Posted on October 16, 2009 by Chris Jaglowitz

"Do you want a loan with that balcony retrofit?"

Daily Commercial News reports on a trend emerging in response to the deteriorating physical and financial condition of older condominiums -- "lender tenders."

The article cites a report by GRG Building Consultants showing that condominiums built in the 1970s are in worse shape today in terms of their building envelope and structure compared to complexes built in the 1980s and 90s. Moreover, increasingly stringent reserve fund requirements in the Condominium Act since the 1980s have created a financial gap between condominiums built in the 1970s and those constructed afterwards. The 1970s condominiums are less likely to have a properly-funded reserve to pay for major repair and replacement of the common elements than condominiums constructed since then.

For this reason, and to avoid financially devastating their unit owners, it is little wonder that older condominium corporations are increasingly turning to lenders to finance necessary repairs.

Some contractors quoting on condo retrofit work in older buildings are now including in their tender a rate quote from a financial institution prepared to loan the condo corporation the necessary funds to finance the work.

This concept of “lender tender” seems strikingly similar to the offers by retailers like The Brick and Leon’s, etc, who lend money (or arrange loans) to consumers for the purchase of furniture, electronics and appliances. This development suggests that lending to condominium corporations is becoming more common than ever before and will probably become more competitive over time, especially if contractors begin lending their own money on favourable terms designed to secure the contract.

I just wonder how long it will be until we see condo corporations being offered loans for repairs on the basis of “Zero Down! Zero Interest! and Zero payments until next December!”

See the full article in DCN here.

Hat tip to Jason Tower at Waste Solutions Group for sharing this news.
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Posted on April 14, 2009 by Chris Jaglowitz

An ounce of prevention . . .

In a recent blog post, personal finance diva Gail Vaz-Oxlade reminds homeowners of the need to budget for home maintenance items and be ready for big costs that can arise.   Good advice.

Condominium corporations typically prepare their annual budgets with reference to the reserve fund study ("RFS") mandated by section 94 of the Condominium Act.  The RFS helps ensure adequate funding for the major repair and replacement of common elements.    The Act requires that the RFS contain both a physical analysis of building components (including a component inventory with estimated remaining lifespan for each item) and a financial analysis as to the various costs of each item and a plan for the future funding of the reserve.    

The reserve fund study does not, however, provide much guidance about routine maintenance, which leaves condo boards to make their own judgement calls and to pay the cost for such work out of the operating account.   As a result, it becomes easy to justify putting off expenditures for routine maintenance when times are tough or the budget is tight.  

While deferring simple maintenance might seem like a good short-term solution, that approach may be more costly in the long run.

While her comments were probably directed to owners of freehold houses, Gail says the following which is directly applicable to condo complexes of any description:

"You can skimp on your home maintenance, ignoring the cracking foundation, the rotting deck or the fence that’s falling down only so long. When it finally MUST be done, no doubt it’ll cost three to five times as much as it would have if you’d simply maintained it."

With the good weather soon upon us, condo boards and their managers should inspect their common elements from top to bottom and work with their engineers and contractors to identify components that require preventative work this season.

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