About 15 percent of Ontario households currently live in condominiums, and more than half of all new homes being built in the province are also condominium units.
There are 900,000 condominium units in the province that are managed by 11,000 condominium societies and some units that are over 30 years old are beginning to show their age.
A recent research report published by the Canadian Institute of Actuaries found that condominium boards should ensure that sufficient reserve funds are budgeted to help pay for costly repairs in the future.
Jon Juffs of McIntosh Perry, an engineering firm that has experience with reserve fund studies, said condo boards need to make sure they have funds ready for unexpected repairs.
“A lot of condominium corporations can realistically expect to suffer a special assessment because planning horizons are so short and cost decisions are driven by deferrals or trying to get the least expensive repairs that may not last as long. Juffs said.
A special assessment is when homeowners are required to pay extra on top of their monthly maintenance fees to cover a major expense, such as replacement of roofs, exterior glass walls, balconies, foundations, and parking lots.
While condo owners pay maintenance fees each month to care for their building, not enough money may be raised to cover major renovations when they’re needed.
Also compounding the problem is that many condo owners pressure their boards to keep monthly maintenance fees as low as possible.
“When you’re not making the right raises, you’re not saving enough money when big bills come due,” said Mark Weisleder, a real estate attorney with RealEstateLawyers.ca LLP.
Special appraisals can range from a few thousand dollars to as much as $50,000. Assessments are generally divided by the number of units in a building or complex, although assessments may vary based on the square footage of the units.
If a roof is needed for a building and the cost is $1,000,000 and there are 200 unit owners, a special appraisal of $5,000 would be issued to each of the 200 owners.
In the event someone refuses to pay a special assessment, a lien may be placed on your unit.
While an increase in condo maintenance fees can be frustrating for homeowners if it is helping top up the reserve fund that can prevent special assessments in the future.
“If a higher percentage goes into your reserve fund, people should understand that they’re saving money and that’s a good thing because it means the money will be there when repairs are needed,” Weisleder said.
If your building needs repairs now and they are put off too long, the situation could get worse and more expensive to fix later.
“If you’re already seeing the deterioration (in your building) and you’re procrastinating, that deterioration will only get worse and the cost to repair will be higher,” Juffs said.
When purchasing a condo, it is important to check the certificate of status to see the financial status of the building and to check for pending judgments or special appraisals.