Capital improvements can be a challenge for condo corporations. They are expensive and funds needed for the work may not be available. The problem is exacerbated when necessary work is unexpected or the reserve fund is not fully funded.
Traditional approaches for condo corporations to obtain funds from owners on short notice, special assessments, can be financially crippling for condo owners.
Older condo buildings needing to modernize up to five elevators, replace a leaking roof and repair an underground parking area while also updating boilers and other infrastructure have faced bills in the millions of dollars. Residents have been required to pay a special assessment of $30,000 or more to cover their share of the bills.
It is a mistake to assume that owners can pay these large assessments. Most people just do not have access to tens of thousands of dollars for unexpected expenses.
Good management and compassion can help condo owners avoid crippling financial hits such as this.
One co-op that required repairs on six old elevators faced $1.8 million in expenditures; about $15,000 per owner. Management and directors realized that not all owners could afford this amount so created a “compassionate payment plan”.
This creative approach to funding necessary work was intended to reduce the financial burden of owners.
Money was needed immediately so the condo corporation’s line of credit was increased to $3 million. This allowed contractors to commence work.
Owners were offered options for repaying their share of this work. The choices were an immediate lump sum payment or to pay an equivalent amount plus interest in three years. About one-third of owners made the immediate payment. This reduced the amount used from the line of credit. Those choosing the three-year repayment plan were given an option to make payment sooner if their financial situation improved.
This creative approach recognizes that individuals have varied financial situations. Those capable of paying an unexpected assessment were given the opportunity to do so. Those requiring time to obtain necessary funds were allowed to “borrow” from the condo corporation and make payment plus interest according to a predetermined plan.