Predicting the Unpredictable

September 2020

Each year condo boards and management struggle with predicting the unpredictable.  More formally we call this the condo budget.

The process takes many months.  Guesstimates are made of how much water and electricity will be used, what equipment will break down, what needs to be repaired or replaced.

Condo budgeting combines known expenditures with educated assumptions, predictions and events beyond the control of management.  Historical data, anticipated cost increases and other information is combined to hopefully develop a realistic budget.  Owners are then informed how much they need to contribute based on this budget.

This year the task has become harder with COVID.  Past use patterns for utilities are unhelpful.  Many costs have escalated beyond reasonable expectation while trying to minimize the risk of virus infection.  The amount spent on cleaning staff plus hand sanitizer, masks, desk shields, cleaning supplies and related equipment is likely to increase.  New equipment may include foggers, hand sanitizing stations and thermometers.  Many of these are line items in the budget that didn’t exist prior to March 2020.

At the very least, uncertainty about condo expenditures has increased.

The basics of condo budgeting remain unchanged.  There is added stress in that expenditures are on the rise.  Condo boards need to address if they can reduce expenses elsewhere in the budget or pass along all expenses in the form of higher fees.

Condo boards and management will, as always, use their best judgement based on where they are today.  The reality is that not all communities are at the same place.  Some have spent years focusing on cost reduction or energy efficiency, and are in a better position to control their major costs thus keep condo fees lower.  Others, should they start today, likely have a few years of escalating costs before being in a position to benefit from cost savings.

On the revenue side, many will remain unemployed and possibly unwilling or unable to pay higher monthly fees.  It may be necessary to tighten collection policies or procedures to ensure fees are collected when due.

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