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Florida’s Champlain Towers’ south condo collapse is a scenario all condo boards dread. Yet, lost life due to poor property management is completely avoidable. Here we look at five important things the surfside collapse has taught condo boards.
The Danger of Deferrals
According to sources, an engineering report noted “major structural damage” in 2018. The report advised the damage would need timely and expensive repairs yet failed to warn of imminent collapse. Because of the boards failure to manage the reserve funds properly, they chose to defer repairs to a later date. This speaks to the deadly combination of deferring required maintenance year after year in hand with a poorly managed reserve fund.
The Importance of Reserve Funds
Condo boards that establish and maintain a healthy reserve fund and consider the findings from reserve fund studies, decrease risk for structural damage. When managed properly, fund allotment based on ongoing forecasts ensure timely management of major repairs and replacements. Had the Champlain Towers’ board been more diligent in their financial management, they would have had funds earlier on to manage repairs and avoid the disaster of this condo collapse.
The Importance of Reserve Fund Studies
In Ontario, every three years reserve fund studies allow boards and corporations to follow and monitor a building’s state of repair. This process identifies maintenance issues earlier on allowing condos to take a more proactive approach. Less extensive structural damage discovered in early stages allows for reserve fund allotment in manageable amounts. In turn it reduces risk for special assessments that place unnecessary financial burden on owners.
Avoiding Special Assessment Burden
When looking at the Champlain Towers collapse, a 2018 assessment found the state of deterioration would cost $9 million to repair. This translated into a special assessment costing unit owners between $80,000 for a one-bedroom unit to $330,000 for a penthouse. In many cases this was the equivalent to a third of their home’s value which made it hard for them to come to terms with the request. However, avoiding special assessments with high price tags are avoidable when boards manage reserve funds properly.
Adjusting Common Element Fees
Boards that avoid the unpleasant task of raising common element fees eventually face special assessments. However, owners prefer manageable fee increases as they can make smaller contributions over time. As a result, they avoid facing the high cost of a special assessment. By monitoring imminent repairs and replacements based on reserve fund studies, boards can decide when to adjust common element fees. Unfortunately, most directors lack experience managing the hundreds of thousands or even millions of dollars in their budgets. Therefore, seeking advice from property management experts is the best way to ensure your reserve fund remains healthy.
Luckily, Ontario laws are designed to avoid tragedies like the Surfside condo collapse. However, it doesn’t make the lessons learned any less important.
If you need assistance in effective reserve fund management, the experts at CPO Management Inc. can help. As a Toronto property management company specializing in condo management services, we can help manage your reserve fund and find cost savings through efficiency. For more information about how we can assist with your property management, or for any other questions reach out to us today.