May 2024
Deferring work may at first seem to be a reasonable solution for condo boards struggling to balance rising costs, inadequate financial resources or an operating deficit.
Condo fees from owners is the only source of funds for paying the costs of work in a building. Condo boards find it difficult to explain why fees need to be increased and addressing opposition to this, so may prefer to cut back on necessary expenditures.
Budgeting – deciding how much money is needed and what to spend it on – involves trade-offs and requires discipline. There is a limited amount of money available and not everything can be done at once. The annual budget identifies priorities for how money is to be spent in the coming year. Except for emergency situations, there should be no expenditures not included in the budget.
Any budget can incorporate a prior-year surplus for unexpected expenditures that can be rolled over to the next year’s budget thus lowering condo fees.
Deferral of major projects is unwise. Costs will be higher in the future. In the present, deferred projects require more maintenance and repairs to keep spaces functional and systems operational.
Adhering to a budget forces a condo board to plan, and to follow the plan. It provides advance warning of upcoming financial shortfalls, and time to consider options. Raising condo fees is practical if there is sufficient time to obtain funds for necessary work. A special assessment requires owners to provide needed funds by a set date. Obtaining a loan can provide immediate funds that owners must repay with interest over a set period of time.
When a community defers necessary work, this is a budgeting failure. It signifies an unwillingness to ensure owners are aware of and required to pay the true costs of maintaining your home.
