Well, if you live in Edmonton, you’ve probably heard of Oliver Gardens condo complex. If not, the brief summary is the complex was recently hit with a 2.1 Million dollar special assessment due September 1 of this year. That averages out to about $45,000/unit.
The media, of course, is having a field day talking about how unfair it is…
As an owner of several condos, I have absolutely no sympathy. The owners of the condo complex were more interested in saving a few buck than maintaining their property and it came back to bite them.
I am on every condo board for properties I own. It takes a lot of my time, especially when you get into the number of properties I own, but it’s a critical. If I’m not on the board, I’ve got no idea how my building is being cared for. From what I’ve seen, most of the time the boards are trying to keep costs down (probably because they overpaid for their property in the first place or, if they are “investors”, they are trying to maximize their profits), this is a huge mistake.
Now, as an investor, I don’t like to waste money but there is a huge difference between waste and proper maintenance. If proper maintenance isn’t done, then you can face massive repairs, as we’ve seen with Oliver Gardens.
Condo fees are not “extra” costs of owning a condo. These are fees designed to cover the maintenance of the building. If you own a home, and don’t do proper maintenance, you’ll suffer the same fate, with no one to share the costs.
Owners of Oliver Gardens are complaining about the sudden special assessment, but they can’t seriously say they haven’t noticed the foundations crumbling, the roof leaking, etc. These problems have been going on for years, yet no one wanted to pay for them. Condo funds are not “free money”, there are no government grants for condo users. If you don’t set aside some fund every month in your condo fees for future maintenance, then you can’t be surprised by special assessments. The money has to come from the owners, there is no other source of income. As I said, if you own a house, you face a similar scenario, your house will eventually need a new roof, if you don’t save for it, you’ll be faced with the same bill regardless.
As an investor, I prefer special assessments. I’d rather put my money to work for me than have it sit in a condo account. The difference is, as an investor, I also budget maintenance costs into my calculations and have access to the funds needed should we have a special assessment. If you’re an owner, I’d recommend not complaining about condo fee increases, as long as there is a plan to spend it wisely. Most owners, I’ve found, can’t afford a one time large payment, so the “little bit each month” is usually their best option. How can you be sure there is a plan? Join the board.
I’m always amazed at how few owners there are on a condo board. These people are charged with maintaining one of your most valuable assets, but people can’t be bothered to spend a couple hours a year in meetings to have some say in what is happening.
Also, be sure you are spending properly. A good property manager can guide you in making informed decisions (you don’t have to be an expert on boilers, roof, windows, etc.), but be careful you don’t have a bad property manager who gets kickbacks, and recommends shady companies.
Lesson: If you’re cheap, and avoid spending money at all costs, it will eventually catch up with you. It’s better to always budget and fact in proper maintenance.