CONDO ARCHIVES

Visioning comes before Budgeting

May 2020

Any condo corporation managing to keep fees low does a disservice to its owners.  This virtually guarantees everyone will pay more.

Budgeting is an annual process in most condo corporations.  Reserve fund budgeting generally occurs once every three years.  These are tools intended to aid the community and control costs.

Vision is a plan the community follows to achieve its goals.  Decide what needs to be done and what you want to do or achieve.  Then determine what level of budgeting, or condo fees, to make this happen.

Managing by budget with the goal of keeping condo fees low is a short-term approach easily achieved at the expense of dramatically higher costs later on.  A community unable to afford necessary maintenance today is less likely to afford higher maintenance costs tomorrow and early replacement of equipment inadequately maintained.

Artificially low estimates in a budget or reserve fund keep condo fees lower in the current year.  They ensure budget targets are not met in the coming years.  Funds deplete for a few years before the corporation totally depletes reserves it may have had and becomes unable to pay the cost of maintaining the community.  Things wear out, problems increase and property values decline.

Nobody comes out ahead when condo fees are inadequate.  Huge condo fee increases and special assessments become the only way to reverse a worsening situation.  Everyone pays more because of a condo board making short-sighted decisions that keep condo fees artificially low.

Make a plan before establishing a budget.  Don’t let the tail wag the dog.