January 2022
Major building systems wear down and require maintenance. Use and weather cause damage that needs to be repaired. All of this means owners must pay to keep the corporation and their home well-maintained.
Over time payments inevitably increase. When that time comes it’s important that boards, management and owners understand why fees are increasing and when they will increase. An open and direct board interested in transparency makes the process easier. It reduces conflict as compared to a board that is more arbitrary and secretive. Owners receiving reliable information are less likely to complain or oppose fee increases.
Why condo fees increase
Monthly fees increase for a number of reasons. Expenses may be increasing. Older equipment may cost more to maintain or require replacement. Repairs may be more frequent. Local laws may have changed requiring greater expenditures. Insurance costs may have increased perhaps due to an increase in claims.
At the very least monthly fees should be increasing each year in accordance with cost increases. Further increases can be necessary to build up the reserve fund or pay for increased operational costs.
Informing of a condo fee increase
Once the annual increase has been determined it’s time to communicate and sell this plan to owners. Boards should explain why more money is required. Being honest and transparent is the best approach. Owners should be made to understand that funding decisions are not made without first considering reserve fund and operational requirements, and other factors impacting on any fee increase. Where fee increases are necessary to fund a major new expenditure, owners should be made to understand why the expenditure is occurring including future benefits.
Focusing too much on condo fee increases may make owners angry and can lead to less desirable outcomes. Yet, ignoring the issue is unacceptable. Running out of funds to undertake regular maintenance or replace costly systems leads to long-term and more expensive problems to be addressed without sufficient funds. Any effort to placate owners by keeping fees too low leads to this outcome rather quickly. Problems and complaints increase along with funding requirements. Lifestyle and resident satisfaction decline. Satisfaction with how the board is operating will likely plummet.
Boards with a financial surplus may feel they can defer raising fees. This can easily backfire. Using up available cash to reduce or defer increases for a year only leads to a greater increase the following year. An annual increase of three percent is likely to be more acceptable over a zero percent increase one year and 6 percent the following year. The combined increase over two years, while identical, is rarely perceived in this way.
Most owners recognize that a small increase in fees is necessary each year. It is better for boards to opt for consistent annual increases that are more easily anticipated and planned for.
