A Toronto condominium is making headlines after levying a $14 million special assessment. The condo’s 321 units were given 15 days to pay between $30,000 to $42,500. Many residents are seniors who see their units as their retirement home but the condo promised it wouldn’t enforce its liens before April…how generous.
The building needs major structural repairs and its finances are shocking to say the least. Last spring, the condo had a $5,000 operating fund and a whopping $1.75 in its reserve fund. The condo reportedly owes “as much as $9 million in debt” with $8 million owed to private lenders and another $1 million owed to the City of Toronto for unpaid utility charges – the condo pays $80,000 a month on interest alone.
This condo’s dysfunction predates the $14 million special assessment – it is one of the few condos that had a court-appointed administrator. Evidently this condo’s problems could not be solved even with an administrator. This is story should serve as a both a warning and a rude awakening for condos across the province: condominium operations are no joke.
This is a sad ordeal that could have been avoided. Here are Tony’s Takeaways from this story:
- Don’t Fear the Reaper – Reasonable fee increases are a good thing: Condos will inevitably age as wear-and-tear accumulates – this is why reserve funds are so important. Money needs to be spent to pay for maintenance and repairs but as the saying goes, “money doesn’t grow on trees”.
All too often we see owners protest monthly fee increases. But many condo owners do not appreciate that condo living is communal and everyone is collectively responsible for the health of the condo. No one wants to pay more than they need to but there is a fine line between being fiscally conservative and unreasonably frugal. We often see boards delaying important repairs or resisting fee increases but this does little more than “kick the can down the road”: the problems get worse and when it comes time to act, the funds aren’t there.
We generally view fee increases as a good thing – the beefier a corporation’s reserve fund is, the better equipped it is to respond to major repairs or unexpected disasters.
- Play by the Rules – Adopt a Code of Ethics: A condo with different opinions, backgrounds and expertise is always a good thing. Those differences prevent hive mentality but it can also lead to tension and conflict. By outlining how owners and directors are expected to behave, you minimize tension and conflict; at the very least, you set procedures to deal with certain problems before they spiral out of control.
While the Condo Act does not impose a Code of Ethics, we strongly recommend all of our condo clients pass a Code of Ethics to outline what is expected of owners and directors. At the very basic level, owners and directors should be expected to conduct themselves in a courteous, respectful and non-confrontational manner. The board should rightfully be held to higher expectations and their Code of Ethics should require they keep board business confidential, reduce in-fighting amongst the board and respect decisions passed by the board despite any personal disagreements – if the rest of the board believes a director has breached their Code of Ethics, that director is deemed to have tendered their resignation.
- Knowledge is Power – Stay Educated on Condo Affairs: There is a lot of misconception about the Condo Act amongst owners and directors. The best solution to this problem is to stay educated and informed.
As complicated as the Condo Act can be, the Condominium Authority of Ontario provides free easy-to-digest guides on issues like condo governance, funding and dispute resolution. The CAO also offers a free online directors’ training which is available to everyone, not just directors. These resources are a valuable crash course into condominium operations that we think every condo resident should take the time to review.
It is also crucial that owners and directors stay on top of their condo’s operations and make informed decisions before electing directors. Being a condominium director is a thankless position but that doesn’t mean owners should simply vote for any candidate that puts their name in the hat. Before voting, owners they should ask themselves and the candidates, “what problems need to be solved at my condo” and “does this candidate have the expertise to tackle this problem? Have they been on the board before and if so, how did that go? Are they committed to taking on the position or does it seem as if they are simply filling a vacancy?”.
At the end of the day, the board is empowered to make the hard decisions on behalf of the corporation. However, in most cases owners get to decide who they entrust to make those decisions. This is a right that should not be taken lightly.
Condominiums are dynamic creatures that can’t be considered without considering the socioeconomic, community, and cultural factors that influence both owner and board decision-making. There is rarely a “one size fits all” answer to condo problems but by being proactive and informed, you can avoid being in this predicament.