Condo Special Assessments

[I-Hate-Hulse]

Originally Posted by trueimage

mid 1980s
I don't understand how more than 15% of the owners will be able to come up with this amount in that timeframe. Can't they get a loan and spread out the payments over time?

And borrow against what assets and revenue? Banks are incredibly reluctant to give condos a loan. Who pays for the interest? Most of people end up talking to their mortgagor and either setup a HELOC or add to their mortgage principle in some shape or fashion.

Owners need to realize that Boards aren't some faceless entity - the Board is representative of you the Owner.

Don't like something? Join it and make a difference. Invest your spare time, energy, and headaches into it. If not - live with their decisions.

[CaptainYooh]

It is a condominium Board's responsibility to ensure that annual corporation's budget is fully covered by condo fees including reserve allocation (no deficit, no surplus). If the Board feels incompetent to manage the budget themselves, they may (not obligated) hire a professional condominium property manager to do it for them and report budget recommendations, which the Board can dispute, discuss, revise and/or approve. Additionally, Condominium Property Act of Alberta requires professionally-prepared condominium reserve studies conducted periodically to the Board identifying the large items that require accumulation of funds to replace (windows, siding, roofs etc.).

Special assessments are never ludicrous. Most of the times, they are a result of one or a few of the following:

1. Legitimate defects that could not have been reasonably identified by the reserve fund study (i.e. black mold developed in the wooden structure, those cost portions of emergency damages due to fires, flood, accidents not covered by insurance etc.);
2. Board's over-zealousness in protecting the amount of condo fees and ignoring reserve fund study recommendations;
3. Boards' stupidity in not recognizing the need for a reputable professional property manager;
4. Significant market shifts resulting in drastically increased costs of replacements identified in a reserve fund (i.e. asphalt shingles replacements due in 2006-07 were astronomically higher due to the increased price of oil etc.)

$2.1M special assessment on a small-size condo building does seem very high and was likely caused by something very serious. But it is your right as a homeowner to challenge your Board on this. You should talk to your neighbourts and call for a special general meeting, unless there was one and you ignored or missed the notice. Your rights at this meeting are limited to questioning the Board for their reasoning of this assessment. If you and enough others disagree with the Board you can cause the special resolution passing and take further steps (this is where you HAVE to read your ByLaws to see the actual % votes required to do so). You can also sue the Board as a homeowner and request a review of the Board's decision, but this is expensive and unless it made a decision in gross negligence, your chances of winning are miniscule.

In general, once the special resolution is passed, this is it, you are on the hook for costs.

Compare this situation with a house you bought from someone and had a house inspection done. Then, after one year you've discovered that there's mold in the attic and bathroom walls. Here's $50,000 bill right there and nobody to blame (house inspectors always put million disclaimers in their reports about this stuff). Sucks, yes. But what do you do, right...

[photon]

Who's doing the repairs? It's not Fat Tony is it?

[AMG_G]

Originally Posted by JD

True enough, it doesn't manifest itself that way, but if you own 10,000 shares of a stock that goes from $20 a share to $12 a share in a short period (ahem, Penn West), you've essentially suffered a similar loss. It happens.

A big company with solid backing will eventually ride out the dips and bounce back. Will the $64k paid for the special assessment be seen in the value of the condo he already paid too much for? I highly doubt it. If a stock can go to zero just by market forces (not scam) then you shouldn't be investing in such high risk stocks.

[CubicleGeek]

You should call your insurance. I know my condo insurance will cover one-time special assessments for areas not covered by the condo corp's insurance. It is precisely to cover loss due to required work to common property. There are some stipulations, but only way you'll know is if you call.

[trueimage]

Originally Posted by CubicleGeek

You should call your insurance. I know my condo insurance will cover one-time special assessments for areas not covered by the condo corp's insurance. It is precisely to cover loss due to required work to common property. There are some stipulations, but only way you'll know is if you call.

Hadn't thought of this, it is worth a call. Thanks

[cracher]

I got hit by an assessment in the 6 digits a couple years ago. My unit factor is actually quite small relative to most other units so I actually got off lucky.

There wasn't much I could do about it. The board settled for a tiny amount against the builders and designers for envelope repairs. The lawsuit was a mess; so many of the contractors closed down their incorporations and, consequently, made it difficult to chase them. The residents who didn't pay are fighting action started by the board now.

[Winsor_Pilates]

Can your condo board actually issue an assessment without a majority vote?

In BC we can't, and any assessment vote has to be taken at the AGM or and SGM. I'd be surprised if Alberta allows a volunteer council to make assessments of $2 Million dollars, but I'm not overly familiar with the Alberta Condo Act, as I am with BC's.

Either way, sorry to hear about your assessment. Hopefully they allow a payment plan which is usually the case. I've seen payment plans stretched over 4-5 years even to allow some ease.

Were there signs of this upcoming when you bought the place?
Very rarely have I seen a large assessment that couldn't have been predicted. The reserve fund studies, an agent familiar with the buildings in the area, and a good inspector prior to purchase should have given you many warning signs.

[trackercowe]

Wow that's a lot. Paranoid that I'll be hit with an assessment myself this year since I've heard people talking about it. 64 grand though... yeesh.

[CaptainYooh]

Don't have to be paranoid. Volunteer to participate in the Board, stand-up for election at the next AGM. Then you will be a part of decision-making. It's only once a month, normally and a useful experience.

[I-Hate-Hulse]

Originally Posted by Winsor_Pilates

Can your condo board actually issue an assessment without a majority vote?

In BC we can't, and any assessment vote has to be taken at the AGM or and SGM. I'd be surprised if Alberta allows a volunteer council to make assessments of $2 Million dollars, but I'm not overly familiar with the Alberta Condo Act, as I am with BC's.

Yes they can in AB - and while the possibility of abuse does exist (as it does in any democracy) frankly you kind of want the Board to be unencumbered in addressing issues.

Lets say there's a certain 50 unit apartment condo out there. Due to the builder specifying one thing and delivering another with respect to the exterior envelope, there is massive water penetration along the entire West facing wall. Lots of mold in units approaching toxic levels.

Do you want them taking decisive action to correct the problem, or do you want it to turn it over the Calgary Sun comments crowd in the building? (taaaxes!) No one likes to have to pay assessments, especially if their unit isn't affected. So they tie up the process, dragging it out 2 more years before repairs even start, which by then - have doubled in cost (is this what happened in the OP's situation?)

Is this perfect? No. Many Boards are populated by morons who have no common sense - let alone business sense or experience to be effective Board members ("What do these brackets mean around numbers on the financial statements" was a gem I've encountered) Bad decisions can be made by them. Generally a good property manager can make up for a bad Board, but they aren't perfect either. In a special assessment situation - you generally want either of them to ensure that the best, most researched alternative is done. But again, the system isn't perfect. (Its government on a small scale).

Again - decisions are made by those that come out. Join the board. Pay attention to it as if it were your own house or stock you just bought.

[Calgary14]

Just curious to anyone who has had a special assessment in the past - has insurance covered all or part of it? Do most insurance policies have a special assessment coverage option?

Asking someone to come up with $64k in 30 days is insane.....

[CubicleGeek]

I've never had to exercise on it but with TD, my insurer, it is covered under "Loss Assessment" and is part of standard condo coverage. I did not know about it until the agent walked through everything I got as part of my coverage.

http://www.tdinsurance.com/products-...condo.jsp#loss

Loss assessment
An important feature of a condominium insurance policy is loss assessment. This is when you share responsibility with others for common property. The insurer will pay, up to a stipulated limit, your portion of any special assessment that's valid under your condominium corporation's governing rules:

• If it's due to a direct loss that affects a shared part of the premises and if it has been caused by an insured peril
• If it's due to legal liability arising out of shared ownership of common areas of the condominium premises (for example - to compensate a visitor for injuries incurred by tripping over a frayed carpet in a corridor)
• Providing that the assessment has not been made necessary because of a deductible in the corporation's own insurance policy.

In most cases, the condominium corporations own insurance coverage will be adequate.

I'm sure there are some cases that might not be insured, but it sounds like the only thing it won't cover is if your condo board decides ask for a one-time assessment to cover the deductible an a large claim. IIRC, our condo deductible was $100K and we had to exercise due to flooding this summer. We did not do a one-time assessment but raised condo fees to rebuild our reserve fund over a number of years. But it looks like if they went the route of one-time assessment to cover this deductible, I would not have been covered anyways.

[lorenavedon]

looks like someone is trying to bail out as fast as possible.
http://calgary.kijiji.ca/c-real-esta...AdIdZ563518657

[I-Hate-Hulse]

The OP should call their insurer as there's a slim chance - but I'm afraid the news may not be good. To use CubicleGeek's post:

Loss assessment
An important feature of a condominium insurance policy is loss assessment. This is when you share responsibility with others for common property. The insurer will pay, up to a stipulated limit, your portion of any special assessment that's valid under your condominium corporation's governing rules:

• If it's due to a direct loss that affects a shared part of the premises and if it has been caused by an insured peril

• If it's due to legal liability arising out of shared ownership of common areas of the condominium premises (for example - to compensate a visitor for injuries incurred by tripping over a frayed carpet in a corridor)

• Providing that the assessment has not been made necessary because of a deductible in the corporation's own insurance policy.

In most cases, the condominium corporations own insurance coverage will be adequate.

The key word is insured peril. In general your insured peril is for things like fire, vandalism or theft. If the building's insurance is unable to cover thse insured perils (ie fire causes $2M damage but coverage is only $1M, your personal insurance on the unit kicks in and covers any amounts the Board has to special assess for.

Unfortuantely here, water related exclusions seem to be previlant right now. A few years back, one water related claim would void the building's ability to make further water related claims. As such, from the OP's description, it sounds like the building doesn't have coverage in this situation, therefore he doesnt under his own policy.

Bella Vista went through this a couple years back - how's a $110K assessment? http://www.cbc.ca/news/canada/calgar...ills-1.1264358

A Beyond member tried to run it through insurance and ran into the above wall unfortuantely.
http://forums.beyond.ca/showthread.php?threadid=336045

[Table 5]

Originally Posted by lorenavedon

looks like someone is trying to bail out as fast as possible.
http://calgary.kijiji.ca/c-real-esta...AdIdZ563518657

This is pretty much why it's crucial to have someone inspect your condo docs when you are looking to buy one. You spend a few hundred dollars to do it, but you can find and avoid these types of traps. Even if there is no giant assessment looming, you'll get a much better long term picture of what's to come. When we bought our condo, I was able to negotiate another 5k off our accepted offer because our inspector saw that the reserve fund was on the low side and that they would probably try to boost it up soon... and sure enough, 6 months in there was.

[Table 5]

You'd think there would at least be a way to spread out the cost over a few years...that type of amount in such a short time is just unreasonable. We were assessed 3-4k for some repairs last year, but it will be spread out over 3 years.

I would think a random 64k bill would be a death-blow to the majority of people's finances.

[blankall]

This is a very common thing in Vancouver. In fact, it's so common that I'd suggest not buying anything here made in the 80s to the early 2000s. Unfortunately, it was a time period where lots of developers were putting up cookie cutter buildings and cutting corners.

If there is major work being done to your building envelope, 63k is actually pretty cheap.

It's really quite a shame. These buildings were largely put up due to sub-standard government control and tax breaks given by the government. The government has done absolutely nothing to help the affected people.

[Table 5]

Originally Posted by blankall

In fact, it's so common that I'd suggest not buying anything here made in the 80s to the early 2000s. Unfortunately, it was a time period where lots of developers were putting up cookie cutter buildings and cutting corners.

Has it really gotten better? Every time I go into a new-built condo, it feels cheaply thrown together. The stuff built in the 60s/70s might look ugly in comparison (and have post-tention cable issues in some instances), but they seem to be build to a more solid standard than what you get today.

I have a feeling we're going to be seeing a lot more of this kind of stuff going forward, especially of condos/homes built in the 2000s boom era.

[RW99]

I-Hate-Hulse is correct. The coverage on condos is much like your own home. If the builder does a crappy job, or it's a long term maintenance thing, it wont be covered by your own insurance.