You'd think lower condo fees are a good thing, right?
Not necessarily. A recent story in the Globe and Mail (Faulty Towers: The hidden dangers of low condo maintenance fees) talks about 40 Panorama Court, a condo building near Finch and Kipling. In an effort to keep condo fees low, past Boards of Directors put off doing essential repairs for years.
Things had gotten so bad, that in 2010, the Board of Directors sent a letter to each resident, telling them that millions of dollars would be needed for upcoming repairs. The board recommended that they take out a multimillion-dollar loan to cover the costs. The owners refused. The board had to bring the issue to the Ontario Courts to get an administrator to take over property management and impose higher condo fees.
Successive boards kept the condo fees unreasonably low
The judge said “[The building] has suffered from years of neglect by successive boards of directors who, aided by the support or indifference of many residents, kept the common expenses unreasonably low, neglecting repairs and maintenance and postponing the inevitable day when the chickens came home to roost. That day has come and gone.”
The court-ordered property management company has done a preliminary review and estimates there are $4 million dollars of repairs that need to be done to the building over the next 2 years - and that's just the beginning. The result - an estimated $25,000 per unit repair bill!
As you might expect, the current owners feel betrayed by all of the owners who have served on previous condo boards, and former owners who paid low fees over the life of the building but moved out before the problems presented themselves.
The moral of the story?
Never buy a condo without having your lawyer examine the status certificate. Among other things, it will show the size of the reserve fund, which is a good indication of the condo corp's financial health. It also shows whether or not there is a pending increase in monthly condo fees or a pending special assessment.
If the building hallways, elevators, lobby, or parking garages look shabby, it may be worth reading the minutes of the last annual general meeting to see if repairs or renovations are being considered. If so, where's the money coming from? If not, you may want to buy elsewhere.
If you're going to buy a condo...