Condo Living

March 4, 2025 Published by Toronto and Area Chapter - By Ingrid Kulik, Jeremy Nixon

When Bliss Turns to Misery

From the Winter 2024 issue of CCI Toronto Condovoice Magazine.

Is condo ownership right for you?

You purchased a condo unit - congratulations! More accurately, you now own a home. Condo living can be wonderful for many reasons, whether its relative affordability of ownership, mostly hands off lifestyle, sense of community, and many others. However, many still treat a condo unit as a short-term investment by becoming landlords at an expected return rate, rather than an appreciating asset or a long-term home. Sadly, most condo owners, especially first-time buyers, fundamentally misunderstand what it is they are buying into and the set of laws, responsibilities and financial implications that come with it.

Sidetracked Focus?

It is easy for the first-time property owners to become sidetracked by the bliss and pride of building equity or entering into the real estate market. Many often do not think much about nor are aware of the monthly fees, annual increases, or what they even are for. Buying into a condominium means that you accept; the building’s current physical and financial state, its declaration, rules and by-laws, governing documents, and pay your proportional share of the fees for operations and maintenance of the common elements. It also means that you largely hand over the care and decision making to an elected Board of Directors and the Property Management. Individuals coming from single family home ownership as a downsize or lifestyle change, may often get underwhelmed as they no longer have full authority on all parts of their home. In many cases, condo living and the governance thereof, are sometimes met with surprise and disdain; therefore, it is vital to gain full understanding of the pros and cons of owning a condo.

The Importance of Status Certificates

Condominium Authority of Ontario (CAO) produced a “Condo Owner’s Guide” last year, which summarizes the Condo living and ownership essentials, which can be found on their website. But it does not tell potential buyers the specifics of any given Condominium Corporation they are looking to invest in.

A common mistake that potential and existing condo purchasers make is the failure or the lack of an in-depth assessment of the building’s overall health – physical and financial, as well as the governing documents. Particularly, the Declaration, which outlines the maintenance and repair responsibilities of an individual unit owner vs the Corporation and the implications of the lack of maintenance of their own unit. There is a vast array of factors to consider and review in detail to make sure the Condominium is right for you and to make a sound financial decision without any regrets. The health of a Corporation can be examined by reviewing the Status Certificate and its accompanying documents, which can be purchased by anyone for $100 per the Condominium Act 1998:

The Declaration – refer to the ‘Unit Boundaries’ and the ‘Maintenance and repair responsibilities’ for owner vs the Corporation. Remember, it takes 80 to 90% of all owners consent to make amendments to the Declaration, hence a careful review is crucial beforehand.

By-laws are crucial aspect of the overall administration of a Condominium Corporation, the number of Board members, their terms and qualifications. Can anyone run for the Board within your corporation or remain on it after selling? Standard Unit By-law sets out what is recoverable under the insurance policy of the Corporation and what is excluded in case of flood or fire? Any Shared Agreements between surrounding buildings that can impact the Budget and overall enjoyment?

Annual Budget – look at the Budget items listed to determine if the building is being maintained at the highest standard and cover key mechanical aspects: HVAC, Fire Protection, Emergency Generator, Elevators, amenities etc. Look at the previous year’s costs and also to other similar sized Corporations. It is important to take building age and the number of units into account, as boutique Condo’s tend to pay much higher fees per unit than a large community.

Notwithstanding, all Condominiums are unique.

Legal Claims or special assessments against the Corporation – must be disclosed within a Status Certificate. These can affect not only the annual budget, but depreciate the overall value of a building and your unit.

Reserve Fund balance and annual contributions – taking building’s age into account and increasing costs year after year, it is vital that Reserve Funds are funded accordingly to repair and replace key elements of the building without being surprised with a Special Assessment or a Loan at a high interest rate that will burden the homeowners if the Reserve Fund Balance or the annual contributions are too low.

Taboo Around Reserve Fund

Perhaps the area of greatest contention and source of frustration is around Reserve Funds, which has been widely covered in the Condo World lately, becoming quite the polarizing topic. Unlike Operating Funds that are relatively consistent from year to year, Reserve Funds are predictably unpredictable. Many want to think they are gospel – they are not. They are in effect an engineer’s or a Reserve Fund Planner’s best educated guess based on current conditions, expected future performance, in the midst of ever changing and escalating costs, in growing cities and regions that are becoming increasingly difficult to navigate and operate in, mixed in with changing boards with changing and evolving priorities, from sophisticated to naïve decision-making skills, all while trying to cut costs.

Reserve Fund contributions, while collected as a “fee”, should be better thought of as investment into communities. They are not refundable when an owner sells, they pass on in perpetuity to the next owners. Just because you did not personally see that new roof come to fruition, does not mean you do not have the legal obligation to contribute to it. In a single-family scenario, value is perhaps calculated a bit differently. One might be willing to pay a bit more for a home that has that new roof rather than one that is going to need replacement soon. A perfect example of this is a very recent case of a condominium community in Toronto’s North York area, which after only 7 years required a special assessment of $70,000 for each owner or a $7 million loan to be taken for various parking garage and structural repairs.

A well-funded Reserve Fund directly correlates to higher unit values compared with a poorly funded community in disarray. In the case of a community facing under funding, well, that is part of the risk you implicitly agreed to participate in when you purchased. It is really no different than any other real estate owner anywhere else, except in rare cases of fraud or gross negligence in management. Buyer beware! Purchasers should stop thinking of the fees as “fees”, rather think of them as investment into probably the most valuable asset most people will ever own. Change that mindset and participate within your community for collective growth!

Participate, Understand and Avoid Frustration

Anyone who has ever run into disagreement over condo governance, by-laws, rules, etc. has surely felt frustrated. In these times however, it is important to maintain respect of communication despite the differences of opinion. The vast majority of the time Boards act honestly, fairly, in good faith, and with first-hand information provided to them to resolve an issue. It is important to remember that board members are owner-elected volunteers, who undergo a mandatory Directors training by the Condominium Authority of Ontario (CAO). Property Management operates at the direction of the Board, with respect to the existing building Rules and policies that property management provides to the Board to be in compliance when making a decision. Both parties rely on each other to manage your investment.

Talk to your Property Manager or the Board and breathe fresh new ideas into how your building is being run and the implementation of such changes. Participate in the Annual General Meetings to gain deeper understanding of your community. Ask questions to the thirdparty auditor presenting the Annual Financial Statements. Ask your Board or management to clarify any concerns or questions pertaining to the common elements or the Corporation as a whole to educate other owners as well, not only yourself.

Taking all into account, every potential or already existing owner should be critically evaluating all aspects and the condition of the community they own or are thinking of purchasing. The joy of ownership could be turned into misery when unprecedented instances occur.

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Ingrid Kulik, RCM, CMCP is a Condominium Manager with Icon Property Management Ltd., providing full-service property management services in the Greater Toronto Area.”

Jeremy Nixon, P.Eng., BSS is the Vice President at Brown & Beattie Ltd., a building science engineering firm dedicated to providing clear and sensible building improvement, maintenance, and repair planning advice by listening to clients’ objectives. Mr. Nixon is licensed with Professional Engineers Ontario (PEO) and holds a Building Science Specialist (BSS) designation.