The Unreal World of Condo Living

April 2017

Experience has shown there is no better way to predict the future than by looking at the past. Those that choose to ignore experience and history are doomed to pay for their choices.

Believing that a particular situation is unique, when it is not, generally does not lead to good choices about how to proceed.

Good condo boards are expected to rely on experience, history and solid information. They choose not to make decisions based on innuendo and opinion. Consultants play an important role for these condo boards. They provide the information needed to make informed decisions.

In contrast, people tend to be motivated by fear or greed. These emotions can overpower logic and good judgement.

Fear and greed take on even greater importance when condo boards fail to disclose pertinent information to condo owners. This lack of disclosure creates a vacuum where fear and greed can combine with mistrust to create a volatile environment.

Following are some real examples of matters handled by condo boards and interactions with owners.

Electricity Costs

What condo owners want to hear is that condo fees will not go up. In older condos, residents also like the convenience of not having to see or deal with utility bills. With utility costs being 30% to 40% of many condo budgets, any increase in electricity costs is viewed as an upcoming increase in condo fees.

Attempts to rein in electricity costs by having owners pay direct for what they use is often met by irrational opposition. This opposition finds factual information provided by industry experts to be inconvenient. It shows that condo buildings which have sub-metering of electricity results in lower per suite usage and costs than those that have electricity bills paid by the condo corporation.

This pits condo directors against each other. Some accept their fiduciary responsibility, rely on industry experts and try to implement policies in the best long-term interest of the condo corporation. Others, perhaps more interested in being liked and re-elected, are more focused on their personal convenience and unwilling to support change supported by history and data but not belief.

Lower Condo Fees

Everyone wants lower condo fees without any loss of convenience or services. The reality is that lower condo fees only results from lower costs or elimination of services. Reducing costs requires hard work to avoid sacrificing what is important to the community.

There is always support for those who promise lower condo fees. There are few instances where these promises have been kept. A year or two of lower condo fees may come about by delaying regular maintenance, building upkeep or reducing reserve fund contributions. Soon after equipment fails, building maintenance declines and problems become more frequent.

Condo directors elected on promises of lower condo fees don’t last long. They fail to maintain the condo building and are soon replaced by someone else making this magical promise.

Condo corporations with a revolving door of directors making impractical promises is an ineffective way to manage a multi-million dollar budget.

Every few years reality sets in. That dramatic increase in condo fees or special assessment is likely the result of poor management and condo board decisions from past years. A condo board gets elected that is forced to deal with matters that have been ignored for too long. On far too many occasions, the current board is blamed for cost increases due to prior board mismanagement. This current board is then viewed as the problem, individuals replaced with new board members making impossible promises and the cycle begins again.

Internet and Cable Services

The Internet has created new services and cost structures. While some condo corporations pay for cable television through condo fees, others require each suite to obtain the services they desire. Where cable television is paid through the condo corporation, opposition may exist from those who prefer online services such as Netflix.

It can be appealing to discontinue cable services as a condo corporation paid service. This approach could free up hundreds of thousands of dollars each year. It could also require condo owners to individually purchase comparable services at nearly double the cost.

Condo boards need to understand the makeup of the owners they represent, what services a majority desire and make decisions that benefit the majority. It is, and will always be, easier to continue with the status quo to avoid potential conflict and vocal disagreement.