In September 2021, the owners of a large condominium in North York were collectively struck with an eleven million dollar special assessment to pay for structural building defects that had not been properly addressed. The amount owed by each of the 300+ owners ranged from approximately $30,000 to $42,500. The owners were given fifteen days to pay up.
If the unit owner wasn’t able to pay, then Legislation in Ontario - the Condominium Act - had provisions that allowed the condominium corporation to sell the unit to collect the funds owed.
A special assessment, even a quarter of this size can be devastating to most condo owners. To avoid situations like this one, condominium boards are expected to properly plan the yearly budget. While there are certain controls in place to help condominium boards and owners avoid extreme cases like the one mentioned above, the controls aren’t able to guarantee that such disasters won’t happen.
Typically when structural defects are identified, condominium boards will come up with a strategy to pay for the necessary repairs. Reserve funds are analyzed by engineers every three years to ensure there is enough money to cover any upcoming costs. In this case, the reserve fund analysis process seems to have been very badly managed.
The Canadian financial landscape has undergone tectonic changes over the last three years. Interest rates have fallen to troubling depths, and inflation – particularly in the construction sector – has risen to newsworthy heights. According to the Canadian Institute of Actuaries, the reserve funds of many condominiums are extremely low. They state that "...in aggregate, not enough money is being set aside for future expected payments or to cover unexpected repairs..."
The uncomfortable truth is that many condominium are not adapting to recent economic changes and are not reserving enough funds for future needs. Depending on the situation, owners may be left financially vulnerable to large fee increases and/or special assessments like this one.
Our primary objective at Vertical City is to help condominium boards avoid these disasters. By using our solution toolkit, condo boards are able to chart the progress of their reserve fund investments over time, ensuring that contributions stay steady, and therefore avoid special assessments like the one mentioned above.