Quick links
- BC Strata Housing: Special levies in stratas
- Webinar video: Spending money: CRF, operating fund, and special levies
What is a special levy?
A special levy is money collected from strata lot owners for a specific purpose. They are most common for large capital projects such as replacing balconies and roofs or remediating the building envelope. Special levies are often needed because the contingency reserve fund (CRF) isn’t large enough to fund these projects.
What expenses can a special levy be used for?
The operating fund is for common expenses that usually occur either once a year or more often than once a year (or are necessary to obtain a depreciation report or an electrical planning report). The contingency reserve fund is for common expenses that usually occur less often than once a year or that do not usually occur.
While a special levy is typically raised for expenses akin to CRF expenses, it can also be used for operating expenses. There is no restriction on the type of expense that a special levy can be raised for. The Act simply says that a special levy must have a “purpose”.
How is a special levy approved?
A resolution for a special levy must be approved by a 3/4 vote at an annual or special general meeting.
Strata Property Act (SPA) s. 108 (3) says the resolution to approve a special levy must set out all of the following:
(a) the purpose of the levy
(b) the total amount of the levy
(c) the method used to determine each strata lot’s share of the levy
(d) the amount of each strata lot’s share of the levy
(e) the date by which the levy is to be paid or, if the levy is payable in instalments, the dates by which the instalments are to be paid
The resolution may establish a rate of interest to be paid if an owner is late in paying the owner’s strata lot’s share of the special levy. The rate of interest cannot exceed the rate set out in the regulations, which is 10% per annum compounded annually. Alternatively the strata may have a bylaw setting out a rate of interest.
Payment of an insurance deductible
If an insurance deductible must be paid by the strata corporation to repair or replace damaged property, the strata council can decide whether to use money from the CRF or to pass a special levy. See SPA s. 158.
How is each owner’s portion calculated?
The strata corporation must calculate each strata lot’s share of a special levy based on the Schedule of Unit Entitlement. This is the same formula that is used to calculate strata fees. Learn more about unit entitlement and how to calculate strata fees.
Can levies be calculated using a different formula?
The owners can use another way that divides expenses for that particular levy but this requires a unanimous vote. For most stratas it’s simply not possible since every strata lot would have to vote in favour of the resolution.
SPA s. 108 says the strata corporation must calculate each strata lot’s share of a special levy
(a) in accordance with section 99, 100 or 195, in which case the levy must be approved by a resolution passed by a 3/4 vote at an annual or special general meeting, or
(b) in another way that establishes a fair division of expenses for that particular levy, in which case the levy must be approved by a resolution passed by a unanimous vote at an annual or special general meeting.
Late payments
If payment of a special levy has not been made or is late, the strata corporation might be able to charge interest or fines.
Fines: There must be a bylaw that permits the strata corporation to charge a fine. Before issuing a fine, the strata council must follow the bylaw enforcement process set out in SPA s. 135.
Interest: A strata corporation may, by bylaw or in the resolution that approved the special levy, establish a rate of interest to be paid if an owner is late in paying the owner’s strata lot’s share of the special levy. The rate of interest cannot exceed the rate set out in the regulations, which is 10% per annum compounded annually.
Liens: The interest payable on a late payment of a special levy is not a fine, and forms part of the special levy. If the owner doesn’t pay the levy, the strata corporation may register a lien against an owner’s strata lot for any unpaid amount of the special levy and interest. Learn more about arrears, interest, and liens.
How is accounting done for special levy funds?
Special levy funds are not part of the operating fund or the CRF. The money must be accounted for separately. Having a separate bank account and bookkeeping for the levy money is the easiest and most transparent way to keep the books. If your strata passed more than one special levy, each special levy must be accounted for separately. The money can be in one or more bank account, term deposit, and GIC. Any interest earned on that money is part of the special levy money.
SPA s. 108 (4) The strata corporation must
(a) account for the money collected separately from other money of the strata corporation
(b) invest all of the money collected in one or both of the following:
(i) investments permitted by the regulations
(ii) insured accounts with savings institutions in British Columbia
(c) use the money collected for the purpose set out in the resolution, and
(d) inform owners about the expenditure of the money collected.
What happens if the project is over budget?
The council doesn’t have the authority to spend more than the amount approved. If more money is needed to complete the project, the strata must hold another AGM or SGM to approve funding from the CRF or by another special levy.
What happens if the project is under budget?
If a project comes in under budget, the strata may have to pay the money to the current owners. It depends on how much money is left in the special levy fund after all expenses are paid. Based on unit entitlement, would any owner be entitled to receive $100 or more? If not, the excess funds may be deposited into the CRF.
SPA s. 108 says:
(5) If the money collected exceeds the amount required, or for any other reason is not fully used for the purpose set out in the resolution, the strata corporation must pay to each owner of a strata lot the portion of the unused amount of the special levy that is proportional to the contribution made to the special levy in respect of that strata lot.
(6) Despite subsection (5), if no owner is entitled to receive more than $100 in total under subsection (5), the strata corporation may deposit the excess in the contingency reserve fund.
Can special levy funds be spent on other projects?
No. Special levy funds can be used only for the purpose stated in the special levy resolution approved a general meeting. If there are excess funds the strata must follow SPA s. 108 explained above.
Member-only resources
Log in to your account to access the following resources. *Indicates a resource for corporate members only.
- Worksheet for calculating a special levy by unit entitlement (Excel)*
- Sample financial statements*
- Spending Money: CRF, Operating Fund, Special Levies and More (slides)
- Spending Money: CRF, Operating Fund, Special Levies and More (transcript and case law)*
