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Few topics create more debate at an Annual General Meeting than money. When a major repair is approaching—a roof replacement, parkade rehabilitation, elevator modernization, or building envelope repair—owners often hear two competing proposals. One group argues that strata fees should increase gradually to build the Contingency Reserve Fund (CRF). Another believes it's better to keep monthly fees lower and simply approve a special levy when major work becomes necessary. Neither option is automatically right or wrong. The best approach depends on the building, its financial position, upcoming capital projects, and long-term planning. Unfortunately, many strata corporations make these decisions based on what owners can afford today instead of what the building will realistically need tomorrow. Understanding the difference between a special levy and a strata fee increase can help councils make more informed decisions—and avoid unpleasant financial surprises later. What Is a Special Levy? A special levy is a one-time contribution collected from owners to pay for expenses that cannot be funded through the operating budget or the Contingency Reserve Fund. Most commonly, special levies are used for major capital projects such as roof replacement, building envelope remediation, plumbing replacement, or parkade repairs. Unlike monthly strata fees, a special levy is typically calculated based on unit entitlement and can require owners to contribute thousands—or sometimes tens of thousands—of dollars within a relatively short period. The Strata Property Act sets out the voting requirements and procedures for approving a special levy. Strata finances and insurance What Happens When Strata Fees Increase? Increasing strata fees works very differently. Rather than collecting a large amount of money at once, the strata corporation gradually builds its reserve fund over time. Higher monthly contributions allow the Contingency Reserve Fund to grow steadily, making future capital projects less financially disruptive. For many owners, paying an additional $30 or $50 per month feels far more manageable than receiving an unexpected special levy for several thousand dollars. However, increasing strata fees is not always popular. Owners naturally focus on monthly affordability, especially during periods of higher mortgage rates and rising living costs. This often creates a difficult balancing act for strata councils. Why Low Strata Fees Aren't Always Good News Many buyers are attracted to buildings with unusually low strata fees. At first glance, lower monthly costs appear to make ownership more affordable. But experienced buyers—and increasingly, lenders—often ask a different question: Why are the fees so low? If contributions to the reserve fund have remained relatively unchanged for many years despite aging building components and rising construction costs, it may indicate that future owners will eventually face larger special levies. In other words, low strata fees today can sometimes mean higher costs tomorrow. That doesn't mean every building with modest fees is underfunded. However, fees should always be evaluated alongside the building's reserve fund, age, maintenance history, and long-term capital plan. The True Cost of a Special Levy A special levy isn't just a financial decision—it can also influence owner satisfaction, buyer confidence, and even resale activity. Imagine two similar strata corporations. Both need a $2 million building envelope project. Building A has consistently increased strata fees over the past decade, allowing its reserve fund to cover a significant portion of the project. Owners approve a relatively modest special levy to fund the remaining balance. Building B kept strata fees artificially low for years.With insufficient reserve funds available, owners suddenly face a levy exceeding $25,000 per unit. The repair project is identical. The financial experience for owners is not. Special levies can also create practical challenges. Some owners may need to arrange financing, refinance their mortgage, or sell their unit if they cannot pay the assessment. This is one reason many strata councils aim to reduce reliance on large, unexpected levies whenever possible. Is Increasing Strata Fees Always the Better Choice? Not necessarily. There are situations where a special levy makes good financial sense. For example, if an unexpected event—such as storm damage or a sudden mechanical failure—requires immediate repairs, increasing monthly strata fees may not generate funds quickly enough. Similarly, some capital projects arise unexpectedly despite good planning. In these cases, a special levy may be the most practical solution. The key is distinguishing between unexpected events and predictable capital expenditures. A roof reaching the end of its expected service life is not unexpected. Neither is an aging elevator or deteriorating building envelope. When repairs are predictable, funding them should ideally be part of long-term financial planning rather than an emergency response. Construction Costs Continue to Rise Another factor that many owners overlook is inflation. Construction costs across British Columbia have increased significantly over the past several years due to labour shortages, material costs, and supply chain challenges. Delaying reserve fund contributions doesn't simply postpone expenses—it often means the same project will cost considerably more in the future. Statistics Canada continues to report increases in non-residential and residential construction price indexes, reflecting the broader trend affecting repair and replacement projects. For strata corporations, this reinforces the importance of building reserve funds gradually rather than assuming future costs will remain stable. So, Which Option Actually Costs Owners Less? There is no universal answer. From a purely financial perspective, gradual reserve funding often reduces the likelihood of large special levies and provides greater flexibility when major repairs arise. From an owner's cash flow perspective, modest annual increases in strata fees are often easier to manage than a significant one-time assessment. However, every building is different. The right decision depends on factors such as: the age of the building the condition of major building systems upcoming repair timelines current reserve fund balance projected capital expenditures Without understanding these variables, comparing strata fees and special levies becomes largely guesswork. Why a Depreciation Report Matters This is exactly where a Depreciation Report becomes invaluable. Rather than asking whether strata fees should increase or whether a special levy should be approved, a Depreciation Report asks a more important question: What will this building actually need over the next 30 years? A professionally prepared Depreciation Report evaluates major common property components, estimates their remaining useful life, forecasts future replacement costs, and models funding requirements. Instead of relying on opinions at council meetings, strata corporations can make financial decisions based on objective engineering analysis and long-term planning. Strata depreciation report requirements Final Thoughts Special levies and strata fee increases are not competing strategies—they are financial tools. The goal should never be to eliminate one entirely. The goal is to ensure the building has enough resources to maintain its assets without placing unnecessary financial strain on owners. Buildings that plan ahead generally experience fewer surprises, smoother capital projects, and greater financial stability over time. The question isn't simply whether owners should pay more today or tomorrow. It's whether the strata is preparing for costs that are already inevitable. At ENGIPRO, our Professional Engineers prepare comprehensive Depreciation Reports that help strata corporations understand future capital expenditures, evaluate reserve fund adequacy, and make informed funding decisions before major repairs become financial emergencies. Whether your council is debating a special levy, reviewing its reserve fund strategy, or planning long-term maintenance, a current Depreciation Report provides the information needed to support confident, data-driven decisions. Contact ENGIPRO today! Resources: Strata finances and insurance - https://www2.gov.bc.ca/gov/content/housing-tenancy/strata-housing/operating-a-strata/finances-and-insurance Statistics Canada - https://www150.statcan.gc.ca/ Strata depreciation report requirements - https://www2.gov.bc.ca/gov/content/housing-tenancy/strata-housing/operating-a-strata/repairs-and-maintenance/depreciation-reports/depreciation-report-requirements

A Good Investment Isn't Always a Good Building When investors evaluate a commercial property, most start with the numbers. They review the asking price, rental income, occupancy rate, lease terms, operating expenses, and capitalization rate. If everything looks attractive on paper, the property quickly moves to the top of the shortlist. But experienced commercial investors know that spreadsheets only tell part of the story. Two office buildings can generate the same annual income. Two retail plazas can have identical occupancy rates. Two industrial warehouses can appear equally profitable. Yet one may require several million dollars in capital repairs over the next decade, while the other may only need routine maintenance. That's why experienced buyers spend just as much time evaluating the building as they do evaluating the financial statements. A property's value isn't determined solely by today's income—it's also shaped by tomorrow's repair costs. Numbers Don't Tell You Everything Net Operating Income (NOI) and cap rate are essential investment metrics, but they don't reveal the condition of the physical asset. For example, a property may appear to generate an attractive return because the current owner has postponed major repairs for years. On paper, operating expenses look low. In reality, the next owner may inherit: a roof nearing the end of its service life aging HVAC equipment deteriorating building envelope components outdated electrical infrastructure deferred maintenance throughout the property None of these issues appear directly on an income statement. But together, they can dramatically change the true cost of ownership. This is why due diligence should never stop with financial analysis. Deferred Maintenance Doesn't Disappear After Closing One of the biggest mistakes new commercial investors make is assuming that maintenance can always wait another few years. Unfortunately, buildings don't work that way. Deferred maintenance doesn't simply pause until a new owner takes over. It continues to progress. A small roof leak may slowly damage insulation and structural decking. Cracked sealants around windows may allow moisture to enter wall assemblies. An aging rooftop HVAC unit may continue operating—until it fails in the middle of a tenant's busiest season. Because these problems often develop gradually, they're easy to underestimate during a standard property tour. What looks like a relatively minor maintenance item today may become one of the largest capital expenditures after closing. Capital Expenditures Can Change the Entire Investment Many first-time investors focus heavily on purchase price while underestimating future capital expenditures. Yet for commercial buildings, capital costs often have a much greater impact on long-term returns than buyers initially expect. Replacing a commercial roof Modernizing elevators Repairing underground parkades Replacing aging boilers Upgrading electrical service Improving accessibility to meet changing code requirements None of these projects are inexpensive. Without understanding when these expenses are likely to occur, investors may significantly overestimate a property's actual return. Tenants Notice Building Condition Too Commercial buyers often think about attracting tenants—but existing tenants are equally important. A poorly maintained building can affect: tenant retention lease renewals operating interruptions maintenance complaints overall marketability For office and retail properties, building appearance also influences how prospective tenants perceive the business environment. An attractive lobby may create a positive first impression, but recurring HVAC problems or frequent plumbing issues can quickly undermine tenant satisfaction. Over time, deferred maintenance doesn't just increase repair costs. It can also affect occupancy and rental income. Don't Assume "Recently Renovated" Means Everything Is New Marketing brochures frequently highlight renovated common areas, updated finishes, or modernized interiors. These improvements certainly add value. However, cosmetic renovations rarely tell the full story. Fresh paint doesn't replace aging chillers. A renovated lobby doesn't reveal the condition of the roof. New flooring doesn't indicate whether electrical infrastructure can support future tenant needs. Experienced investors understand the difference between cosmetic improvements and critical building systems. During due diligence, it's often the systems that buyers can't immediately see that deserve the closest attention. Documentation Can Be Just As Valuable As The Building Itself One thing sophisticated investors consistently look for is documentation. A well-managed property should have organized records showing how the building has been maintained over time. This may include maintenance logs, repair histories, equipment replacement records, engineering reports, roof inspections, and previous investigations. Complete documentation gives buyers confidence because it reduces uncertainty. By contrast, when records are incomplete or inconsistent, buyers are often forced to make assumptions—and those assumptions usually translate into more conservative offers. Why More Investors Are Ordering Building Condition Assessments This is one reason Building Condition Assessments (BCAs) have become increasingly common in commercial real estate transactions. Rather than relying solely on visual observations or seller disclosures, a BCA provides an independent evaluation of the property's major building systems, identifies visible deficiencies, and helps buyers better understand future capital requirements. For many investors, a BCA isn't about finding reasons to walk away from a deal. It's about buying with realistic expectations. A building that requires repairs may still be an excellent investment—as long as those repairs are understood before closing rather than discovered afterward. ASTM's E2018-24 Standard Guide for Property Condition Assessments, widely referenced by lenders and commercial investors across North America, provides the framework for evaluating commercial property condition in a consistent and systematic way. Final Thoughts Commercial real estate is ultimately a long-term investment. While rental income, occupancy, and market trends all influence performance, the physical condition of the building often determines whether projected returns become reality. The most successful investors don't simply buy profitable properties. They buy properties whose risks are well understood. That understanding begins with thorough due diligence—not only of the financial statements, but of the building itself. Whether you're purchasing an office building, retail plaza, industrial facility, or mixed-use development, understanding the building's condition before closing can help you make more informed investment decisions. At ENGIPRO, our Building Condition Assessments (BCA) are prepared by Professional Engineers (P.Eng.) and follow the ASTM E2018-24 Standard Guide for Property Condition Assessments. We help commercial buyers, lenders, and property owners evaluate major building systems, identify deferred maintenance, and better understand future capital expenditures before a transaction is finalized. A commercial property may look like a great investment on paper. A professional Building Condition Assessment helps you understand whether it's a great investment in reality. Resources: ASTM's E2018-24 Standard Guide - https://store.astm.org/e2018-24.html