There are over 30,000 Strata Corporations in BC, and less than 100 have terminated. However, with the recent changes in the lowering of the approval from 100% to 80%, interest has grown.
The change in land values with the increasing costs of maintaining older buildings lead some to believe that their Strata Corporation may be better off just winding down and cashing out.
The termination of a Strata Corporation is economically viable when the value of the land is in excess of the aggregate (total) market value of all the strata lots, if sold individually. The other time it becomes viable is when the ongoing Contingency Reserve Fund (CRF), by annual contributions or special assessments, to maintain the building are too high.
Having an understanding of the land value is essential, as the Strata Council and the Owners need to feel confident that they are not been short changed is critical. This is best done by an appraisal firm such as Bramwell & Associates, which experience in land development.
The value of the individual strata lot current market value is also required by a firm with residential or commercial strata experience, depending on the make-up of the complex.
Also, a complete understanding of the appropriate Act that will determine the distribution of the sale price, as well as the remaining money in the Contingency Reserve Fund (CRF), is critical. As experts in strata, Strata Reserve Planning’s parent appraisal firm, Bramwell & Associates Realty Advisors can assist with this issue.
We believe that all strata councils should undertake an appraisal at the beginning of the process, before the Strata Corporation becomes responsible for the bills. Recent estimates are that the Realtor and Legal Fees will be around 5%.
Bramwell & Associates and Strata Reserve Planning can provide estimates of current value of the units individually against what owner would expect to receive in a sale, as well as a Depreciation Report to indicate the cash flow expectations for ongoing maintenance.
It should be clear that 80% approval does not guarantee approval. Anything less than 100% must be approved by a Judge, who may listen to a dissenter and not allow it. One method to increase the probability of success is to complete a Depreciation Report, to show that the Special Assessments are too high.
Call us today at 604-608-6161 to see how we can assist you in determining if winding-up your Strata Corporation is a viable option financially.