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Condo Fee Increases: To Avoid confrontation with unit-holders, Condominium Property Managers and Condo Board of Directors should be taking a pro-active approach. Notices of Reserve Funding should address steps the Board is taking to lessen the Condo Fee Increase. See how Lambda can help.
Table of contents
2023 Condo Fee Increases
Condominium Unitholders recently got a dose of Inflation with the 2023 Condominium Fees increasing. 8% or more is the trend for Ontario condo fees seen in 2023 as noted here 2023 Condo Fee Increases. If your Condo Corporation didn’t increase Condo Fees in the annual budget, your time is coming…
Inflation’s impact on Condo Fees
Inflation decreased from a several decade high in June of 8.1% to 6.3%. 6.3% inflation is seen as a “positive”? Well, when your ship is taking on water, you start to use the Bilge pump. That’s what the Bank of Canada and the Federal Reserve in the United States have done to increase Interest Rates to try to stop the flow of inflation into the economic ship. Bank of Canada Interest Rate Increase – January 25, 2023 But turning on the Bilge Pump, and plugging the hole to make the ship sea-worthy are two different things.
There are “Optimistic” economists, and “Pessimistic” economists out there… but if you are wanting a quick stop to inflation and interest rates to decrease, or at least stop increasing, you need to be rooting for the “Pessimistic” economist. See – the only way Inflation decreases further quickly, and along with it Interest Rates, is if the economy takes a sharp down-turn. Rooting for this, is a bit like betting against the shooter at the Craps table… even if you are right, a lot of people aren’t going to be too happy. Baton down the hatches!
Condo Reserve Expenditures Impact on Fees
But back to Condominiums: 2022 or 2023 was likely the first real taste of inflation that Condominium Owners had in their monthly condo fee. Watch out if a recent Reserve Fund Study hasn’t been done. Most Condominiums in Ontario were underfunded before the recent inflation – 69% of Ontario Condominium Reserve Funds are underfunded. So the recent Condominium Reserve Fund Contribution increases may only be catching up prior underfunding, not even addressing the further inflation that has happened.
Unit-holders, rightly or wrongly, will be demanding answers from Condo Boards and Property Managers, as if AGMs weren’t tense enough dealing with Mr. Smith’s poodle who continues to befoul Mrs. Poole’s begonias, or late snow removal. So, Condo Boards and Property Managers should now be taking the time to develop an action plan to at least demonstrate that they are doing everything they can to address the increase in maintenance fees. Ensure proper preventative maintenance of common elements is done to make sure that major expenditures are not a surprise, and that Condo fees cover Condo Building maintenance costs.
Reserve Fund Investment Review
While most boards and property managers will think of physical preventative maintenance and repair on the common areas – roofs, doors, windows, driveways, swimming pool, etc. Yes, that is very important. But equally, if not more important is Condo Reserve Fund Preventative Maintenance. Invest Reserve Funds at the highest rate, and ensure strata fees are sufficient to prevent special assessments. Additionally, evaluate Condo Reserve Fund CDIC/DICO insured amounts, to weather this storm.