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As the coronavirus crisis continues, your condo corporation could come toe to toe with owners who feel that their common expense fees (CEFs) should be lowered or deferred. In fact, since their amenities have been cut off, owners might feel they no longer have to pay their CEFs at all.
Unfortunately, this is not an option for condo corporations. The operation of your property still depends on those funds to function, including the increased cleaning tasks required to keep tenants safe.
Maintenance fees must cover incurred expenses
CEFs are not designed for condo corporations to turn a profit. They are designed to cover the costs of maintaining the building(s), property and operation of the condo. Condo owners should understand their CEFs are not limited to their condo amenities but also must contribute to other costs such as:
- Utility costs for water and hydro
- Insurance premiums
- The condo reserve fund
- Pay for employees and contractors of the condo corporation
CEFs are given super priority in accordance with the Condominium Act in Ontario to ensure these fees are paid on time and are available to cover these costs.
The Condominium Act states, “(4) The corporation shall collect contributions to the reserve fund from the owners, as part of the contributions to the common expenses payable for their units, to ensure that the amount of money in the fund and the number of contributions to the common expenses that the corporation collects are adequate, as determined by the regulations, for the purposes of the fund mentioned in subsection (2). 2015, c. 28, Sched. 1, s. 84 (3).” You can refer to this clause if dealing with owners determined to stop paying their fees.
Amenities that aren’t available
In the current situation, the province and city have instructed condo management teams to shut down amenities in order to help stop the spread of the virus. Therefore, tenants and owners, for the most part, are aware this is not due to any decision made by the corporation. But instead as a direct response to the COVID-19 crisis.
Owners (and/or their tenants) could feel without the use of amenities they are not required to pay their CEFs. However, the Condominium Act in Ontario states, “An owner is not exempt from the obligation to contribute to the common expenses even if…the declaration, by-laws or rules restrict the owner from using the common elements or part of them. 1998, c. 19, s. 84 (3).
Collecting unpaid CEFs
Property managers and condo corporations will continue to collect unpaid CEFs, as per usual. Inform owners who fail to pay that you will still be required to register liens within three months of default. If you do not register liens in time, you put the condo at risk of running out of funds.
If you are seeing requests to defer CEFs, provide information for owners regarding the mortgage relief available to them should they be unable to make their payments. This will also be helpful for owners who rent their units who might not be able to collect rent. By deferring mortgage payments, owners will be more likely to have access to the funds required to pay their CEFs.
During the crisis, keep owners up to date on what you are doing to keep them safe. Use this communication to educate owners on their CEFs, what they cover and why they must still be collected.
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.