Q. Our condo fees are increasing to the point where we may no longer be able to afford them. It is also going to be more difficult to sell our condo. Why can't the fees be capped at some point? Ours are nearly as high as our mortgage payments. We have been told that increases are necessary to build our reserve fund. Is this true?
A. The reason for increases in your common expenses should have been revealed at your annual meetings of the corporation or indicated in the corporation's financial statement or auditor's report. These reports are sent to each owner prior to their annual meetings. Your auditor will also receive notice of the meeting and, in most cases, will attend. He/she is there to answer the owners' questions.
Condo fees are similar to city taxes. They are collected from each owner in order for the directors, who, like elected officials of our city, must direct a portion of these fees towards maintenance, repairs, reserve funds, etc., while continuing to provide the best level of services demanded by all owners. Maintenance fees can be much higher or lower between neighbouring condominiums, depending on what type of recreational facilities are offered. Sometimes condo boards maintain low fees because they are ignoring looming capital costs, such as replacing roofs, hot water boilers, etc.. When roofs and the pipes leak, and there is not enough money in the reserve fund, owners could face huge special assessments.
The monthly condominium fee is based on the outcome of the yearly budget, and reserve funds are a critical part of that budget. According to the Condominium Act of Ontario, directors must conduct a reserve fund study, which must be updated every three years. Unfortunately, there are several condo corporations that have never completed a reserve fund study or have outdated studies. Directors who avoid this procedure are fooling themselves. In the long run, all owners will suffer the consequences due to insufficient reserve funds and directors could be sued for ignoring reserve fund studies that are mandatory under the Condominium Act.
There is no provision in the current act that allows capping monthly common expenses. This would be impossible to do, as unforeseen expenses and general costs rise yearly. I suggest that you voice concerns to board members and inquire why the increases were necessary.
- Marilyn Lincoln is a condominium owner, director and author of The Condominium Self Management Guide, 2nd ed. Send questions to marilyncondoguide@hotmail.com.
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