Surpluses Can Occur in Condominiums

Gerry Hyman has another article for the Toronto Star,  Let’s look at the questions:

QUESTION:  Our board admitted that the corporation overcharged the owners $40,000 in their common expense contributions. The board advised that it has made up for the overcharge by increasing the corporation’s operating account by $40,000. Can the corporation do that or must it refund each owner’s overpayment to that unit owner?

ANSWER:  Placing $40,000 in the operating account will reduce the future common expense contributions for the owners — except for those who sell their units. Payment into the operating account will not fully reimburse owners who were mistakenly charged more than other owners and more than the benefit they will receive form the reduced future common expense contributions.

The correct procedure would appear to be to make a refund of the over payment to each unit owner.

Surpluses, which is what the $40,000 is, will occur in not-for-profit organizations like condominiums.   The questions that need to be addressed though, are as follows:

1)  How many units are there in the condominium?

2)  How much are the maintenance fees every month?

As to the first question, in a condominium of 100 units or less, the surplus is worth $400 or more per unit which is a considerable amount, and some of which could be returned to the owners, or at least used to offset the maintenance fees for the upcoming fiscal year.

The other question about maintenance fees is also important.  If the condominium is charging $700-$800 per month in maintenance fees already, the money may be very small, especially in a condominium of 150 or more units.

The main issue right now is how many units there are in the condominium.  In a larger condominium, the $40,000 may be a drop in the bucket for the money the condominium needs to operate on and as such the Board should be thanked for coming in so close to a balanced budget (and remembering that a $40,000 deficit must be made up the following year through either higher maintenance fees or a special assessment.)

My personal recommendation, unless this is a very small condominium, would be for the Board to keep the money in the Operating Fund as a contingency and that everyone just move on.  A small surplus isn’t a bad thing.

Another question raised was:

QUESTION:  Our board has sent owners a preliminary notice of an owners’ meeting and advises that the corporation intends to pay for common element alterations out of the reserve fund. Can the corporation do that?

ANSWER:  Subsection 93(2) of the Condominium Act provides that: “A reserve fund shall be used solely for the purpose of major repairs and replacements of the common elements and assets of the corporation.” While the permitted use of the reserve fund has been extended by a recent amendment to section 93, the reserve fund cannot be used for additions, alterations or improvements to the common elements.

The alterations may or may not be required.  For example, older condominiums may not be accessible so the alterations will be required to make the building accessible, or more accessible.  The same goes for fire code related alterations, these changes are required under the fire code and the Board has no option but to make the changes.

Also, in some cases, new technology will make older systems obsolete and thus the alterations may have to occur because it is simply more practical to make the changes.

At the end of the day, the owners need to question the Board about the changes, and if they are not required changes, to pressure the Board not to make the alterations, up to and including electing new directors.

And finally, we have this question:

QUESTION:  Extensive noise from a neighbouring unit prompted me to write about it to the on-site manager. When I did not receive a response, I wrote to the board and then to the management company. Still with no response, I wrote to the board requesting documents of the corporation relating to my complaints — including minutes of a directors’ meeting in which the complaints were dealt with. I received neither a response nor the requested records. What can I do?

ANSWER:  A recent amendment to the Condominium Act provided for the creation of a tribunal to resolve disputes between various parties — including unit owners and a corporation.

Initially, the only dispute that may be referred to the tribunal is one in relation to the obligation of a corporation to make its records available to a requesting owner.

The request for records must be made in the form prescribed in regulations under the Condominium Act. You do not have the right to examine, or obtain copies of, records relating to employees of the corporation other than employment agreements or records relating to actual or contemplated litigation, or insurance investigations involving the corporation, or records relating to specific unit owners or specific units. Any such matter in the minutes of directors’ meetings that you have requested must be removed before being provided to you.

An application to refer a dispute to the tribunal must also be made in the prescribed form and must be made within two years after the dispute arose.

The Board needs to address noise related issues.  I, for one, get migraines and headaches.  Loud noise, or excessive noise, can trigger a headache.  This could make the noise a health issue.

Also, you have the right to peaceful enjoyment of your unit.

But I agree that the issue should be referred to the Tribunal as the Board and management seems to refuse to do anything about the issue.

About Edward Brain

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