LED Lighting Retrofit Projects – Financing Options Available to Strata Owners and Building Managers
The total cost to upgrade a residential high rise building to energy efficient lighting is typically below $50,000. Annual savings in energy and maintenance costs is averaging around $20,000. This translates into a payback period of only 2.5 years and represents a unique opportunity for strata councils to drastically reduce their buildings’ escalating BC Hydro bills for years to come.
To fund retrofit projects, strata corporations have the following main options available to them:
1. Contingency fund (50%)
2. Special Assessment (30%)
3. Bank loan (0%)
4. Lease to own / Pay as you save (20%)
1. Contingency funds are increasingly being used to pay for LED lighting upgrade projects which was not the case a few years ago. Increasingly, strata councils are better informed today and appreciate the benefits of investing in capital projects with significant long term cost saving potential. The most significant factor in favour of this option is the avoidance of costly financing charges.
2. Special assessment is a popular option when the strata does not have access to contingency funds. The average cost to individual strata unit owners in a typical high rise would be a one time assessment of $285 ($50,000/175 units) or the equivalent of one month’s strata fees. (Dinner for two in Vancouver costs more !)
3. Bank loan are avoided like the plague and rarely give serious consideration. Definitely the most expensive and onerous financing option. Enough said.
4. Lease to own (Pay As You Save) is gaining in popularity which is a noticeable recent trend. Increasingly, vendors are offering this financing option in their proposal packages on the proposition that monthly leasing payments will be paid from energy cost savings . Third party leasing is also available from a wide variety of leasing companies and should be considered as well. However, I would recommend obtaining help from a trusted advisor to review and recommend the best leasing option for you strata, and avoid costly mistakes and unintended consequences.
Anil Mehra, CA,CPA Managing Director, Titan Enersave. www.titanenersave.com