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From the Winter 2023 Issue

Understanding the Financial Risks of the Condominium Manager Shortage

The Manager Shortage

Your Condo || By Christina Ajith-Brandford, CPA, CA

For decades, urban and suburban centres across Ontario have been reshaped by sprouting towers and low-rise townhome residential units, many of them condominiums. The goal has been to accommodate a rapidly growing population with denser urban planning and construction, resulting in a surge of new condo residences. But what happens when there aren’t enough qualified property managers available to help management companies ensure the success of these communities?

Currently, there are approximately 3,900 licensed condominium managers in Ontario (CMRAO Summer Quarterly). These professionals are tasked with managing 12,690 condominium corporations containing approximately 987,300 condo units (CAO 2022/23 Annual Report), with many more to come. Canada Mortgage and Housing Corporation data shows that about 55 per cent of new homes being built in the province are condominiums, the majority of which will retain the services of a professional manager or management firm.

This supply and demand imbalance—exacerbated by the constant construction of new condominiums—exposes condo unit owners to significant financial and governance risk if the manager shortage isn’t addressed in the near term. Property management firms are responsible for ensuring that owners receive effective service from their on-site managers. The steps they take to attract and retain qualified managers has a direct impact on unit owners’ lifestyle experience and long-term financial security.

Why? Because condominium boards are typically staffed by volunteer unit owners with no prior condominium management experience. They rely heavily on their property managers to handle technical details such as legislative compliance and financial reporting along with a raft of other responsibilities: unit owner communications, property operations and maintenance, by-law enforcement, the oversight of building infrastructure upgrades, contractor management, and much more. Think of it as the equivalent of running a multi-million-dollar business governed by complex legislation and related requirements—all in condo board members’ spare time. This is an onerous task for seasoned professionals, let alone volunteers with expertise in other areas. 
It’s on the financial side that qualified property management is perhaps even more indispensable. Property managers help board members develop annual budgets, manage and deliver updates on those budgets and related financial and accounting reports, manage monthly banking and reconciliation and handle both payment and financial conflict resolution. In addition, they also work with the corporation’s engineer to coordinate reserve fund studies and help to ensure that reporting requirements under the Condominium Act, 1998, are met. 

When property management falters, the financial security of the community—along with the long-term valuation of individual condo units—is at stake. Costs can quickly escalate if routine projects (think ongoing property maintenance fees or larger capital projects) spiral out of control. That can result in a spike in maintenance fees or special assessments resulting from reserve fund shortfalls. Compliance issues can also mount. These combined red flags can put downward pressure on unit prices while potentially deterring prospective home buyers. 

The condo property manager shortage was foreseeable. Property managers are required under the Condominium Management Services Act, 2015, to be licensed by the CMRAO.  To acquire a General Licence, managers must log two years of full-time experience managing a condo, complete a 6-course educational program and, as of July 1, 2023, complete 10 hours of continuing education annually to renew that license. Some managers have (and could in future) seek other employment opportunities rather than go through that process, further increasing manager attrition rates that had already spiked during the pandemic when COVID-19 restrictions made condo management exceedingly difficult. While condo property manager compensation has increased in recent years, low unemployment levels, an aging manager cohort nearing retirement, and the prospect of higher salaries elsewhere are prompting many professionals to leave the industry. 

This new dynamic is posing another challenge for property management companies. They not only need to find creative ways to attract qualified property managers but also to retain their highly sought-after services.

Make no mistake, forgoing professional condo property management should never be on a condo board’s list of strategic options. That’s why retaining property managers is becoming increasingly important (and challenging) for management firms aiming to properly service and retain their clients. Property management companies can use a multi-phase strategy to help ensure service continuity, including:

  • Taking the time to recruit qualified property managers capable of fulfilling the full scope of their clients’ operational requirements, while communicating to condo boards that a qualified manager or team will usually deliver operational savings that more than offset the cost of their fees.
  • Reviewing their property manager’s compensation packages and workplace expectations, ensuring that both are in alignment with industry standards.
  • Providing managers with a path for career advancement and other professional growth opportunities.
  • Helping boards develop realistic management budgets that reflect competitive compensation expectations.
  • Developing and leveraging systems, processes, and technology platforms to boost efficiency and automate processes. Doing so helps to ensure that management service agreements are as cost-effective as possible while meeting the operational requirements of the condo community. It also provides managers with the tools they need to be more productive and deliver a better service experience to their condo clients.
  • Working with a qualified audit/accounting firm that specializes in the condominium sector. The firm can liaise with the property management company and their on-site managers to ensure full financial and legislative compliance while also mitigating the risk of legal and other challenges.

Christina Ajith-Brandford is a Partner in the Condominium Practice at Adams + Miles. For more than a decade, Christina has helped spearhead the delivery of a broad suite of services to Adams + Miles’ condo clients, ranging from condominium audits and compliance advisory to financial reporting.

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