Year-End Surplus and Deficit Rules for BC Stratas

When your strata finishes its fiscal year with more money than it spent, that's a surplus. When it spent more than it brought in, that's a deficit. Both have to be dealt with at the AGM that follows year-end, and the rules are governed by a single, well-defined section of the Strata Property Act. The mechanics are simple but councils still get them wrong every year, usually by ignoring the surplus rule until the AGM has already passed, or by addressing a deficit informally outside of a meeting. This guide walks through what s. 105 actually requires, what happens by default, and how to put the right resolutions on the AGM agenda. We see this question every spring as Sea-to-Sky stratas roll into AGM season.

What SPA s. 105 actually says

The governing section is Strata Property Act s. 105. It covers three related obligations:

• The strata must prepare year-end financial statements
• It must present them at the AGM
• It must address any surplus or deficit at that meeting

The default rule on surplus is that it goes back to owners proportionate to their unit entitlement, but the AGM can vote (by majority) to retain it instead. The default rule on deficit is that it must be addressed. The section doesn't prescribe how, leaving council and the AGM to choose among the available mechanisms.

The "operating" qualifier matters. This rule applies to the operating fund only. CRF surpluses and deficits aren't covered by s. 105; CRF mechanics live in s. 96 and money in the CRF stays in the CRF until spent on an authorized purpose.

Handling a surplus: three options

When the year ends with operating money left over, the AGM has three choices:

1. Refund to owners (default if no other vote is taken). Each owner receives a cheque proportionate to their unit entitlement.
2. Carry forward into next year's operating budget (majority vote at AGM). The surplus reduces next year's fees.
3. Transfer to the CRF (3/4 vote at AGM). The surplus boosts the reserve fund.

The cleanest option for most stratas is option 2, carry forward. It avoids the administrative cost of issuing dozens of small refund cheques, it smooths fee fluctuation year to year, and it requires only a majority vote. Option 3 is the right choice when the CRF is behind on its target and the surplus is meaningful. Option 1 is rare in practice; refunds are administratively heavy and many owners don't even cash the cheques.

CRT decisions on surplus distribution have reinforced that owners can compel a refund if the AGM fails to pass a retention resolution. Councils that try to retain a surplus by inaction will lose.

A practical surplus example

Suppose a 30-unit Sea-to-Sky strata budgeted $360,000 for operating expenses and actual spending came in at $342,000. The surplus is $18,000 (about 5% of budget, which is typical).

• Refund option. ~$600 per unit entitlement on average, mailed as cheques. Administrative cost of issuing 30 cheques alone eats $200 to $400 of value.
• Carry-forward option. Next year's fees can drop slightly (by $50/unit/month for one year), or the surplus offsets a planned increase.
• CRF transfer option. $18,000 added to the reserve fund, useful if the CRF is short of its s. 96 target.

Most councils in this scenario choose carry-forward. Some choose CRF transfer when a known capital project is coming. Either is defensible.

Handling a deficit: four options

A deficit is harder. The AGM has to decide how to recover the shortfall, and every option costs owners money. The options are:

1. Raise next year's fees to recover the deficit over 12 months. Built into the next year's budget under s. 103.
2. Special levy under s. 108, requiring a 3/4 vote. One-time charge to owners.
3. CRF transfer if (and only if) the deficit relates to a CRF-eligible expense. 3/4 vote required under s. 96.
4. Draw on operating reserves if the strata has any retained operating cash beyond normal float.

The right choice depends on the deficit's size and cause. A $5,000 deficit on a $300,000 budget is noise; fold it into next year's fees. A $50,000 deficit from an uninsured loss or a missed major expense needs a special levy or CRF transfer, not a fee increase.

A practical deficit example

The same 30-unit Sea-to-Sky strata, but this time actual spending came in at $382,000 against a $360,000 budget. The deficit is $22,000 (6% of budget). Council investigates and finds two causes: a $10,000 insurance premium increase that wasn't budgeted, and $12,000 in unplanned snow removal during a heavy winter.

In this example, the insurance increase is likely permanent so it should be folded into next year's budget. The snow removal was one-time. Council might choose a small special levy for the snow portion and a fee increase for the insurance portion. The CRF transfer is not available here because neither expense is CRF-eligible.

What goes on the AGM agenda

The notice of AGM must include the year-end financial statements and any resolutions related to surplus or deficit. Specifically:

• Year-end financial statements as an information item
• Surplus resolution (carry forward, transfer to CRF, or refund) if a surplus exists
• Deficit resolution (levy, transfer, budget increase) if a deficit exists
• Next year's budget including the impact of the resolution above

Resolutions must be drafted in the notice. Owners can't be ambushed at the meeting with a new resolution. Notice rules are in s. 45 (notice of AGM, at least 2 weeks before).

When the surplus or deficit is unusually large

If year-end shows a surplus or deficit greater than 10% of operating budget, something went wrong with the budget itself. Either spending wasn't tracking through the year (a management or council reporting failure), or the original budget was unrealistic, or a major unbudgeted event hit.

A surplus over 10% usually means fees were too high. Council should consider reducing fees next year or accelerating CRF contributions. A deficit over 10% usually means fees were too low, or a major event hit, and the recovery plan needs more than a fee bump. In either case, an audit or review engagement is worth considering to understand what happened.

Why this matters for fee stability

Owners hate fee surprises. The cleanest way to keep fees stable is to budget conservatively, present year-end results promptly, and let the AGM decide what to do with the result. Councils that handle s. 105 well have flat fees with small annual adjustments. Councils that mismanage surpluses and deficits get bigger and bigger swings, owner trust drops, and the AGM turns into a fight.

For the budgeting side of the equation, see our strata budgets BC guide. For the AGM mechanics themselves, see strata AGM guide. And for council members who want to read the financial statements that drive these decisions, our strata financial statement guide covers each section in detail.

If your strata's books look messy heading into AGM season, reach out, we'll do a free review of your year-end financials and help you draft the right resolutions before the notice goes out.