UNDERSTANDING CONDOMINIUM FEES

1. UNDERSTANDINGCONDOMINIUM FEES Presented by

2. CONDOMINIUM FEES • What is a condominium corporation? • A Not-For-Profit Corporation • Created under the Condominium Property Act, 1993 upon application to raise titles in accordance with the Condominium Plan

3. CONDOMINIUM FEES • What are condominium fees called? • Common expenses; maintenance fees, condo fees • What are they? • The lifeblood of the condo corporation. • sole principal source of income to cover costs to operate and maintain the corporation

4. CONDOMINIUM FEES • What are they? • Unit owner’s proportionate share of expenses of corporation including contribution to reserve fund • Collected monthly on first of each month • Special assessments + other permitted costs • Act obligates owners to pay and mandates Board of Directors to collect. • No excuses

5. CONDOMINIUM FEES • How are the annual costs determined? • Annual budget for total costs of operating the corporation (common expenses) incl. mandatory annual contribution to reserve fund. • E.g. insurance, maintenance of common property and facilities, utilities, security, management fees, elevator service

6. CONDOMINUM FEES • How determined for each unit? • Either based on unit factors or Scheme of Apportionment • Not discretionary • Not necessarily based on sq. footage • Not always appear to be fair

7. DUTY TO PAY • Owners must pay • Not exempt even if: • Owner doesn’t use common property • Owner making a claim against the corporation • By-laws or rules restrict owner from using common property or part of them

8. DUTY TO PAY • Corporations have powerful statutory collection tool: LIEN FOR ARREARS (Sec. 63)

9. lien • Statutory lien right against unit (immediate) • Arrears plus interest and reasonable legal costs and expenses (check by-laws) • Constitute secured claim for fees due 3 months before notice provided to other interest holders • Registered lien covers future arrears • Registered lien takes priority over mortgages

10. COLLECTION PROCEDURE • Different for each corporation • Warning letter from management • Formal Steps under Act: • Notice Of Lien • delivered to mortgagees and other interest holders • Wait until confirmed that delivery has occurred • Certificate of Lien registered on title • Cost • ISC

11. COLLECTION PROCEDURE • Garnishment of rent – if leased (s.81) • If owner pays all amounts then lien must be discharged • Foreclosure • Lien can be enforced in same manner as a mortgage • Lose your home

12. CONDOMINIUM FEES • Special Assessments – ‘Dirty Word’ • Added to owner’s common expenses and collected in same manner as normal contributions • Usually decided by Owner’s meeting

13. RESERVE FUNDS • Mandated by Act (Sec. 55) • Major repair and replacement of common elements and assets • Cannot be used for general operations

14. RESERVE FUND • Reserve Fund Studies • Within 3 years after first annual meeting (S 58.1) • Every 10 years thereafter • Included in Estoppel Certificates

15. CONDOMINIUM FEES It’s not about fees It’s only about costs

16. CONDOMINIUM LIVING People living together and sharing housing costs

17. CALCULATING CONDO FEES • Estimate all the costs that will be required to operate the community of homes for the year • add them up and • Based on scheme of apportionment or unit factors.

18. CALCULATING CONDO FEES • There is no landlord making outrageous profits OWNERS ARE THE LANDLORD THERE IS NO PROFIT MARGIN

19. EXPECTATIONS • Just bought/going to sell • Fixed/low income/higher income • Basic lifestyle/best of everything Individual owner expectations are unlikely to match those of any other owner COMPROMISE IS NECESSARY

20. EXPECTATIONS • Disconnect between costs and service levels • Can’t drive a Cadillac, pay for a Chevrolet • What you get, you must pay for • Quality definition and owner agreement essential MORE/BETTER SERVICES MEANS HIGHER COST

21. EXPECTATIONS AND COSTS • Can’t have 24/7 security without paying for 24/7 • Cant expect clean windows if washed once a year • Can’t expect a clean building without paying for the hours necessary to keep it clean • Can’t have well maintained grounds without paying for the necessary flowers, shrubs and labour • Can’t expect skilled security, cleaning and grounds personnel, etc. by paying minimum wage

22. COST FUNCTION OF QUALITY AND SERVICE The highest price is not a guarantee of the best quality and/or service A really low price pretty much guarantees lower quality and/or service

23. COST • For comparable quality materials, suppliers have to pay much the same prices • For comparable skills, suppliers have to pay much the same wages and benefits • Very low quotes almost certainly mean that the materials, the labour, or both, are lower quality and the level of service is suspect

24. CONDOMINIUM COSTS There are only 5 cost categories 1. Reserve fund 2. Utilities 3. Professional Service 4. Repairs and maintenance 5. Administration and all other

25. COSTS

26. TYPICAL COSTS • Reserve fund • Utilities, heat, air conditioning, lights, water, waste, telephone • People costs, management, security, cleaning, grounds, elevator, mechanical contracts, etc. • Insurance, audit • Inspections, fire, elevator, roof anchors, etc.

27. VARIABLE COSTS • Compensation levels • Service levels • Quality of materials • Repair and maintenance standards • Other (small) costs

28. CAUTIONS • Energy costs rising over time • Rising energy costs increase material costs • Wages and benefits rise over time • New costs occur from time to time

29. CAUTIONS • Fees kept unrealistically low lead to deferred maintenance, deficits and special assessments • Directors have a duty of care to manage the property reasonably on behalf of the owners • Beware electing directors who promise reduced fees

30. NO FREE LUNCH • Owners have to pay the costs necessary to operate their community at the consensus quality level • Either they pay in the current year or run a deficit or defer needed repairs and maintenance • A deficit, in dollars or repair and maintenance, is like a bank overdraft - it never goes away and • Sooner rather than later, deficits have to be paid or the community deteriorates

31. So you are looking toPurchase a Condominium… • What is a Condominium Budget • Why do some Condominiums have higher or lower fees than others? • Items to look for in a Condominium Budget that can influence costs • Why Fees often increase from year 1 to year 2

32. What is a Condominium Budget? • A budget is made up of the total estimated costs to run a condominium corporation for the year. • It outlines all anticipated expenses, contracts, insurance, maintenance and repair, administration and reserve fund contributions.

33. Why do some Condominiums have higher or lower fees than others? • How many units in the building? • How many stories and how intricate is the architecture? • How many elevators? • Does/will the Condominium have underground parking. How many levels? How often will it be cleaned? Is it heated? • Are energy efficient alternatives used?

34. Items to look for in a Condominium Budget that can influence costs • Is there Concierge and if so how many hours? • Is there a pool, whirlpool or steam rooms / saunas? Are the pools heated, year round, indoor or outdoor? • Does/will the Condominium have a large Garden or roof Top Terraces that will need to be landscaped and maintained during the summer months?

35. Items to look for in a Condominium Budget that can influence costs • Does/will the Condominium have a large driveway and areas requiring snow removal? • Does/will the Condominium have full time professional Property Management? • Does/will the Condominium have a Superintendent? These are just some of the items that will influence the budget and in turn, your monthly common element cost.

36. Why Condominium Fees often increase from year 1 to year 2 • It is often difficult for a builder to anticipate the costs required to run a condominium which will finish being built in 2-3 years time • Reserve Fund Study and subsequent funding plan • Inflation • Contract Increases • Utility Increases