November 2015
Ensuring that high-rise condo buildings survive as quality housing for decades is not easy.
One only needs to look at British Columbia to understand the importance of Ontario’s Condo Act and its reserve fund requirements in maintaining our condo buildings.
The Condominium Home Owners Association of B.C. estimates that 10 per cent of the province’s condos are now 30 to 45 years old. These older buildings require significant funds for major renewals that their condo owners cannot afford.
Many condo owners spent everything they had to purchase their condo. When condo expenses were lowest in the early years of a condo building, too many condo owners did not have the financial resources to pay for ongoing condo maintenance, general operations and replacement. Yesterday’s difficulty in paying the cost of maintaining these buildings is now more challenging.
As condos age, replacement costs can be as high as 45% of expenses and many of today’s B.C. condo owners lack the financial resources to maintain their condo buildings. In some instances condo buildings are in such bad state and available funds so tight that condo owners are discussing the possibility of liquidating their corporation.
In British Columbia the approach to funding major infrastructure replacement in condos differs from Ontario. British Columbia had, until 2009, a cap on how much money could be placed in Contingency Reserve Funds. Larger repairs were financed through special levies which required 75% owner approval. Even when the need for repairs was agreed on, condo corporations had difficulty getting the necessary 75% approval to enact these special assessments. This is understandable when condo owners were having difficulty paying mortgages and condo fees. Condo corporations with a greater proportion of seniors, who often live off fixed pensions, were even less capable of obtaining the necessary funds.
Today, in British Columbia, it requires a majority vote of owners to increase what is called a rainy day fund which is used for large repairs and emergencies.
While this is an improvement over the prior 75% approval for special levies, a special assessment that is voted down is costly and time consuming to reverse. It is not uncommon for condo owners to support needed repair work but vote against the necessary funding to undertake repairs.
One important benefit of mandating reserve funds, as done in Ontario, is that condo owners are less able to allow their building to fail by avoiding repair and maintenance.
