Financial Solutions that Bridge the Gap Between Condo Owners, Property Managers and Condo Boards
Condo life definitely has its perks. Whether you’re looking for an affordable first property or you and your spouse are downsizing for retirement, a condo can provide the perfect lifestyle choice for your housing needs. In a similar fashion, condos make an attractive investment property in growing communities all over Southern Ontario. But how your Condo Board keeps things running smoothly when financial trouble strikes is a well-discussed issue for Condo Owners? When many condos hit critical points of ageing, questions are beginning to arise. How should condo corporations handle their financial needs?
Financial Options for Condo Corporations:
- Raise each unit’s condo fees to accommodate costs of maintenance or repair.
- Pass an Assessment for the accumulative costs in a lump sum to the Condo Owners.
- Create a proposal to present to the condo board and apply for a loan.
Why Raising Fees isn’t Always the Right Choice
While it may be the simplest option on paper, opting to increase each unit owner’s condo fee can be avoided in some cases. Why do condo boards want to avoid increases? For starters, it makes day to day life easier. When fees are raised every time a financial event arises, unit owners get upset — and rightly so. It’s difficult to budget fee changes when they’re being raised frequently.
Another point to keep in mind is that a condo board that is known to regularly increase fees may chase away buyers or diminish the sales price. As the fees continue to climb, some unit owners may choose to sell. If the fees on the unit are not competitive to other buildings in the area, the condo corporation as a whole could face serious problems.
Is There a Better Way?
Are you a condo board member or unit owner seeking out other options to combat unexpected lump-sum costs? Condo Corporations are actually permitted to seek out financing as a whole. This route has the potential to ease the financial burden of all involved. That being said, there are stipulations that apply when seeking credit as a condo. It’s important to deal with an experienced lending agent. Ensure that each step of the process is handled correctly and in the best interest of the corporation as a whole. If it’s possible, find someone who has been on a board or who has completed similar deals successfully.
Steps for Condo Corporation Lending:
- Gather the Status Certificate, Reserve Fund Study, year-end financials, bylaw information and any other pertinent documents
- Seek out a proposal from a financial institution or trusted lending agent
- Present the proposal to the board for approval
- Decide as a board whether or not to hold a unit owner vote regarding the financing
Life After Lending
Are you worried about how this type of lending affects a future unit buyer? Don’t be. These loans are transferrable — meaning any unit owners who wish to sell can do so. While there will be parameters attached to any lending agreement, the term lengths and payments often allow the condo corporation to avoid fee raises and leave reserves intact.
While many corporations are able to benefit from this type of lending, not all banks offer this service. It should be noted that getting approved for this arrangement is difficult at mainstream institutions. Be prepared to seek out credit unions and independent brokers to find someone who will work with such a unique situation. But if it results in happier owners, a healthy reserve fund and a maintained building, the extra work getting it off the ground is worth it.
Look to Experience for Your Unique Lending Needs
The above situation is not one that all lenders are well-versed in. To make the lending process as smooth as possible, choose a trusted agent or company to work with. Don’t be afraid to ask them about their experience dealing with condominium credit deals.
Gerard Buckley has based his entire career in the world of finance. He has the knowledge to assist your condo board — whether you live in a 20-story building or a renovated century complex. Gerard has been both a Condominium President and Director for over 10 years and has been a member and educated by CCI – The Canadian Condominium Institute. Explore the financial solutions open to you and consult with Gerard before making the difficult decision to raise fees and see how this innovative provision can help.