Many people who work with condominiums raised an eyebrow after reading a recent Toronto Star story entitled “Maintenance fees take a toll on Toronto condo owners.”
The piece highlights the divergent philosophies about the interplay between common expenses and market values and the growing trend towards gathering, tracking and comparing common expenses data from building to building. Most notably, it cites the example of a local condominium that reduced its common expenses by 30% (probably by slashing contributions to the reserve fund) and is now witnessing a boom in unit resale values compared to nearby condos.
Condo boards have an obligation to spend the owners’ money carefully, but convincing the reserve fund preparer to lower the estimates so as to decrease the funding plan isn’t a terribly difficult or courageous thing to do. It’s more like kicking the can down the road. The current penny-wise condo board and engineer likely won’t still be around when it becomes patently obvious that there is insufficient money in reserve to fund major repairs and replacement. The real courage will be shown by those purchasers buying into this condominium years from now based on the low common expenses but who might find themselves confronted with a strikingly under-funded reserve. This is the inevitable danger of basing market values too heavily on the common expenses, no matter how you slice and dice the numbers.
In these days following introduction of the HST and as utility costs sky-rocket, it’s easy to be sceptical about whether severe austerity creates lasting positive effects. It’s even easier if you live in Toronto and witnessed the end of mayor Rob Ford’s single-term slash and burn campaign to “stop the gravy train” that is thankfully being reversed and undone in several key areas. It is probably only a matter of time until similarly-extreme economic doctrines in condominiums are discredited and rejected. No one would doubt that reducing common expenses is attractive, popular and seemingly positive, but the long-term results are easy to predict.
What do you think?
And while slashing and burning line items on condo budgets is hard to do without short-changing future owners or eliminating valuable services, there are some ways to realize costs savings. An easy one is to eliminate double taxation on amenity units.
Condo corporations that still pay municipal taxes on superintendent, guest or amenity units they own can potentially eliminate that obligation by asking Municipal Property Assessment Corporation to reclassify those units as non-taxable. GMA senior partner Bob Gardiner spearheaded a brilliantly successful case against double-taxation in 2011 (see here for the report) and is once again providing condo corporations a streamlined, flat-fee process to take advantage. View the package here: Letter to Managers re 2015 RfR Program (.pdf), but act fast because the MPAC filing deadline is March 31, 2015.