January 2023
Condo boards have a limited responsibility for maintaining property values. They are required to maintain and protect the community, and to determine how much owners must contribute to do so.
Property values are partially determined by how effective the board is in fulfilling their obligations which hinge on collecting a proper amount of money from owners and using these funds in a responsible manner.
How funds are obtained for maintaining a property depends on effectiveness of the condo board, management and financial planning.
Proper Level of Condo Fees
Maintaining condo fees at a level appropriate for current and future expenditures is the preferred approach. It minimizes problems and avoids financial surprises.
Some communities choose to keep their condo fees artificially low. They do this by delaying preventative maintenance and failing to undertake repairs. This allows equipment to require replacement sooner, and damages to worsen, which increase future expenses.
Reserve funds, based on the premise that each owner should pay for what they have used, are intended to replace building components that need to be replaced. Failing to sufficiently contribute to the reserve fund, which pays for future capital expenditures, is likely the most common approach to maintaining artificially low monthly condo fees.
Artificially low condo fees ensure alternate sources of funds will be necessary.
Special Assessments
When repairs and equipment replacement can no longer be postponed, it becomes urgent that condominium corporations find an immediate source of funds.
A special assessment bad news. It is an acknowledgement that the corporation has made poor decisions in the past that now need to be rectified. It is a determination by the condo board, not subject to owner approval, that each owner pay a specified amount ranging from hundreds to tens of thousands of dollars.
Those unable to pay a special assessment could be forced to sell their home to meet this obligation.
Borrowing Funds
Borrowing money may be a more practical option in communities where owners are unable to immediately pay higher monthly fees or a special assessment. This may be the only option when funds are needed quickly and owners are unable to provide them.
Borrowing money is an effective way to cover any shortfall between what is needed and what has been saved. It can be a responsible way to address major expenses to reduce overall costs or provide value.
