Find out why a high strata maintenance fee might not necessarily be a bad thing in this week’s VREP Short.
Adam: Okay, Matt. Wow. That’s…Are you on vacation or what? Who answers their phone like that?
Matt: Who is this?
Adam: Is this Griswold family vacation or what’s going on? Okay Matt, its episode VREP Short #4. Today we’re talking about maintenance fees, strata maintenance fees, to be correct.
Matt: That’s exactly what I want to talk about on vacation but yeah, sounds good but why are we talking about strata fees?
Adam: I’m fired up. It’s my favourite topic. You know what, it occurred to me the other day, I’m at an open house and we’ve got…I probably had about 30 groups through the open, beautiful townhome in Fairview and
Adam: the consistent question I’m getting throughout the 2 hour stretch is what’s with the maintenance fee? Why is it so high?
Matt: How high was the maintenance fee?
Adam: Well it was about $675.00 a month approximately.
Matt: That does sound high, doesn’t it?
Adam: Okay. Well it occurred to me… 2 things…one is that most buyers and a lot of buyers don’t realize that the larger the unit the larger the maintenance fee.
Matt: Right, so break that down a little bit.
Adam: Well you know, maintenance fees are determined on unit entitlement so often smaller units will have lower maintenance fees, larger units will have higher maintenance fees so the idea being
Adam: that this was a 1700 square foot plus townhouse and the maintenance fee was high due to the fact that there was more square footage.
Matt: Right so it actually wasn’t, if you break it down on a per square foot basis, it actually wasn’t a high maintenance fee.
Adam: It was actually below average.
Matt: It was actually just that the unit was very large so the more of the building you actually own the more you are going to pay for.
Adam: Right. Now let’s pull back to #2 here so the second thing I noticed is that everybody thinks and I mean this is just at the open house I’m not saying in general but a lot of people made the case that a low maintenance fee is a lot better than a high maintenance fee and I got to say it’s not always the case.
Matt: Well hey, nobody likes to pay for things on a month to month basis if they don’t have to but why do you think that’s not the case?
Adam: Well here’s the thing. Home ownership is expensive, right and I mean I liken it to having two cars okay? So here’s the thing. We have the same two cars. You own one of them I own one of them okay? Now
Adam: every month I maintain the car. I wash the car. I take care of any nicks. I maybe change the oil. I use premium gas. I have a budget, an operating budget for this car. You on the other hand, treat it, like you actually treat your car in real life. You don’t really care about nicks, you use the cheapest gas possible. You know start, stop, start, stop, you accelerate very quickly.
Matt: I save at least 5 to 7 dollars every time I fill up. I save.
Adam: Right. Right. Exactly so you are running what I would call a very lean operating budget on your car right? Now which car would you rather buy in 10 to 15 years?
Matt: Well I would rather have your car.
Adam: Well exactly. Exactly so what I’m getting at here is that a higher maintenance fee is not always something you should be concerned about. At the end of the day check the size of the unit but also review the strata docs and the financials and make sure that the money is going somewhere that is justifiable. That’s the key thing. You got to actually look at buildings on a case by case basis. If they are spending money on a maintenance program that makes sense then maybe a maintenance fee, a higher maintenance fee is not a bad idea and if you look at provinces like Ontario that have had reserve fund studies which is similar to our depreciation report in place for many years they have much higher maintenance fees than Vancouver and B.C. in general.
Matt: Yeah, that’s definitely across the board. I know people from Ontario or Alberta come to the lower mainland they are blown away by how cheap the maintenance fees are.
Adam: Exactly but the other thing that they do in Ontario is they often do repairs and maintenance through the operating budget and the capital expenditures of the building and it prevents them from levying every time work needs to be done.
Matt: Right and hey just as a final thought here. What is the price per square foot on average for strata buildings in Vancouver?
Adam: You know it would be hard to get that number but I think overall usually you are seeing something around 39, 40 cents a foot on average but it also comes down to you know the size of the building, the age of the building, the amenities in the building and just basically how they are structuring their finances.
Matt: Alright. Well hey thanks for calling me but I’m going skiing.
Adam: Okay. Take care.