What Do Strata Fees Cover? A Full Expense Breakdown

Strata fees, also known as strata levies or contributions, are mandatory payments made by property owners in strata-titled developments. These developments often include condominiums, townhouses, and other multi-unit residential or commercial properties. These fees collectively fund the maintenance, management, and upkeep of common property and shared assets belonging to the strata corporation.

Regular Operating Expenses

Strata fees cover regular operating expenses for the day-to-day functioning and upkeep of common property. These recurring costs ensure the community is well-maintained and services are consistently provided.

Utilities for common areas include electricity for hallways, lighting, elevators, and heating or cooling systems. Water and sewer services for the entire building or complex are also typically covered by these fees, rather than being individually metered.

Building insurance is a substantial component of regular strata fees. The strata corporation insures the building’s structural integrity and all common property, such as roofs, foundations, and shared amenities. This master policy protects collective assets, though individual unit owners need their own insurance for personal belongings and interior unit coverage.

Maintenance and repairs cover routine upkeep to preserve the property’s condition. This includes landscaping, cleaning common areas like lobbies and stairwells, and minor repairs to shared infrastructure such as gates, fences, and plumbing or electrical systems.

Management fees cover administrative services, record-keeping, financial management, and coordination of maintenance and compliance if the strata corporation employs a professional manager or company. These services can range from 10% to 50% of total levies.

Administrative costs include:
Legal fees
Accounting services
Banking fees
Office supplies
These support the strata corporation’s operations.

Maintenance costs for shared amenities like swimming pools, gyms, or community rooms are also covered. Expenses include cleaning, repairs, and utilities for these spaces.

The Contingency Reserve Fund

Beyond immediate operational needs, strata fees contribute to a contingency reserve fund. This fund serves as a savings account for major, non-routine repairs and replacements of common property.

The fund accumulates capital for large-scale, infrequent projects like replacing roofs, upgrading elevators, repainting exteriors, or major plumbing overhauls. It is distinct from the operating budget, which covers daily expenses.

Maintaining a healthy reserve fund is important for the strata corporation’s long-term financial stability. Adequate funding helps avoid unexpected financial burdens on owners and reduces the likelihood of large, sudden special assessments. Without sufficient reserves, associations may face deficits or be forced to take out loans.

Many jurisdictions require strata corporations to maintain a contingency reserve fund and conduct regular depreciation reports, also known as reserve studies. These studies assess the expected lifespan and replacement costs of major common elements over a multi-year period, guiding funding levels. Contributions to this fund are a mandatory part of strata fees, designed to protect owners from significant, unforeseen expenses.

How Strata Budgets are Created

Strata fees are determined through a structured annual process that begins with a comprehensive budget. This budget forecasts the strata corporation’s financial needs for the upcoming fiscal year.

The strata council or board proposes the annual budget. They estimate expenses for the regular operating fund and contingency reserve fund, then set the proposed strata fees. This process often involves reviewing past spending and current contracts.

Financial statements from previous periods are reviewed for future cost projections. The board also considers anticipated cost increases, such as inflation, rising utility rates, or insurance premiums, to ensure a realistic budget. Requests for Proposals (RFPs) may be sent to vendors for accurate cost estimates.

Once drafted, the proposed budget and strata fees must be presented to and approved by owners at an Annual General Meeting (AGM). Owners vote to ratify the budget, which dictates the amount of mandatory contributions. The amount each owner pays is typically proportional to their unit’s entitlement, relating to its size or assessed value.

Understanding Special Assessments

Special assessments, also known as special levies, are an additional financial obligation for strata owners, distinct from regular strata fees. These are one-time or short-term payments required beyond standard contributions.

Special assessments typically arise from unforeseen major repairs, emergencies, or significant capital projects not covered by the regular operating budget or an insufficient contingency reserve fund. This can include damage from natural disasters, unexpected structural issues, or large insurance deductibles. They may also fund large-scale improvements or upgrades to common areas, if not adequately planned for through existing reserves.

The approval process for special assessments generally requires a specific owner vote, often with a higher threshold than for regular budget approval. However, emergency repairs not covered by reserves may not require a membership vote. These assessments can be a significant and unexpected financial burden, payable as a lump sum or in installments.