Finances

September 7, 2022 Published by London and Area Chapter - By Jennifer Dickenson, Séan Eglinton, Andrew Elliott, Alana Haggis, Lisa Skirten

Q&A—Inflation in Condos

From the CCI Review 2022/2023-1 September 2022 issue of the CCI London Chapter

We’re all experiencing a difference in costs, whether at the grocery store, the gas pump or in maintaining your property. In May, 2022 consumer inflation rose 7.7% year over year. This was the largest yearly increase since January, 1983 and up from a 6.8% gain in April, 2022. I’ve reached out to condominium managers at different management firms, who are members of CCI-London and Area Chapter, to pick their brains a bit about what they are experiencing in the way of maintenance costs.

1. What aspects of your Corporations’ budgets are you seeing affected by the inflation rate changes?

AE - Right now the increases we are seeing are insurance, maintenance and lawn care/snow removal.

AH - The most categories I've found affected are: the common area budget lines generally due to supply/demand, contractors are hitting us with pricing indicative of increased costs of wood, etc. Natural gas is being affected by the good ole carbon tax, and rates that constantly fluctuate.

SE - The ones I see the most are labour, lumber, window/doors and of course fuel. I know these are not so much normal inflation; rather, more hyper inflation because of world material shortage and local labour shortages/cost of living. If I would hazard a guess I would think all operating accounts could be over budget by 3-10% depending on contracts and needs of the community.

LS - Landscapers/snow removal contractors and all other contractors

2. Are condo fees being affected by these increases?

AE - You see some Corporations being affected. Those corporations are usually the ones that run a very tight budget with little to no wiggle room. Corporations that tend to leave some financial padding in their budgets did not see as much of an increase.

AH - Because these expenditures are happening "now" the condo fees are being increased in the next budget to compensate for the losses that weren't predictable, combine that with horrible insurance premiums, the fees are leaping in huge increments.

SE - Absolutely. Take for example a condo who are set to complete deck and fence replacements in 2022, but are using the study plan from 2019. The construction costs are two, three and even four fold what the study plan indicated so the Boards need to pivot and increase fees more than they ever planned to cover these costs.

LS - Yes

3. Are your operational costs increasing due to inflation?

AE - I think in this climate we are seeing increases everywhere.

AH - Yes-gas pricing to get to my site inspections and board meetings is the most affected.

SE - Absolutely – it costs twice as much in fuel to go visit a property now. During the pandemic other costs increased not so much due to inflation but due to the need to work remotely. So home office equipment was purchased and cloud programs such as DocuSign, Zoom and SurveyMonkey were added to the managers’ tool kit as well.

LS – Yes

4. Are any of your Boards pushing back at the increases? How are you working around it or explaining?

AE - I explain my budgets to my Boards and Owners with as much information as possible. The best way to inform anyone of an increase is to put all the information in a notice of any increase and why.

AH - No, because I can explain the reality to them. However, the unit owners who aren't affected daily by these increases are oblivious and not appeased.

SE - During the 2020 and 2021 years almost all Directors pushed back on any increase as many were out of work and worried about the future. This caused some corps to run very thin budget lines and some even ate up surpluses. Going into the 2022 budget season, most Directors noted these shortfalls, combined with increased costs and began to start to increase fees, but not to where they should be knowing that future costs are going up. Many Directors are already planning for big fee hikes or even reserve fund assessments going into the 2023 year.

LS - No push back from my clients.

5. Have you redone any Reserve Fund Studies prematurely, in order to account for cost increases?

AE - I have not been requested to prematurely reorder any RFS, but we have seen, and I am warning Board Members that numbers in the RFS are lower than quotes will be. I have also suggested that the Board prematurely increase the RF amount in any budgets.

AH - Not yet, but it's coming. The comments in my current studies seem to now include a disclosure where the engineer does not recommend making major replacements until the economy levels out. (whenever that is)

SE - Yes! If the study was not fully completed, tables were at least reviewed and updated by the planner where and when possible.

LS - No, my portfolio seems to be timed perfectly. Studies underway as we speak.

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Jennifer Dickenson, RCM, OLCM, LCCI is a condominium manager with Dickenson Condo Management and the President of the CCILondon and Area Chapter

Séan Eglinton, OLCM, ACCI, LCCI is a condominium manager with Thorne Property Management Ltd. He has been a professional Member of CCI since 2008 and was elected to the Board of Directors in 2018.

Andrew Elliott, RCM, OLCM, ACCI, a condominium manager with M.F. Arnsby Property Management for 12 years. He joined the team with over 10 years of experience in the real estate field, working for the Government of Ontario and in the private sector. He achieved his RCM in 2016. He has been a professional member of CCI since 2017 and qualified for his ACCI in 2018. His portfolio is specific to condominiums in London and Woodstock with an emphasis on newly built condominiums..

Alana Haggis, RCM, OLCM has been a practicing condominium manager for over 7 years. Currently heading 16 corporations as part of Sunshine Property Management Inc., in and around the London Area. She has been a member of CCI since 2018.

Lisa Skirten, RCM, OLCM is President of Skirms-Ave Property Management Inc. and provides condominium and property management services . She has been a member of CCI since 2019 and was elected to the Board of Directors that year.