How fixed are “Fixed” Costs

August 2018

Condo corporations have little control over 80 percent to 90 percent of their budget. With no more than 10 percent to 20 percent of a budget being discretionary it can be hard keep condo fees under control when costs escalate each year.

One way to do this is by identifying major costs that can be reduced and developing a long-term approach to getting them under control.

Major “fixed” costs that can be controlled in this way may include utilities – water, electricity, gas -, property management expenditures and security. In total, these three expenditures alone can account for $500,000 or more in annual expenditures for a high-rise condo building.

One condo corporation paying about $100,000 a year in water and sewer costs took such an approach. They were unable to impact on the cost of water charged to them so decided to control the amount of water being used.

The board began by requiring an upgrade of plumbing fixtures be undertaken before approval was granted for a suite renovation. This was considered reasonable because owners were expected to pay for their water consumption. Conscientious owners using less water should not be subsidizing those that use less efficient bathroom fixtures or who fail to stem water leaks in their suite.

Upgrading toilets and replacement of shower heads and faucets, if done throughout the building, was expected to provide a 20 percent to 40 percent reduction in water consumption. Within the first couple of years a 20 percent drop in water costs was realized.

This new policy was considered a success. Water consumption was reduced and condo fees were kept under control. Prospective purchasers could see proof the board was concerned about the environment and keeping costs under control.