What is a condo special levy in Alberta? Everything you need to know

What is a condo special levy?

A condo special levy, also known as a special assessment, is a type of financial contribution made by condo owners when the condominium corporation needs money beyond regular condo fees. 
 

What is a condo special levy used for?

Generally, it may be used for unexpected and urgent repairs, unexpected operating account shortfalls, increasing the reserve fund to meet the reserve fund plan, capital improvements approved by special resolution, judgments against the corporation, or other purposes permitted by regulation.
 

Who pays condo special levies?

In most cases, every owner who is required to contribute under the condominium documents must pay their share of the condo special levy. The amount is usually calculated based on unit factors, unless the Alberta condo bylaws allow another method.

That means owners may not all pay the same amount. A larger unit or a unit with more unit factors may owe more than a smaller unit.
 

Condo fees vs. special levies

Condo fees are regular payments owners make to fund the condominium corporation’s ongoing budget, including maintenance, insurance, utilities, management, and reserve contributions. A condo special levy is an extra charge for a specific expense that is not fully covered by the regular budget or available funds.
 

Reserve funds vs. special levies

A reserve fund is money set aside for major repairs and replacements to common property, managed property, and other corporation assets. A condo special levy may be needed when the reserve fund is not enough, the expense is unexpected, or the board decides additional funding is needed for a specific project.
 

How to avoid condo special levies

At FirstService Residential, we work closely with condo corporations to put proper financial plans and budgeting tools in place that will help you strengthen your community’s finances and avoid, as much as possible, having to impose special levies over the long term. Let’s review them.

1. Consider your reserve study

   One of the best ways to understand your community’s future liabilities and help make funds available when they are needed is to follow the guidelines put forth in your reserve study. We have seen some condo boards hesitate to strengthen reserves out of concern residents will question the reasoning behind carrying large reserve fund balances.
   
   However, the most equitable course to follow for current and future residents is to pre-fund capital expenditures.

   "One of the biggest factors that drives a special assessment is when reserves have been underfunded. For example, when there's a large expense two or three years out and a community has not incrementally increased their fees to bolster reserves that would otherwise cover it, that can force a special assessment."
   
   Glenne Manlig, president, FirstService Residential Alberta

   While your reserve study is one of the best defenses against having to impose special levies, it is not set in stone. Rather, it is a living, breathing document that needs to be tweaked over time. The common use components reviewed in your study have lifespans that are estimated and can change over time due to overuse, weather events, and plain old tough luck.
   
   A good rule of thumb is to have professional contractors regularly assess the condition of common use components to stay on top of when they will need to be refurbished or replaced. If you plan for and address issues sooner rather than later, you can avoid a special levy down the road. Learn more in our guide to preventive maintenance.
    

2. Find funding alternatives for capital projects

   Borrowing money for capital projects is sometimes a viable financing alternative. For example, a community that intends to replace roofs over the course of several years might discover that it would be more advantageous to replace all of them at the same time, thereby eliminating bills for interim repairs.
   
   A good condo management company will have the resources to present financial alternatives to its community corporations.

   "With a loan, you’re paying for a capital expenditure over a period of time versus a one-time assessment that you might not be able to afford but you need."
   
   Lauren Larre, vice president of community management with FirstService Residential

3. Update your insurance

   Insurance costs have been steadily rising for corporations in recent years and there are several reasons for this. The uncertainty that the pandemic ushered in caused insurance renewals to come in at a higher price point than in previous years.
   
   Many property insurance carriers are now offering reduced coverages at higher prices. And in some markets, the number of insurance carriers has been decreasing. There is also a growing reluctance among some insurance providers to cover smaller corporations.
   
   As we have witnessed time and again, insurance is a line item that cannot be ignored. Partnering with a property management firm that has a strong financial arm can be extremely beneficial because it can help you to navigate the complexities of insurance coverage and confirm that you are budgeting for it properly, so you’re not caught off guard and under-protected or underfunded.
   
   To properly budget for insurance costs:
    
   • Consider what your corporation has experienced over the last year regarding your insurance needs and what coverage you wish you had.
      
   • Review your current coverage with your condo management company to gain its insights on possible gaps.
      
   • Remember what your insurance deductible is and how this will be paid in a major claim.
      
   • If your condo management company has insurance resources, tap into its buying power to secure the best possible rates for the coverage your community really needs.

The importance of reality-based budgeting

Occasionally, we see boards resist the best practice of raising regular assessments – either because they don’t want to deal with the residents’ reaction to it or they don’t want to pay more themselves, or both. However, in our experience, the decision not to raise regular assessments invariably results in the need for a condo special levy.

One of the easiest ways to avoid having to impose a condominium special levy is to develop budgets that are reality-based. A realistic budget is comprised of two basic categories: the amount of money you need to properly care for your community and the amount of money you must put into your reserves fund according to your reserve study. Then, budget for those two categories each and every year.

While condo special levies are not completely unavoidable, by following these guidelines you can successfully steer clear of them while maintaining your community’s fiscal health.

To learn how FirstService Residential can support your Alberta community's vision, contact a member of our team.

This information is provided for general informational purposes only and is not intended to constitute, and should not be relied upon as, legal, regulatory, financial, or operational advice, or as a representation or guarantee of any specific services, capabilities, or outcomes. Property management needs, regulatory requirements, market conditions, and available services vary by jurisdiction, property type, and community. FirstService Residential provides services through locally based affiliates and associates, and services and results may vary by community, region, contractual terms, and applicable law.