A condo in Toronto recently made the news after levying a $14-million special assessment. The corporation gave owners 15 days to pay for repairs. Claudia Pedrero, associate in the Real Estate Group at Robins Appleby LLP, explains how other condo corporations can avoid this predicament.
York Condominium Corporation (YCC) No. 82, which operates a 10-storey, 321-unit building in the Jane and Finch neighbourhood, is facing the proverbial 'perfect storm' in condo operations, maintenance, and governance, with unit owners footing the bill.
In September 2021, YCC No. 82 sent letters to all owners announcing an $11,235,000 special assessment. This translated to $30,000 to $42,500 per unit, depending on unit size.
After the special assessment was issued, a unit owner brought a court application seeking an order to compel YCC No. 82 to hold a requisition meeting to remove the condominium's board of directors.
The decision from Justice William D. Black of the Ontario Superior Court of Justice, released mid-January 2022, goes to great length to describe the state of the building and the many difficulties faced by the condominium.
The engineering report described by the court illustrates a building fallen into a state of significant disrepair. A recent engineering report advised immediately installing shoring to maintain the structural integrity of the building. There are also defects in the underground parking garage roof and cracks in the foundation. The report describes loose concrete on many balconies and recommends that residents and children avoid them. The City of Toronto has commenced proceedings against the condominium for fire code violations.
The estimated cost of repairs to the building within the next year alone would exceed $14 million.
But YCC No. 82 couldn't pay. According to the financial material presented to the court, YCC No. 82 had only $1.75 in its reserve fund and just over $5,000 in its operating fund. It pays $80,000 a month in interest to service existing debts for repairs. These debts relay a history of difficulty. The court noted that the loans were entered into when the condominium was facing insolvency and put under the control of a court-ordered administrator. Like all condo corporations, YCC No. 82 is overseen by a group of owners elected to a board of directors. Under Ontario's Condominium Act, the board has the power to require that all owners pay for common expenses and can levy a special assessment if the condo does not have an adequate reserve fund to cover the cost of repairs or unexpected projects.
Unit owners who fail to pay a special assessment run the risk of a lien being placed on their unit. If the lien is not discharged, the condominium can sell the unit to recover the amount owing.
How can other condo corporations avoid this nightmare? Here are three lessons for condo boards and owners.
Professional accredited property management and engaged directors
Even though the condominium is led by a board of directors, it needs to rely on the advice of professionals for the proper management and budgeting for a building. The property manager plays a key role. At the same time, condominium directors should have some knowledge of condominium governance and funding while being committed to staying on top of their condo's operations.
Follow the advice of reserve fund studies
Condominium boards and management should follow the advice of each reserve fund study to determine how much needs to be in the fund to ensure the condominium can afford necessary repairs in the future.
Raise common expense fees when needed
Older buildings require more maintenance and repair as they age. In condominiums, these costs are borne by unit owners through their monthly
common expenses and contributions to the reserve fund. Increasing monthly expenses is unpopular among unit owners and condominium boards may be hesitant to do so, but inevitably someone needs to pay for the repairs. A healthier reserve fund makes a condominium better equipped to respond when faced with major repairs or unexpected expenses.
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