Hiding from reality
“They deem him their worst enemy who tells them the truth.”

“In an age of universal deceit, telling the truth is a revolutionary act.
—George Orwell

There are some condos that are so poorly managed, so poorly maintained and are in such serious financial troubles that they are virtually bankrupt and yet the directors and some of the owners feel that, although they are having some short-term difficulties, all is well. There is nothing to worry about.

How bad can it get?
In the west end of Toronto, there is a condo apartment tower that has had water penetration through the building envelop since it was built 30-odd years ago. The builder gave the corporation some money as compensation but that money was not spend on repairs so the leaks were never fixed. Now, a third of a century later, about a third of the units have serious water leakage and mould problems. (All of the units are on the east side of the building.)

The building has a serious cockroach infestation problem that is being ignored and the corporation is not paying its shared facilities expenses. The utility bills and the contractors are paid late.

The reserve fund is woefully inadequate and is regularly tapped to support the operating deficit. The roof anchors are unsafe and the board needs to spend $500,000 to $1,000,000 to fix the exterior brickwork. They have around $13,000 in the Reserve Fund but the board tells the owners they have $300,000.

This year (2012) they had an AGM, after not holding one for the last two years, and they have released no audited financial reports in the last five years. The owners don't know how bad the situation is and their board doesn't want them to know.

Yet, with all their problems, the two-bedroom units sell for over $250,000. The purchasers see a pleasant looking front lobby, clean elevators and clean hallways so they think everything is in order. Their real estate lawyers don't pick up on the bad financial situation that is described in the status certificate and there are no warning signs of trouble until after they have moved in.

How do they get away with this?
The board hired a small property management company that is happy to have a contract. Then they tell the owners that they can't provide audited financial statements because the previous managers lost or destroyed the records.

Very cute!

Who benefits?
The low-income owners who want low monthly fees. The board refuses to listen to the manager when he tells them that the monthly expenses must be raised and they need to arrange for a loan or special assessments to make the necessary repairs. If the manager gets too insistent, they will replace him.

Why they won't listen
The owners do not want to pay, or can not afford to pay, an extra $30,000 per unit in special assessments, or a loan, plus pay extra monthly fees to maintain the property.

Most of the seniors and low-income owners strongly support the board because their fees have not been increased for the last seven years so the board has a lot of support.

How can this go on
The disgruntled owners are too few in number. They do not have the necessary political support to remove the board nor do they have the money to take the corporation to court.

Further more, the owners are split into different ethnic groups so they have trouble working together. The owners know that the condo is not being run well but they have no idea how bad things really are.

There are a lot of seniors in that condo and more than anything, they want—or need—their fees to stay low.

Finally, no one wants the real estate agents, potential buyers or the banks to learn the true condition of their building as property values will sink and they could lose up to two-thirds of their equity.

The smarter owners—the ones who can afford to leave—are selling, one owner at a time. Many are stuck there because they do not have enough equity to buy elsewhere.

Eventually, the city inspectors will be made aware of the water penetration problems and they will issue work orders. That is when the board, and the owners, will be forced to fix their problems.

Chickens coming home

Eventually, the blindfolds must come off and as the owners at Las Brisas, an aging condominium highrise on Bathgate Drive in Ottawa found out in December 2013, reality can be quite a shock.

They got hit with a $53 million special assessment, roughly $40,000 to $66,000 per unit.

Time is running out

A posting on the city's website

It looks like this condo's financial problems are catching up to them. This is the second time in two years that the city has threatened to disconnect their hydro unless they pay up.

What can be done
Anyone in the market for a condo needs to be aware of the dangers of buying into a troubled building. Reading and following the buying tips on this website could help keep an informed purchaser from buying a lemon.

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