Strata Tip of the Week - The Strata Financials: The Budgets

Financial documents can provide a lot of valuable information. If you’ve read our previous email titled The Strata Financials You Should Be Reviewing, you’ll know why it’s important to review a strata’s financial documents, and you’ll also have a list of the strata financials we recommend you obtain and review.

The Strata Budgets

This week, we’re going over some of the items you should watch out for in the strata’s budgets. When it comes to budgets, we recommend you (at the very least) obtain the current and previous fiscal year budgets. This will enable you to analyze various financial metrics and other related information.

While this list is by no means exhaustive, some items to look out for in the strata’s budgets include:

• The strata’s fiscal year.

  • Not all stratas have a January-December fiscal year.

  • Check that the strata is holding its annual general meetings on time, which should be within two months of the strata’s fiscal year end.

• Check the correct strata fees for the strata lot you are evaluating.

  • You’ll be surprised how many stratas are not calculating strata fees correctly, or noting the correct amount on the Form B. See our email titled Check the Strata Fees, for more info on calculating strata fees.

• Check how much strata fees have increased over the past two years.

  • As of the date of this email and based on the last 808 strata reviews we have completed, strata fees have been increasing, on average, 8.44% year-over-year, in BC.

• Check how much each budget line item has increased over the past two years.

  • Out of the norm increases (such as significant increases in insurance premiums) could signal possible issues within the strata.

• Check the strata’s current contributions towards the contingency reserve fund (CRF).

  • Make sure the strata is meeting its minimum legislated CRF contributions requirement.

• Check for surpluses carried forward in the operating budget.

  • Some stratas use past year surpluses to pad their current budget. See our email titled Watch Out For Stratas “Padding Their Budgets” for more info.