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As a condo owner who’s been affected by the COVID-19 crisis, you might be looking to reduce your monthly expenses. In fact, with the shutdown of condominium amenities, many owners might feel they have a right when it comes to deferring Common Expense Fees (CEFs).
Unfortunately, there aren’t any existing statutory provisions to guide condo corporations on collection of CEFs during the pandemic. However, even when use of amenities are restricted, boards maintain the right to collect the full amount of CEFS.
However, if you are finding that the condo owners are resisting paying CEFs, there are a few options to consider. Options that’ll allow you to help your residents during these difficult times, pertaining to deferring CEFs.
Contingency or Surplus Funds
As a property management team or a member of a board of directors, you might find your corporation has a surplus of funds or a contingency fund in case of unforeseen emergencies such as this. If so, you can consider allowing deferment for a month or two based on the amount of funds available.
Revisit Your Budget
If you find you are receiving a large number of requests for deferment, the board might consider revisiting their budget. You can see if you can manage for a month or two with a new budget in place and then send out a notice to owners’ that you’re offering a deferment option. This could prove to be the easiest option in that you will know for certain you can offer deferment, for how long a period and apply the offer to all owners. By doing so you can ensure your budget remains sound and that all owners are treated equally.
Having said that, “it’s important to note that condo corporations can not reduce the CEFs without impacting and changing the budget. The revenue numbers will reflect the uncollected amount of CEFs, which eventually must be collected from the unit owners by means of additional revenue to the next year’s budget or a special assessment levy,” Vadim Koyen, Owner and Operator of CPO Management Inc. notes.
You could also consider some form of payment plan for owners failing to make their complete payments.
Payment plans allow you to collect at least a portion of their fees so you can continue to access funds to cover expenses. Owners can avoid falling into default, and you still have some form of payment. Considering not every single owner will be asking for deferment, this could prove to be manageable.
The challenge remains how many people will be asking for the option. Therefore, you must crunch the numbers to see how much you can afford to reduce payments for every single owner for the month. As well, consider if this can be a one-month option only, or if you can afford to do it over a few months, etc. Payment plans only work if:
- The lien deadline has not expired
- The agreement is executed before the deadline has expired
- The owner sticks to the agreed-upon payment plan
Just make sure you have the manpower to manage these payment plans as they can get complicated.
Consider a Loan
If you find you are seeing multiple defaults, explore the loans available to your corporation to ensure you have the cash flow required to remain operational.
In order to take out a loan, you would have to introduce a borrowing by-law. Of course, this could prove tricky as you would need to pass the bylaw with a vote by owners, a difficult process during social distancing practices. We have some tips on voting during the crisis here.
Delay Reserve Fund Contributions
Monthly delays in contributing to the reserve fund could be an option. However, this eats into the interest gained and could put you at risk of not meeting your annual reserve fund contribution obligations.
Your decisions will have to ensure you remain financially sound and that it does not affect your status certificate. You also must keep all owners informed of decisions, so they understand how deferring CEFs affect the corporation. Your decisions cannot override your statutory obligations and must consider lien rights for defaults.
If you would like assistance in managing your property through these difficult times, the team at CPO Management is here to help. Reach out to us today.