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New Mortgage Rules Contemplated

The Tories are contemplating new mortgage qualification rules, as some of you will have seen. The change is simple: strata payments will be factored in as an expense at 100% rather than at 50% as is now done. You can see the National Post story here.

Good idea? At first blush, certainly. However, as any fan of Freakonomics podcasts can assure you, there are always unintended consequences. Are low strata fees a selling feature or are they a negative? That’s debateable, but, consider: two 1976 buildings, side by side in East Van. One has strata fees of $175.00 month, while the other charges $250.00. The first is a little more rundown and has a smaller Contingency Reserve Fund. The second has new pipes, new carpets, a new loby and is saving for a $75,000 elevator replacement.

Which is worth more? The difference in strata fees is $75.00, half of which is $37.50, which, depending on rate and amortization period, can be close to $10,000. Cashflow considerations aside, there’s an argument to be made that special assessments will become more attractive, and well kept buildings somewhat less attractive than they have been, especially as we stretch the price envelope.

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