At the heart of our management philosophy is the belief that condo owners are seeking peace of mind. Our goal is to guide our condos to maturity, where all building systems have been replaced at least once, they have adequate reserve contributions, and a large minimum balance in their reserve fund, minimizing the risk of special assessments. 

Unfortunately, many condos prioritize minimizing fees. This ultimately undermines peace of mind when condos fall into a vicious cycle of underfunded reserve funds, deferred maintenance, escalating costs, and crisis-driven special assessments. This is the story of one of our clients who found themselves in this vicious cycle, and how they have managed to get out of it. 

The Vicious Cycle: A Common Pitfall
For years, the building had prioritized low fees, which led to inadequate reserve fund contributions. Window repairs were deferred repeatedly. On one occasion, the board issued a special assessment for the repairs, only to be overturned and the assessment refunded. It wasn't until two plate-glass windows fell out of the building that the project finally moved forward. By then, the cost had skyrocketed to four times the original estimate due to inflation and water damage, resulting in a special assessment of over $20,000 per unit. This is when we took over management in 2021. The lack of peace of mind was palpable in the building, with owners frustrated, leading to the resignation of the previous management company. 

Don’t Waste a Good Crisis
When we took over management in 2021, the building was ready for things to be done differently. The first step was to stop deferring operational repairs. We then updated the reserve fund study in 2022, to include everything necessary for the complete renewal of the building. The combination of the increase in reserve contributions and operating expenses resulted in a 25% fee increase for 2023. To top that off, the elevator controllers failed 15 years earlier than anticipated, necessitating a special assessment of $3,500 per unit. 

Key Tactics: 
1)    Do Not Defer Repairs
Prompt repairs not only provide an accurate picture of the true annual operating costs, but they also let you uncover recurring issues and their deeper root causes much faster. 
2)    Detailed Chart of Accounts
Separate on-demand repairs from routine maintenance. Have lines for each building system and sub-system. Most owners should be able to visualize what goes into each line by its name. The budget will be more robust, anomalies will be more apparent, and financial information will be easier to communicate to the board and owners. 
3)    Demonstrate the Cost of Deferring
Conduct a cost comparison of deferring maintenance, including inflation, short-term repairs, and deterioration costs, versus borrowing the money. Often, the cost is quite comparable, demonstrating that the only thing more expensive than repairs now are repairs later, so why wait? 

Facing Challenges Head-On
The following year, 2023, presented more challenges. We dealt with five pinhole leaks, totalling $53,000, which depleted the meagre operating fund. The reserve fund faced a shortfall after an overdue emergency generator replacement came in at double the anticipated cost. The board wisely assessed rather than borrowed from future projects - $1900 per unit. When budgeting for 2024, an increased operating budget in anticipation of more pinhole leaks, in combination with the planned increase to reserve contributions, necessitated a 16.9% fee increase. This still left money owed to the reserve and a depleted operating fund, so a further special assessment of $1100 per unit was issued. 

Key Tactics: 
4)    Communicate Early and Often
Communicate ANY knowledge the corporation has of ANY circumstances that MAY result in an increase in the common expenses in cover letters of Periodic Information Certificates and AGM management reports. 
5)    Budget Consultation
Go through your draft budget, line by line, with the owners and solicit questions and feedback. Owners thanked us that they only had a 16.9% fee increase and $1100 special assessment at the end of this meeting.
6)    Use Special Assessments
If the corporation needs money it does not have, the only option is to issue a special assessment. Then you, the Board, and all the Owners can remember how painful that was and be more open to the fee increases necessary to prevent them in the future. 

Turning Point
2024 continued to have challenges. A condition assessment of the garage identified $1 million of deficiencies in the parking garage, and the plumbing replacement estimate came in at $2 million - quadruple the RFS estimate. But here is where things started to turn around. We updated the RFS a year early. Continuing the plan to renew the building, we were now able to improve the accuracy of estimates substantially, and most importantly, we increased the minimum balance to $400,000 - roughly 1 year of contributions. In large part because the board had special assessed unfunded projects over the last 2 years, the reserve contributions did not need to be increased. The parking and plumbing projects, however, required planned special assessments totalling $30,000 per unit over 3 years. While many owners accepted this, seeing that the increased reserve contingency gave the corporation a path out of the vicious cycle, there was a fair amount of unit turnover. Despite this, the building finally had a path to stability, and just knowing that started to give the remaining owners peace of mind. 

Key Tactics:
7)    Make Reserve Fund Studies as Accurate as Possible
Include all conceivable future work. Get the planner information from contractors and engineers familiar with the building to make accurate, effective age and cost estimates. And use a real construction inflation rate. (My pet peeve: if you're using 2% as your inflation rate in 2009 your estimates would be roughly 21% low by 2019. If that continued, they would be 116% low by the end of the study period - and that doesn't include COVID inflation!)
8)    Include a Large Minimum Balance in the Funding Plan
Include a minimum balance equal to 3 years of contributions. Being able to inform owners that there is X dollars of contingency before a special assessment will need to be issued is very powerful, provided X is close to or exceeds the special assessments they fear.
9)    RFS Owner Consultation
Open the floor to questions about the component inventory, and then proceed to explain the funding options. Use line charts to show different options. Usually, this makes it very clear why a special assessment for immediate needs with a more moderate fee increase makes sense.

Beginning to Bear Fruit
Fast forward to 2025, and we are beginning to see the fruits of our labour. The fee increase for the year was a nominal 2.5%. Unit sale prices are already bouncing back as buyers see the value in entering the building before the full renewal is complete. The reserve fund is healthy, and we now have a minimum balance that is already proving valuable—this year, the pool HVAC unit failed, and we will be able to replace it without the need for a special assessment. Most remarkable of all, through this entire process, we have been able to improve owner satisfaction as reported in semi-annual surveys. While there are still two major projects to complete and several smaller ones on the horizon, Algoma Condominium is now in a strong position to transition into the “mature” phase of its lifecycle within the next 5-7 years.
 
Key Tactics:
10)    Owner Satisfaction Surveys
Use a very brief survey a few times a year, collecting both quantitative benchmarking data (we use NPS) and qualitative data to understand what the entire building wants, not just the loudest owners. 

Conclusion
Most condo owners would not trade their peace of mind for a lower condo fee. Despite that, this is exactly what is happening to condos stuck in the vicious cycle. Hopefully, the story of our client shows that it is possible to break out of that cycle and restore peace of mind. It is a painful journey, and it takes a lot of hard work, but on the other side is a building and ownership that are drastically easier and pleasant to manage. So, take courage and get your buildings out of the vicious cycle.
 

Nick Sinclair, RCM, is a Condominium Manager at Regent Property Group in Sault Ste. Marie. He began his property management career in Ottawa in 2018, where he managed Condos until 2021. He gives his clients peace of mind by creating financial stability to protect long-term unit value.
regentproperty.ca

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