September 2024
There is a mindset toward reserve fund planning at the root of how many condominium communities operate which has led to the shortfalls these communities struggle to address.
The reality is that many reserve funds are chronically underfunded, have insufficient funds to pay for what is needed, and condo boards expend great effort to hide these problems. Many condo directors may not even be aware that problems exist.
Condo owners and tenants love their home which explains why so many willingly choose this living environment. At the same time, they prefer to pay less to maintain the home thinking they will eventually leave and others will deal with funding deficiencies at that time. In short, too few are concerned about the long-term health of their condo buildings and this includes those elected as directors to serve on the condo board and maintain this long-term health. They are in no rush to increase the amount of money directed to the reserve fund, to raise condo fees for this purpose, or to pay for building repairs and improvements.
“The Condominium Act partially compensates for this by requiring reserve fund studies to be conducted regularly and establishes a minimum contribution level for the reserve fund” explains Jeremy Nixon, P. Eng., BSSO of Brown & Beattie Ltd. The unfortunate reality is that these minimum standards are inadequate and there is no effective enforcement. The result is that too many condominium corporations remain focused on keeping condo fees low and prefer not to upset owners.
The consequence of this is that too many condominium corporations run out of money and are forced to obtain it with dramatic increases in condo fees, special assessments and borrowing money. Nobody is saving money, lifestyles and living conditions are degraded, and most are spending more than would be necessary with a proper mindset. While all this is occurring, necessary repairs and maintenance is not getting done with some communities dealing with safety issues and others with health concerns.
Doing better requires a change in reserve fund psychology by owners, particularly condo directors, and legislative changes requiring better funding to preserve our homes.
