Mortgage Risks in Buying in a Self-Managed Building

Atrina Kouroshnia
September 11, 2014

Self-managed condo buildings, where the strata council runs the building instead of a professional management company, can be attractive to buyers because they typically carry lower strata fees. Professionally managed strata buildings are more prevalent but older smaller buildings or new homes on a cul-de-sac may be self managed if they have common areas or gardens.

Hiring a professional management company with a 24/7 emergency hotline means an extra cost for owners to absorb. But a self-managed building can mean more time and effort for the strata council members because they don't have the support of a professional property manager.

If you're planning to get financing for the purchase, you may have even bigger problems getting a mortgage. Mortgage lenders are often sceptical of self-managed buildings, especially larger ones, because of the potential for mismanagement. Perhaps the council members are unsuccessful at collecting money for a special assessment or maybe they don't properly maintain the books, which can lead to big problems down the line.

In reality, many self-managed buildings are very well maintained, but not all lenders are willing to finance a purchase in a self-managed building because it presents a greater unknown than a professionally managed building would. So, if your heart is set on a unit in a self-managed building, your mortgage options may be more limited and you may not get as attractive an interest rate as you would otherwise.

Here's a rundown of how several lenders, including credit unions and mono lenders through your broker, handle self-managed buildings. All will request to see the Property Disclosure Statement (PDS) and often the strata form B, but some will require additional information as well.

  • Coast Capital will lend on self-managed buildings in BC only and will request to see the last 12 months of strata minutes and most recent AGM.
  • First National will lend to self-managed buildings with up to 12 units (and may consider larger buildings). It will also require a minimum of $1,000 per unit in reserve.
  • Home Trust does not lend on self-managed buildings.
  • Street Capital does not lend on self-managed buildings.

While self-managed condo buildings may have lower fees, they can mean bigger headaches when issues arise in the building or when trying to get a mortgage. Be sure to review the strata documents yourself and weigh these pros and cons before purchasing in a self-managed building.

Atrina Kouroshnia
Atrina Kouroshnia is an independent, licensed mortgage broker in British Columbia (see her website lavarates.ca). She specializes in helping first time home buyers own their first home and invest in their future. She has a degree in Human Relations and Commerce, and past work experience in human resources and real estate development have provided her with solid problem solving and customer service skills.