Condominiums Funding comes from Owners

Gerry Hyman has another article for the Toronto Star.  Let’s discuss the questions raised:

QUESTION:  When I purchased my unit in a highrise condominium, there was a special assessment for the replacement of the condo windows. Are the windows not a common element? And if so, should the cost be borne by the corporation and not by the owners through a special assessment?

ANSWER:  Windows in a highrise condominium are invariably common elements. The cost of replacing failed windows is a cost of the corporation — unless the corporation’s declaration has been amended (in accordance with recent amendments to the Condominium Act) to make the cost of repairs to the windows of a unit the responsibility of the unit owner.

If the corporation is responsible for the cost, and if there are not sufficient funds in the reserve fund to pay for it, the corporation would levy a special assessment for the deficiency.

The owner seems to misunderstand the situation.  The bulk of the condominium’s revenue comes from the owners and in two main sources: through maintenance fee contributions (usually paid on a monthly basis) and through special assessments if extra money is required.  The condominium may receive some small amounts of revenue from other sources – renting out a party room, lockers, parking spaces, etc. to residents and owners as well, but the bulk of the revenue will come from the maintenance fees.

While the Board is required to put money aside into a Reserve Fund, paid out of a portion the maintenance fees, the money set aside is only an estimate based on the latest Reserve Fund Study.  The Study only has to be performed once every three years, and last winter was especially cold.  As such, if windows started to fail earlier than expected, the Board – after consulting the Engineer – may decide to do the repairs early than planned.  If there is not sufficient money in the Reserve Fund then a special assessment is required.

At the end of the day, the condominium’s money is the ‘owner’s money’ as the owners made the contributions in the first place.  Thus any costs that are ‘borne by the (condominium) corporation’ are ultimately borne by the owners because the owners are the source of the condominium’s money.

But this is also why I believe that we need to stop referring to condominiums as ‘corporations’ but as ‘communities’.  While a condominium is essentially governed like a corporation – Constitution, By-laws, Rules, Board of Directors, owners, etc. and each unit essentially is a share of the condominium – the way condominiums operate are more like communities, a group of people living in the same area.

The second question I wish to discuss is:

QUESTION: Unit owners in our condominium were sent notices requiring us to to provide management with keys to our suites. The corporation already has a master key to all of the units. Must I provide a key?

ANSWER:  A requirement for the owners to provide keys must not be made by management — but by the board, passing a rule. Rules must be reasonable and such a rule, if passed, would not appear to be reasonable if the corporation already has a master key.

If you fail to provide your key as required by a rule, the corporation could seek a court order and you could appear in court to argue that the rule is unreasonable and unenforceable. You might consider advising he corporation that the rule is unenforceable and if the board threatens to proceed to court you could determine to avoid a court appearance by providing the key.

The management company is most likely acting ‘On behalf of the Board’ when the notice went out.  However, if the condominium already has a master key then there is likely no requirement to send in a copy of the key.  However, if owners have placed a second lock on their door, then the management company would require a copy of that key for emergency situations.

The condominium doesn’t need to access your unit all the time, but if there is an emergency, such as flood which started in your unit, then the condominium may need to access your unit in a rush in order to stop the flood and if you are at work, for example, then it may take hours for the condominium to gain access to your unit in order to turn off the water and stop the flood from getting worse.  Think about it – if the condiminium waited for hours on end, the flood damage would be quite severe.  While your insurance would pick the repair work you would likely see your insurance premiums increase dramatically, especially if they find out that the condominium was not able to stop the flooding earlier due to you not willing to allow the condominium access.  Plus, all your neighbours who had water damage would likely not be very happy.

Lastly, let’s look at this question:

QUESTION:  The developer of our townhouse condo had a bylaw passed that amends the corporation’s declaration. It adds 49 parking units to the description of the property. And it modifies the allocation of the corporation’s common expenses amongst the unit owners. This is all provided that 90 per cent of the owners vote to approve the change in common expense allocation. Is the 90 per cent vote required?

ANSWER:  The changes cannot be carried out by the passage of a bylaw. The amendments to the declaration required votes of the unit owners at an owners’ meeting for that purpose. The owners of at least 80 per cent of the units must vote in favour of the change to the description of the property. As well, the owners of at least 90 per cent of the unit must vote in favour of the change to the allocation of the condominium corporation’s common expenses amongst the unit owners.

Mr. Hyman misses a significant point here.  The questioner says ‘the developer’ not ‘the condominium’ or ‘the Board’.  If the developer still owns the property, then he/she can likely do whatever he/she wants.  It’s only after the condominium is registered that the owners have any say and when the 80% and 90% requirements take effect.  While it certainly sounds like the condominium has been registered, as we do not know this for sure then we cannot specifically say so.  However, if the proposed change to the allocation of the common expenses (i.e. the ‘maintenance fees’) provides for a more fair or equitable division of expenses, then owners should seriously consider voting in favour of the proposal.

About Edward Brain

I am a long time condo activist and have a background in Business Administration.
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