Condo Special Assessments

[LChoy]

I'm on the board for our townshouse complex (80 units) and we've been really lucky so far. For a complex built in the 70s, there has never been a special assessment in our history. At least for Ontario, we have to have an Engineering study and a Reserve study every 3 years to plan out the major repairs and updates. We have a a healthy reserve fund and I'm pretty good with the budgeting to avoid any special assessment in our future. However as mentioned above, all it takes is one completely unexpected incident to throw all of the planning and budgeting out the window

LChoy

[Iggy_12]

Originally Posted by jaydorn

You should have opportunity to review all condo documents/minutes as purchase condition, either through a review service (should run you $200-$400) that specializes in such things, or just running through them yourself.

I know my realtor puts in ‘document review’ as a sale condition along with the standard property inspection/walk through stuff. He also mentioned he’s had deals fall through because buyers didn’t like what they saw in the documents.

Having said that, with our last complex there was a buyer who bought about 2-3 months before the formal notice was given and they were livid. The board asked her if she’d done a document review, as the possibility of it had been in minute minutes & AGM documentation for at least 12 months prior… they had not done a review as part of their purchase.

I purchased a condo in Mount pleasant 5 years ago on the conditions the documents checked out, basically after reviewing there was going to be a special assessment within 2 years to fix the same problem as the OP, was going to cost me over 40K, noped the hell out of the deal, best 200$ ever spent for a professional review. Woulda walked myself into financial ruin

[lazypucker]

Condo Living 101 - expect special assessments and frequent condo fee increases

[I-Hate-Hulse]

Originally Posted by LChoy

I'm on the board for our townshouse complex (80 units) and we've been really lucky so far. For a complex built in the 70s, there has never been a special assessment in our history. At least for Ontario, we have to have an Engineering study and a Reserve study every 3 years to plan out the major repairs and updates. We have a a healthy reserve fund and I'm pretty good with the budgeting to avoid any special assessment in our future. However as mentioned above, all it takes is one completely unexpected incident to throw all of the planning and budgeting out the window

LChoy

In Alberta, complexes less than 12 units do not require a 3rd party to do the Reserve Fund report - the Board can serve as 'experts'. This of course, means that you're entirely dependent on the quality of people serving on the Board over a period of 20 years before the big ticket items show up.

"Quad-plexes" and Rowhouses are currently in style right now but they are the most vulnerable to this weakness of Reserve Reports. 2 cheapskates in the quadplex can derail the future financial footing of the entire complex.

[jwslam]

Originally Posted by LChoy

We have a a healthy reserve fund and I'm pretty good with the budgeting to avoid any special assessment in our future. However as mentioned above, all it takes is one completely unexpected incident to throw all of the planning and budgeting out the window

LChoy

Someone at my condo AGM was upset that we only make 2% interest on our reserve fund and suggested we should invest it in crypto / NFT's.

[I-Hate-Hulse]

Originally Posted by jwslam

Someone at my condo AGM was upset that we only make 2% interest on our reserve fund and suggested we should invest it in crypto / NFT's.

Luckily Alberta's Condo Act has some reasonably tight guidance around permittable Reserve Fund Investment that should lead to the answer of Crypto being a "hard no"

https://cofsab.ca/wp-content/uploads...estments-1.pdf

Generally it says "invest in boring stuff"

[Locke]

This was a long time ago, but I remember in University I was living in an apartment and the complex was 4 buildings, 2 were apartment buildings and 2 were Condos.

The whole complex needed maintenance work and to pay for it they assessed the Condo owners, since I was just renting in one of the apartments people were complaining that they charged the Condo owners Special Assessments for the work on all 4 buildings because the renters had leases that couldnt be changed until renewal.

That didnt seem right to me, but I'd already known that my rent was locked in and I wasnt renewing.

[photon]

The special assessment would have gone to the owners of the apartments and not the tenants wouldn't it?

[DoubleF]

Originally Posted by photon

The special assessment would have gone to the owners of the apartments and not the tenants wouldn't it?

Yes... which is why in the longer run, the owners were planning to jack up the rents to address the dent from the special assessment. That's what I understood. Locke just left before they could do that to him.

[Cecil Terwilliger]

Yeah the “apartments” are still condos, the owners just rented them out to tenants. Condo is a type of property ownership. But we tend to use condo vs apartment in casual speak to denote own vs rent when that’s not really what it means. Not technically.

Owners of units in all four buildings would have to pay the assessment, regardless of whether they were owner occupied or rentals.

The only time this would ever not apply is when the entire development is owned by a rental company like Boardwalk or Quadreal and the like. Then they own all the units and would be responsible as a corporation for the improvements/repairs.

I guess it’s conceivable that the two rental buildings were owned by the management group and they decided to just not special assess their own units and collect the entire amount from the owners of the other two buildings to repair all four buildings but that sounds very illegal.

[bizaro86]

Originally Posted by Cecil Terwilliger

Yeah the “apartments” are still condos, the owners just rented them out to tenants. Condo is a type of property ownership. But we tend to use condo vs apartment in casual speak to denote own vs rent when that’s not really what it means. Not technically.

Owners of units in all four buildings would have to pay the assessment, regardless of whether they were owner occupied or rentals.

The only time this would ever not apply is when the entire development is owned by a rental company like Boardwalk or Quadreal and the like. Then they own all the units and would be responsible as a corporation for the improvements/repairs.

I guess it’s conceivable that the two rental buildings were owned by the management group and they decided to just not special assess their own units and collect the entire amount from the owners of the other two buildings to repair all four buildings but that sounds very illegal.

Yeah, special assessments have to be done by unit factor. You can't just decide to to only assess half the units.

[Calgary14]

I thought I read somewhere Alberta has a cap on special assessments of $50K per unit, can anyone confirm?

[I-Hate-Hulse]

Originally Posted by Calgary14

I thought I read somewhere Alberta has a cap on special assessments of $50K per unit, can anyone confirm?

Nope - Special Assessments can be unlimited - even more than the market value of your condo technically.

I think you're confusing this with the $50K cap on insurance deductible being charged back to unit owners.

https://globalnews.ca/news/6363998/a...tible-changes/

[Calgary14]

^Got it. But insurance would be irrelevant for a special assessment though as there isnt coverage for that, correct?

Geez imagine getting a bill for $50K+ as a special assessment, I bet some would just mail in the keys

[I-Hate-Hulse]

Originally Posted by Calgary14

^Got it. But insurance would be irrelevant for a special assessment though as there isnt coverage for that, correct?

Someone flooding 6 floors of a condo because they left their tub running isn't really a special assessment - consider it more of that owner paying for the damages that they caused.

The condo's insurance will cover the damage except for the deductible. This can be problematic as some condos with bad history have deductibles well over $50K. Individual condo owners will want (*need*) to get their own personal insurance to cover this $50K

A special assessment is more for when items of common property (ie the roof) needs replacement or repair for which all units will benefit from. That said, in the above scenario - if the deductible was $125K and the Board could only charge back $50K - $75 K would be Special Assessed back to the entire complex (assuming they didn't have a spare $75K)

[blankall]

Originally Posted by Calgary14

^Got it. But insurance would be irrelevant for a special assessment though as there isnt coverage for that, correct?

Geez imagine getting a bill for $50K+ as a special assessment, I bet some would just mail in the keys

In Vancouver you frequently see six figure assessments to fix building envelopes. The city is full of rotting condos built from the 1960s to early 2000s that all need lots of work. If you've held the place long enough you'll have lots of equity to deal with the assessments. New buyers can really get F-ed though.

[Regular_John]

Originally Posted by Calgary14

^Got it. But insurance would be irrelevant for a special assessment though as there isnt coverage for that, correct?

Geez imagine getting a bill for $50K+ as a special assessment, I bet some would just mail in the keys

Of the 180 units in our previous townhome complex the number of foreclosures as a result of our 40-50k assessment was surprisingly low, I’m fairly certain it was less than 10 units, possible even half that.

It was an older complex (1970s) so a few of the original owners were there, and a good chunk of owners had lived there 15-20+ years, so not much motivation to move.

Don’t get me wrong, it was certainly a kick in the teeth financially… but the vast majority found a way to make it work, likely do the group financing our board secured, and the lead time they gave us on actually making payments.

[Johnny199r]

Why do people live in Condos when they could live in modern purpose built apartments? Why pay condo fees? Why risk special assessments? Why pay realtor fees when you sell?

None of that makes sense to me.

[chemgear]

Originally Posted by Johnny199r

Why do people live in Condos when they could live in modern purpose built apartments? Why pay condo fees? Why risk special assessments? Why pay realtor fees when you sell?

None of that makes sense to me.

[Regular_John]

Originally Posted by Johnny199r

Why do people live in Condos when they could live in modern purpose built apartments? Why pay condo fees? Why risk special assessments? Why pay realtor fees when you sell?

None of that makes sense to me.

Right or wrong, home ownership is still very much a marker of success & the dream for many Canadians. Condos are the first point of entry into the housing market for many homeowners.

I’m sure many would love to skip that step, but scrapping together a 5%-20% downpayment for a $200-$250k property is a much lower bar to clear than a $400-$600 SFH.