Consequences – Low condo fees have repercussions

June 2019

One local condo community is currently struggling with the consequences of low condo fees and failure to maintain proper meeting minutes.

The Toronto-area community, a five-year old building with 497 owners, is facing a $1.3 million second special assessment plus an estimated 25 percent increase in monthly condo fees over three years.  An earlier assessment, just three years ago for $300,000, to cover operating expenses should have been a clear indication something was amiss.  An inability to cover operating expenses is a worst-case scenario suggesting multiple problems encompassing poor budgeting and inadequate monthly condo fees.

Residents seeking to oust their elected condo board have called for a requisition meeting.  This is the first step in a process for replacing elected condo directors.  Residents are demanding changes in service contracts they claim are being kept secret.  The condo board claims nothing is wrong with how they are managing the property and an annual budget inadequate to cover costs.

Subsequently the board has lost quorum as directors resigned and nobody appears willing to replace them.  Some directors resigned after receiving “malicious emails” from some owners.  Without quorum the board is unable to make decisions necessary for addressing problems.

Condominium corporations often begin with unrealistically low monthly condo fees based on unrealistic initial budgets developed by condo developers.  Condo boards can choose between raising monthly fees to a realistic level, implementing special assessments at a later date or compromising on necessary building maintenance.  Condo owners, preferring lower fees, frequently oppose fee increases without being aware of the cost to maintain their home.

During condo elections owners may elect as directors those promising stable or reduced condo fees, or minimal increases.  Once elected, these directors may view condo management from the perspective of an individual homeowner.  They lack the business expertise and knowledge to run an operation on the scale of a high-rise condo building subject to oversight, regulation and scrutiny.  They can be unprepared to make unpopular decisions in the long-term interest of all.

The condo board appears to have failed to set monthly condo fees at a level consistent with expenses.  They have been found to employ contractors with family ties to board members.  Finally, they failed to ensure minutes of their board meetings include information about approved contracts, or potential conflict of interest and how it was handled.  Owners appear to have been content in allowing problems to continue by electing unqualified individuals as directors.

The problems in this community appear to be longstanding.  The best path to success is in understanding how a high-rise condo community needs to be managed, then electing directors capable of managing and making decisions so as to avoid unwelcome surprises.