Strata Squeeze: Could Florida’s Condo Collapse Happen in Vancouver?

By the time Mary Fines and her husband bought their condo at the Gardenia Villa in East Vancouver, the worst of the damage had already been done. 

The 11-building, 250-unit complex was in desperate need of major repairs—not least of which was the replacement of the entire exterior, which had been leaking for decades and putting the buildings at risk of structural failure. But instead of repairing and maintaining the 1994 complex, the owners, many of whom were immigrants and seniors with limited means, had opted to save money by pushing the fixes into the future or settling for Band-Aid solutions. Some believed the problems were overblown, and didn’t need fixing at all. 

Unlike many of her neighbours, Fines knew what she was getting herself into. It was 2015, and her husband had a disability that was worsening to the point where the couple wouldn’t be able to live in their west side townhouse. They couldn’t afford a pricey Vancouver property, so they opted to buy into the Gardenia, where they paid just $220,000 for a two-bedroom condo, knowing there would be a hefty repair bill to come. 

Still, Fines, a now-retired mortgage broker, was amazed by what she saw. Because of the infighting over how, and even if, the owners’ money should be spent, there was constant turnover on the strata council and among property managers. “It was clear it was chaotic,” says Fines, who later became president of the council.  

Things were just as bad inside her suite, where the window seals were so far gone she couldn’t see outside and cold, wet air blew through in the winter—just as it does today. “I don’t even bother turning on the heat,” she says, explaining how the windows are so poorly sealed the warmth just gets sucked outside. “And when I walk up the stairs in my building, there’s an area where the ceiling is literally taped up with duct tape.” 

The disrepair has been a problem almost since the complex was completed nearly 30 years ago. Then in 2006, a faction of owners complained to the City of Vancouver about the strata’s failure to perform necessary repairs, which triggered an inspection and engineering report—something that, surprisingly, doesn’t happen as a matter of course for Vancouver condos. 

In a survey completed by the engineering firm, 63 percent of the owners of Villa Gardenia’s wood-frame units reported they had issues with condensation, and 41 percent had mould, fungi or mildew. Forty percent said their apartments had leaked within the last year. Following the inspection, the city warned that some of the buildings on the property were damaged to the point where they were at risk of failing, and ordered the owners to perform the repairs, which the engineering firm estimated at $40 million—or roughly $160,000 per unit. 

“It’s crazy. I cannot afford that much money… It’s like buying another apartment,” one owner, who paid $185,000 for her unit in 2004, told the Vancouver Sun in 2006. “I’m very disappointed,” said another, who paid $115,000 for his condo. “My heart feels very uneasy.”

Without a 75 percent majority vote from owners, however, the strata council could not, and did not, do the full repairs. The owners did approve a $10-million fix in 2008, but little was done and to this day most of the money is unaccounted for; one former council member was later convicted of theft after siphoning more than $160,000 from shared funds.

Finally, a group of owners filed a petition to the B.C. Supreme Court, and in 2016 a judge ordered the appointment of an administrator who would take control of the strata, as well as a special levy to cover the cost of the repairs. 

Those repairs are now estimated to be a whopping $60 million—on average, $250,000 per suite.  

When it comes to cautionary tales, Gardenia Villa may be an extreme example, but it’s far from the only one. Condo strata councils—often made up of owners with no experience in real estate or construction—have long been pressured to keep monthly fees and special levies (which cover shared expenses like roofing, plumbing and landscaping) as low as possible. As condo and townhouse prices reach record highs, however, many buyers are putting every penny they have into down payments and saddling themselves with ever-larger mortgages, adding even more pressure to keep costs low. 

At the same time, many of the buildings that were constructed between the 1970s and the 2000s are aging and require more substantial repairs, all while construction costs skyrocket and inflation is on the rise. Insurance rates are becoming prohibitive, and climate change is taking its toll—all of which is leading to ballooning expenses that tapped-out owners can’t afford. But, as some owners are learning, cutting corners can end in disaster. 

Last year’s collapse of the Champlain Towers condominium in Surfside, Florida—a catastrophic structural failure that killed 98 people—served as a wake-up call, especially after reports show that the condo board knew the complex was in need of major repairs but deferred or delayed those fixes anyway. 

“The concrete deterioration is accelerating. The roof situation got much worse,” wrote Jean Wodnicki, president of the board at Champlain Towers, in a letter to owners explaining a $15-million (U.S.) special assessment less than three months before the collapse. “A lot of this work could have been done or planned for in years gone by. But this is where we are now.”

Tony Gioventu, executive director of B.C.’s Condominium Homeowners Association and the court-appointed administrator of Gardenia Villa, says he is seeing a definite uptick in deferred repairs, which can become very costly very quickly. 

As buildings age, things like roofs, windows, elevators, balconies, plumbing and building envelopes require maintenance, repair or replacement, and the price tags regularly run into the millions. By law, all B.C. strata corporations with five or more units are required to produce a depreciation report—that is, a detailed plan that forecasts the shared costs owners will likely face over the next 30 years—every three years. 

The report must also offer at least three cash flow models that show how those repairs will be paid for: through the contingency reserve fund (basically a joint savings account), special levies, higher monthly strata fees, borrowing or a combination of all four. 

The problem is, strata corporations have the right to waive the depreciation report through a three-quarters vote—and even if a strata corporation gets a report, it isn’t required to have the money on hand to fund the repairs. So when a majority of owners don’t want to cover the costs of repairs and maintenance, those necessary fixes often don’t get done. 

“The challenge for most strata councils is you can only really spend on what your owners approve. And one of the challenges in British Columbia around having no minimum funding or reporting requirements for depreciation reports is that many strata corporations barely have enough money in their reserve funds to meet the next emergency,” says Gioventu. 

To make matters worse, a June 2020 report by the BC Financial Services Authority found that condo insurance rates in the province had skyrocketed 40 percent over the previous year—50 percent in Metro Vancouver—mostly because of minor repairs that resulted from a lack of building maintenance and poor-quality construction. (Plumbing leaks accounted for approximately 46 percent of the total claim costs from 2017 to 2020, with more than 11,000 separate claims in 2018.) 

Those costs, along with the rising price of new building construction and excessive earthquake risk, have led insurers to severely hike rates and deductibles or leave the market altogether. As a result of these findings, the report called the B.C. strata insurance market “unhealthy” and said it “fails to meet the goals of sustainability, affordability and availability.”

In other words, by cutting corners on maintenance and repairs to save money, strata owners actually sent their insurance rates soaring, which in turn left them with less money for maintenance and repairs—and, notes Gioventu, just a couple of $250,000 deductibles can wipe reserves out altogether. 

“A number of strata corporations simply did not contribute anything to their contingency funds to offset the incredible increases in insurance,” he says. “And then the insurance companies are complaining the strata corporations are underfunding and not planning for renewals. Well, they’re funding at zero and not planning for renewals because you guys just increased their rates by 300 or 400 percent.” 

What’s more, construction costs in B.C. have spiked because of supply chain issues, material shortages and high demand, so most condos that have depreciation reports are vastly underestimating, and underbudgeting for, the sky-high cost of repairs. With roughly 800,000 to 900,000 residential strata lots in B.C. and a rapidly growing condo market, that problem could quickly accelerate. 

“Because of the volatility of market conditions worldwide, in most cases they’re out by 50 to 100 percent,” says Gioventu. Many stratas contribute 10 percent of their annual budgets to the contingency reserve fund, but Gioventu says that’s not nearly enough, as it only reflects operating costs, not the real cost of future renewals—and, as the Gardenia Villa owners discovered, once a strata falls behind, catching up becomes even more difficult.

Gioventu points to a mathematical model showing that the cost to owners doubles every five years: so if owners fully fund their depreciation plan from the first year of a strata building’s life, it might cost them $100 to $150 per unit per month and there will be no special levies. If they wait until year five, that amount doubles, reaching $200 to $300 per unit. At 10 years the pain is amplified further, at $400 to $600. 

“That’s where we get the difficulty with catch-up, and that’s why people are faced with these horrific special levies,” says Gioventu. “We have a lot of buildings from the ’60s and ’70s that have done a lot of renewals—but there are a number of them out there that are due for some major upgrades, and I don’t know how they’re going to pay for them.”

It’s a story that’s all too familiar to strata lawyer Phil Dougan, who regularly represents owners who are concerned about their health and safety when key repairs aren’t getting done. When he saw last year’s collapse in Surfside, Dougan feared the same could happen here. 

“We have an awful lot of people living in an awful lot of stratas who cannot actually afford to be there. They paid an absolute fortune for their property, but that puts downward pressure on strata fees… and when you have that kind of pressure, that’s when something like Florida can happen,” says Dougan. “Everybody says, ‘I don’t want to spend the $10,000 or $20,000 levy.’ Well, those people paid with their lives.”

That “I don’t want to pay” mentality crops up in properties from boutique luxury condos to run-down budget apartments, adds Dougan, who has seen many repair-related strata meetings devolve to the point where the police had to be called. When owners take their strata councils to court, however, judges have little patience for those who violate section 72 of the Strata Property Act, which requires them to repair and maintain common property. 

“If the engineers’ report says, ‘This is dangerous, and it has to be fixed now,’ it doesn’t matter how big the levy is. It could be $10 million. It will take about 10 minutes to get a court order,” he says. “The judge will simply look at the owners and say, ‘I don’t care that it costs a lot of money. You have no choice unless you’re going to vote to wind up your property and move out.’ If it’s a life or safety issue, you have to do it.”

To make matters worse, large property management companies that advise strata councils on repairs and gather quotes from contractors are buying up smaller firms, which makes for fewer options in the market; in fact, there are now just 500 to 800 active managers for the province’s more than 800,000 residential strata units. (Gioventu says the province could easily use up to 200 more managers right away.) They, too, are pressured by stratas to keep their fees down—which leads to low salaries, high turnover and inexperienced managers overseeing complex issues that are rife with conflict. 

“Their role is very important but they’re not being paid enough for the same reason: we don’t want to pay big management fees,” says Dougan. “So a lot of managers are saying, ‘It’s not worth it to do this job. If I have to stay at meetings until two in the morning, I want to get paid more than 50 grand a year.”

Dougan believes there should be legislation that requires stratas to fund depreciation reports—that is, they should have the money in the bank for all forecasted expenses—and have their finances audited annually. He also thinks regular inspections of buildings should be made mandatory before there’s a catastrophe like the one in Surfside. 

“People think, ‘It’ll never happen here, and I just can’t afford a big levy,’” he says. “People are hiding from the truth because they don’t want to go looking for it.”

In the meantime, strata councils would be wise to budget for expert consultants and inspectors, hold regular town halls to better involve and inform owners, and save enough money to fully fund the “gold-plated version” of all upcoming repairs, he says. And, even then, they should expect the unexpected. 

“It shocks them that all of a sudden the elevator doesn’t work in their 25-storey building and they can’t repair it without replacing it, so they need $1.5 million tomorrow,” says Dougan, who admits he would never buy into a strata. “And those things are going to happen.”

Vancouver lawyer Lisa Frey regularly represents stratas that have run out of options and are forced to sell—or “wind up”—their properties for redevelopment. She’s also been on the receiving end of panicked phone calls from strata managers who can’t get insurance because their properties are deemed too risky, even though they were warned it could happen.

“One of our property management clients called us and said, ‘What do we do?’” says Frey, who is also on the board of the Canadian Condominium Institute. “What happens if this building has no insurance? What is our liability?”

Frey believes that, to help stem the tide, there should be mandatory education for anyone joining a strata council, and that depreciation reports should be more standardized to include a simplified summary prepared by the expert, since they are often hundreds of pages long and use complicated language. She would also like to see more oversight from governments—which incentivize energy upgrades but not ongoing structural inspections—as well as low-interest loans for stratas facing big expenditures so they’re not tempted to skip key repairs. 

“It would not be ideal to wait until there’s a lawsuit,” she says. “But that’s often the way things go.” 

Of course, that is the way things went at Gardenia Villa. At one point, the owners explored a wind-up, but Gioventu says the City was unclear about what could be built on the $130-million site—plus, they required any interested developer to pay an additional $55-million community amenity charge, which has a significant impact on the property value and, as he puts it, “basically prevented any possibility of a sale on this property.” (He adds that, more generally, the City’s hefty community amenity charges are “an overwhelming deterrent to wind-ups” and prevent vulnerable people from getting out of bad situations.) As a result, the cash-strapped Gardenia owners had two options: cough up more than $200,000 or sell their units for a song. 

Fines says some residents have water literally flowing into their units because of the leaking cladding and the failed window and door seals. But until the whole building envelope is replaced, she says, doing temporary repairs is just throwing good money after bad, so they live with it. 

Some think they shouldn’t have to pay because their own suites are fine (which anyone in the condo business will tell you is a common refrain), and tensions are running so high that at times Fines, who is still strata president, feels unsafe. “Sometimes being on council is a little scary. There are people who really do not want things to evolve,” says the grandmother of three. “Sometimes I wonder what’s going to happen if I’m walking down the street and there isn’t anyone around.”

Now, construction permits, construction insurance and a construction manager are finally in place, and the first payments of the special levy—on average about $75,000 per suite—were due at the end of March. “It’s huge money, especially for the elderly who don’t have additional family, or don’t have savings,” says Fines. She notes that some former owners who have lived there for nearly 30 years are now renting back their own suites after having sold them to investors. 

The repairs are expected to last three years, and Fines is hopeful that, at the end of the ordeal, she will recoup her costs and come out ahead, assuming the real estate market holds. She says strata councils should get regular reports from professionals and property managers, do the fixes that need to be done, and clearly communicate the costs that are on the horizon. (Gardenia Villa never had a depreciation report, but it will once the overhaul is complete.) 

And owners, she says, should inform themselves and be ready for anything. “Take a look at what’s happening in the building,” says Fines. “Then really start saving money.” 

Gioventu agrees. Some condo owners don’t want fees to increase because they’re concerned it will negatively affect their property values, but Gioventu says these days more and more buyers are looking for stratas that are well-managed and well-funded, because anything else is too big a gamble. 

“It’s a self-regulated industry, so it’s buyer beware,” he says, adding a final word of advice: “Do your homework before you buy. It’s fine to say there’s a depreciation report, but how much money is there really in the bank?”