway carpets every year for five years, starting with the carpets in worst shape or by replacing carpets in the lobby on a more frequent basis.

Be careful though not to lose out on bulk discounts or savings by not having contractors complete all the work while they are on site.

The depreciation report will provide three different cash-flow models for consideration by owners. For example, cash-flow models could outline funding work from the contingency reserve fund (CRF) only, from special levies only, from increasing strata fees, or from a combination of approaches.

Another issue to consider when budgeting is how much flexibility is provided and how much transparency and disclosure is provided? Are the maintenance and renewal tasks listed as individual items in the budget (which places some limitations on how money is spent), or are they grouped together?

Getting work done

A solid preventive maintenance program should be a priority for any strata corporation.

After the budget is determined, funds are approved, contractors selected, and necessary permits obtained—conduct the maintenance, repair and renewal work.

Work can include systems reviews as well as minor maintenance, major maintenance, repair and renewal. Routine maintenance can extend the life of interior finishes, decks, roads, machinery, equipment, and other assets.

Have regular physical inspections of systems and assets by qualified professionals. This can mean annual or monthly inspections or some other frequency.  Regular inspections can spot small problems before they become big ones. 

It is important to have maintenance, repair and renewal work completed by qualified personnel and companies and that they meet WorkSafeBC requirements. The qualifications will depend on the type of common property and other assets for which the strata corporation is responsible.

The strata council will need to decide on how to get the work done and how work will be contracted. Does the strata have a bylaw that sets out minimum standards for tendering and procurement? Some strata corporations will negotiate some of these services as part of the strata management contract or hire staff. Services can also be independently obtained. 

If there are bids, decide on the timelines, who will review bids, who will negotiate the contracts and ensure that it meets legal requirements such as WorkSafeBC. Strata associations have examples of Request for Proposals (RFP) or Call for Bids (CFB) on their websites.

Make sure to document the maintenance, repair and renewal work. Documentation provides key information regardless of changes to the strata council and strata managers.

Communicating with owners

Communicating with owners and residents about their homes and investments is essential in in repair, maintenance and renewal work. The strata council plays a key communications role. 

The designated person (or committee) will need to work with staff and contractors, report and explain findings and recommendations to the strata council. Council in turn will need to communicate with strata lot owners and residents. 

It is vital to regularly communicate with owners on repair and maintenance work including: planning the work, funding the work and reporting on progress.

It is a good idea to provide information to strata lot owners well in advance of general meetings. Many stratas hold information sessions for owners and residents to discuss plans, objectives and costs six weeks or so in advance of annual or special general meetings.

As well, the strata council should:

  • regularly remind strata lot owners and residents what they are responsible to repair and maintain (for example cleaning patios and balconies)
  • check this work
  • ask owners to report maintenance problems – whether in the strata lot or common property – promptly to the designated contact on strata council or strata property manager. This helps the strata corporation to identify and quickly address emerging problems.

Checking and acting

It is important to inspect work and common property and see how effective the renewals and maintenance work is. Is common property in good repair?  Does the strata corporation have a proactive approach or a reactive one?

While buildings and assets always age, owners can help protect their investment with careful maintenance and care in operation to help buildings and other assets achieve their full life span. Owners can get the best value for their money and avoid being surprised with unexpected repair costs.

Meet Gord

Gordon McKinlay is the owner of PropertyGuys.com in the Comox Valley & North Vancouver Island. Gordon loves helping people sell their own homes and save tens of thousands of dollars. 

PropertyGuys.com has developed a system that has helped over 90,000 private home sellers in Canada to sell their homes successfully. PropertyGuys.com is the largest private home sales network in Canada.

Selling? Learn more about how PropertyGuys.com works call 778 557 8596 or contact us here!

Everything you need to know when placing a deposit on your Vancouver Island Home

The deposit is put down as good-faith money by the buyer towards a home purchase.

It’s an important part of the process, and to make sure your home purchase goes smoothly you’ll need to make sure you know the norms when it comes to the deposit.

This article outlines the standard deposit amount, when the deposit needs to be handed in, differences between deposit and down payment, and more.

Keep reading for everything you need to know about the deposit in real estate!

What is a deposit in real estate?

A deposit is good faith money that is put down by the buyer upon a successful (or firm) agreement of purchase and sale of a home. This deposit forms a part of your down payment, and thus a part of the purchase price.

This deposit will:

  • Provide security to the seller, as it ensures that the buyer is committed by having a stake in the agreement.
  • Pre-estimate damages in the event of a breach of a contract

Ultimately, the buyer will have something to lose if they walk away from the deal and refuse to close at the time of completion. The deposit is typically paid by form of bank draft, but may also be taken in the form of a certified cheque depending on the brokerage policy.

When do I have to give the deposit?

On Vancouver Island, the deposit is typically due within 24 hours of subject removal in a “balanced” market, where both buyers and sellers do not have any advantage over the other. How deposits are handled in a strong “seller’s market” is discussed further down.   

By contract, the agreement of purchase and sale states that the deposit is due within 24 hours of acceptance unless otherwise stated. It is extremely important that if you have added subjects to the terms and conditions section of your agreement, that your agent also adds that the deposit is due within 24 hours of subject removal (rather than acceptance). This is because if you do not want to hand in your deposit prior to subjects being removed – in case you cannot obtain financing, are not satisfied with the inspection, etc. 

Keep in mind that in a strong “seller’s market” where multiple offers are common place, as a negotiation tool, it is best to have your deposit with you in hand to show that you have the available funds liquid and ready to go. This is specifically important if you are presenting a subject-free offer.

How much is the deposit? How much of a deposit should I provide the seller when buying a home?

On Vancouver Island, the deposit is usually 2-5% of the purchase price. If the seller counters your initial price, they do not typically also counter your deposit amount. Thus, the deposit usually remains 2-5% of your initial offer price. However, there is no fixed deposit amount required by law.

If you are in a strong seller’s market and there are multiple offers, it is quite common to offer more than 5% (i.e. 10% +) to show that you are ready and capable to finance the transaction.  If you have a high deposit, you are also showing the seller that if the deal is firm that you are putting yourself in a situation where if you were to walk away you would lose a significant amount of money. Thus, they will believe that you are more likely to complete than someone with a lower deposit. The truth is, the higher the deposit the more attractive the offer.

Ultimately, the risk of offering a deposit lower than expected (minimum 2-5%) is that the seller and the seller’s agent may perceive you as unserious or financially at risk.

Who is the deposit supposed to be made out to?

In BC, the deposit is always made out to the buyer’s agent’s brokerage or lawyer and held in trust. Don’t worry, the brokerage cannot use this money to pay their own expenses or anything like that. These accounts are regularly audited and very regulated.

If you’re purchasing a presale, then it may be the case that the deposit is made out to the developer’s notary/lawyer or the developer’s realtor’s brokerage. Regardless of whether you are purchasing a presale or resale property, check with your realtor to confirm who the deposit should be made out to before receiving it – you’ll want to know before the 11th hour.

Does my deposit form a part of my down payment?

Yes, your deposit will form a part of your down payment and works to pay off the purchase price. Have your notary or lawyer conduct a statement of adjustments for you, so that you know how much you will have to pay upon closing.

What happens to your deposit at closing?

The deposit forms a part of your down payment, so it is applied to the buyer’s closing costs at closing on the statement of adjustments.

So if a Buyer pays $1,000,000 for a home and provided a $50,000 deposit, then that amount ($50K) plus any additional down payment and mortgage money from the lender will be provided to the seller (less the expenses and adjustments).

Do I have to give my deposit before I remove subjects, or after?

It depends on how your contract is worded. Typically, it will be within 24 hours of subject removal. Keep in mind, this additional detail needs to be added to the first page of the contract, so it is extremely important that your realtor is experienced with contract writing to ensure that you don’t lose your deposit if you don’t remove subjects.

If I can’t get financing, do I still have to give my deposit?

Again, this depends on how your contract is worded. If your contract is “subject to financing” and your realtor has also added that “the deposit is due [enter time] after [or upon] subject removal” then you would not have handed in your deposit yet. Your realtor would simply tell the listing realtor that you cannot obtain financing and the deal would “collapse.” No money lost.

If you have already handed in your deposit contingent to obtaining financing, and cannot obtain financing, your deposit should be refunded in full. Again, make sure you know exactly what you are signing and read through the contract of purchase and sale thoroughly before making anything official.

It is also important to note that when you are dealing with subject removal and you do not remove subjects if the seller does not believe that you acted in good faith in fulfilling the condition (i.e. financing), they can take you to court. If you’ve already handed in your deposit but have not removed subjects, they can refuse to release the deposit. Make sure that when you are removing subjects that you can prove that you were not able to fulfill your subject.

What happens if the deposit is late?

If your deposit does not arrive at the time stipulated in your contract, then you are technically in a breach of the agreement. The seller could potentially walk away from the deal, and if they have a more attractive backup offer in place or other buyers consistently inquiring on the property, they may see this as an opportunity to sell their house for more money. Do not be late with your deposit.

Can I get the deposit out of my RRSP?

Yes, you can, the government offers the “Home Buyer’s Plan” which allows home buyers to withdraw up to $25,000 in a calendar year from their registered retirement savings plan (RRSP) to buy or build a home (given it qualifies) for themselves or a related person with a disability. If they’re in your RRSP make sure your contact your financial institution and confirm that they’re able to withdraw funds within 1 week upon receiving an accepted offer.

“I wrote a subject free deal but now I don’t want to hand in my deposit”

We’ve seen properties that have 20 offers on them, and naturally, the seller ends up accepting the one that is subject free (meaning there were no conditions like financing or inspection) and all that is left is for the buyer to hand in the deposit.

Sometimes a Buyer pays more than they anticipated and wakes up the next day with regret. However, if a deal is firm and conditions are removed then a buyer must proceed with the purchase and provide a deposit regardless of whether they feel regret or not.

Agreements are signed under seal and are binding, and not providing a deposit when you’ve already removed subjects or never had any subjects can get you sued.

As a buyer, what happens to the deposit if I’ve already removed subjects but can’t complete them?

In this situation, your deal has already gone firm. Because one of the purposes of the deposit is to provide security to the seller in the case that you don’t complete it, you will lose your deposit. The seller can also sue you for damages. Damages are calculated based on the seller’s losses due to the breach.

For example, if the market value has significantly dropped $50,000 since your accepted offer and you refuse to complete it, this would be considered a loss. This can get extremely messy, especially if the seller has already bought an additional property, as they are most likely using the funds from their sale to purchase their new home. If you are in this scenario, make sure to contact your lawyer immediately to have them guide you through the process and estimate costs.

As a seller, what happens to the deposit if the buyer doesn’t complete it?

In most cases, when the deal has gone firm and subjects have removed, the seller will keep the deposit and potentially sue the buyer for damages. Like I said before, this can get pretty messy, especially as a seller if you have already purchased. First things first, contact your lawyer immediately to have them guide you through the process, and advise on what steps to take if you have purchased.

Meet Gord

Gordon McKinlay is the owner of PropertyGuys.com in the Comox Valley & North Vancouver Island. Gordon loves helping people sell their own homes and save tens of thousands of dollars. 

PropertyGuys.com has developed a system that has helped over 90,000 private home sellers in Canada to sell their homes successfully. PropertyGuys.com is the largest private home sales network in Canada.

To learn more about how PropertyGuys.com works call 778 557 8596 or contact us here!