Condominiums operations are controlled by a Board of Directors working on behalf of all the owners. The Declaration of the Condominium Corporation defines the framework for the operations as well as the monthly maintenance fees apportioned to each individual unit. For the earlier article in this Condominium series, please click: http://chinesenewsgroup.com/news/667802
The average Condominium monthly maintenance fee for Toronto in 2017 was 65 cents per square foot, with 22 cents at the low end and $1.35 at the high end. It is difficult to compare maintenance fees since there are many variable components between condominiums. Large number of units within a Condominium Corporation would mean a smaller contribution of fees is needed from each unit. Maintenance Fees for buildings with swimming pools will be more expensive than those without due to the added costs for maintenance of such amenity.
The Condominium maintenance fee consists of two components – the Operating fund and the Reserve Fund. The Operating Fund looks after daily operations such as Management fees, security expenses, cleaning fees, elevator maintenance, and building machinery maintenance. These are just very obvious items but there are many others – insurance, auditors fees, facility repairs, and landscaping maintenance just to name a few.
The Reserve Fund is established and adjusted based on a Reserve Fund Study conducted by an Engineering firm every three years as it is required by the Ontario Condominium Act. The study will identify items that need to be replaced over an extended period. Reserve Funds will be expended for replacements and new funding will be allocated for future repairs based on estimation of deterioration. The replenishment of Reserve Funds come from the monthly maintenance fees.
During the yearly financial audit performed by the auditor, the Reserve Fund's viability will have to be addressed. The audit reports are distributed to the owners before the Annual General Meeting (AGM) for their review and questioning if necessary. A healthy Reserve Fund is essential to the Condominium owners since potential buyers will want to examine this item before they put in their offers for the sale through obtaining a “status certificate” from the Condominium Corporation. Underfunded or mismanaged Reserve Funds can result in one-time special assessment fees imposed on all owners to effect critical and urgent repairs to the building.
The Board of Directors will not typically micro manage the use of funding by the Condominium Management. Contract proposals are presented to the Board for review and approval before signing by the Board. Minor expenditures are executed at the discretion of property managers working for Condominium Management and reviewed at Board Meetings.
Section 97 of the Ontario Condominium Act limits the spending power of the Condominium Board of Directors to prevent any abuse of the Condominium Funds without getting the owners involved in major decisions. There are examples of Condominium Boards wanting to spend large amounts on beautifying building lobbies or landscaping projects when funds should be used for other much needed services.
Under the Condominium Act, the Board of Directors is allowed to expense less than the greater of $1,000 and 1% of the annual budget to make any addition, alteration, improvement or change in assets to the common elements without notifying the owners. Otherwise, they have to advise owners of their right to requisition an owners meeting to vote on the item. This limit will eventually be changed to “less than the lesser of $30,000 and 3% of the annual budget” in future.
A Board of Directors with the proper managerial and decision making skills is essential to the success of any Condominium Corporation and the increase in property value and attractiveness for sale. We will explore that area next time.
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