‘I can’t afford it’: Owners outraged after monthly payments double at Ottawa condo
Ottawa Citizen
By Maggie Parkhill
30 April 2018

Joumana Azzi poses for a photo in front of 2630 Southvale Cres. in Ottawa Thursday April 26, 2018.    Tony Caldwell/ Postmedia

Joumana Azzi says she could barely believe her eyes when she saw it: her monthly condo payments were about to double, thanks to $2.3 million in repairs needed for two buildings on Southvale Crescent.

News of the levy, she said, brought other neighbours at a meeting about the cost to tears, describing how they might have to turn their keys over to the bank or take out a loan. Some talked about selling their units.

With less than two months’ notice, residents of 85 units at 2630 and 2650 Southvale Cres. in the city’s south end were told by their board of directors in mid-February that they would have to contribute more than $2.3 million over the next three years after a “special assessment” concluded the buildings were in need of major repairs and upgrades.

While this may seem like an unfair demand, it’s legal under Ontario law. What’s happening to the residents along Southvale Crescent is an illustration of the very few options — none of them ideal — condominium owners have if they find themselves in a similar situation.

The $2.3 million amounts to a 504 per cent increase in the total contribution to the condo’s reserve fund, a special fund all condos are mandated to have to pay for major building repairs or upgrades. The fund is managed by the condo’s board of directors.

Each owner was originally paying around $700 each month in “condo fees,” said Azzi, which included money that went toward the reserve fund. The $2.3 million fee means each owner now has to cough up almost $800 more per month.

For many, that totals costs of around $1,400 to $1,600 per month — and that’s before any additional mortgage payments.

“For me, with my job, I can’t afford it,” said Azzi. “My whole income doesn’t afford that much money.”

the result of a reserve fund study

The $2.3-million increase is the result of a reserve fund study, which a condominium corporation is supposed to complete every three years, according to the Condominium Act.

A third-party expert, usually an engineer, is tasked with evaluating the property and determining what major repairs or replacements it needs in the near future, such as a pool or garage.

The amount each unit owner is expected to contribute to the reserve fund is changed, depending on what the study says.

If major repairs are needed, or if the reserve is underfunded, the board can levy a “special assessment,” or an amount that must be paid by all owners, regardless of whether they use the “common elements.” If an owner cannot pay, the condominium corporation can put a lien on the home. A special assessment can happen with no vote by the individual owners.

Azzi said she is not convinced by the rationale to levy the fee in one lump sum.

“Why don’t you spread the study over many years instead of repairing the whole building, including the tennis court and the pool and the elevators and the floors and, and, and, and, and?” she said.

Richard Mackenzie, another owner in the building, said he was worried that some might not be able to pay off the fee.

“There are a lot of seniors in this building,” he said. “Some of them are 80, 85, 90 years old and you’re going to tell them to get a loan or get a line of credit? That’s not going to happen — they’re on pensions.”

there is little recourse owners can take

According to the Condominium Authority of Ontario, there is little recourse owners can take if they disagree with a special assessment or can’t afford to pay it. The decision to levy a special assessment can be challenged in court, but owners will only win if they can prove proper procedures weren’t followed, such as not getting an expert third party to do the study or not getting the approval of the board.

If all else fails, the CAO suggests holding an “owner’s meeting” to express their concerns to the board.

Owners can also sell their unit, but the special assessment must be disclosed in the transaction, which can lower the value of their home or cause a potential buyer to walk away. If all else fails, the CAO suggests holding an “owner’s meeting” to express their concerns to the board.

The residents of 2630 and 2650 did call such a meeting on April 7 but say nothing changed.

“We had no answers for any of this except their lawyer just being a lawyer,” said Azzi.

While it may seem unusual, a special assessment fee is more likely to happen with older buildings built before 2001, which were not required to conduct reserve fund studies under the Condominium Act. However, according to one lawyer, it can happen to any building with major emergency repairs or mismanaged reserve funds.

Chuck Merovitz, an Ottawa lawyer who specializes in real estate disputes, compares it to the money and resources that go in to owning any home.

“If you own a house, and you don’t do anything to it, and then all of a sudden you think, ‘Oh my, I better do something,’” said Merovitz of the upkeep required to maintain a home. “If you have a condo that’s never done a reserve fund study, they’re going to find themselves in a big surprise.”

While Merovitz said he wouldn’t call this kind of massive increase common, it can and does happen — he knows of a similar case where the reserve fund study determined that each unit would have to contribute $50,000 over five years.

Ultimately, Merovitz said, it’s up to the board of directors to protect the owners.

“If your board has properly looked after reserve funds and reserve fund studies throughout the history of the condo, that’s not going to happen,” he said.

James Davidson, the lawyer representing the condominium corporation who spoke on behalf of the board, said that while it’s a difficult situation at Southvale Crescent, it’s a necessary one.

“I’m happy (the board is) going to be planning well,” said Davidson, who noted that if it did not accept the recommendations of the study, it could be held liable if anything went wrong with one of the common elements, such as the pool or garage.

“I’m not happy that they’ll have to have this big increase. That doesn’t make anybody happy,” he said. “But I certainly feel the board has good reason to have confidence in the study that they’ve got.”

He added he doesn’t see any evidence of the board mismanaging the funds but that the special assessment fee is simply the result of the engineer taking a much closer look this time around compared with the last reserve fund study done by another engineer.

He argued the board can’t space out the reserve fund contributions any more than it is.

According to the Condominium Act, the prescribed period for paying the amount required by the reserve fund study is usually one year. In that case, it would mean residents would have had to pay more than $2,100 per month in reserve fund contributions alone. But because of a pending law, which would extend that grace period to three years, the board was allowed to space out those payments.

Davidson said he and the board sought out other solutions, having “tough meetings” with the engineer who conducted the study to see what could be changed to lessen the blow to owners. Though it’s not easy for the community, he said, he ultimately believes this is the best deal they can get.

“It happens,” said Davidson. “It’s not all that uncommon.”

Mackenzie said he is running to replace the current board of directors with several other owners, hoping they can still make changes to the reserve fund contributions. That vote for the new board is scheduled to happen Monday night.

However, Merovitz said he doesn’t believe a board’s decision can be overturned when it comes to a reserve fund study.

In the meantime, auto-payments are already being taken out of owners’ accounts.

Condo owners keep board of directors after fees double
Maggie Parkhill
Ottawa Citizen
01 May 2018

Condominium owners angered after learning their monthly condo fees would be doubled with only a few weeks’ notice were unsuccessful in their bid to oust their board of directors Monday night.

A reporter from this newspaper was barred from entering the meeting, with the condominium corporation’s lawyer citing privacy.

The owners would have needed 43 votes in favour of each new board member in order to remove any original board member. When the votes were tallied, each new member received between 34 and 37 votes, according to two owners who attended the meeting. Only 69 of the building’s 85 unit owners attended the meeting, they said.

“There were a lot of people missing,” said Joumana Azzi, an owner in the building, adding that there was a push to get people to sign proxies prior to the meeting.

“I’m disappointed about the vote,” said Sigismondo Springer, another owner. “But the most important thing here is the money.”

Residents at 2630 and 2650 Southvale Cres. were recently slammed with a $2.3-million increase in their reserve fund contributions, money meant to be used for emergency repairs or upgrades. This increase, spread out in monthly payments over three years, means owners are suddenly paying around $800 more per month — for many, this means total monthly payments of $1,400 to $1,600 per month — in addition to any mortgage payments.

The jump is the result of a special assessment recommended by an engineer who studied the building and suggested many major repairs and upgrades that some owners, including Azzi and Springer, say are unnecessary. The hike was accepted by the condominium’s board of directors.

Faced with such short notice, some residents say they’re looking into borrowing money or selling their home.

While the special assessment might seem unfair, under Ontario law once a special assessment is levied, there is very little recourse for owners. If an owner cannot pay, a lien may be put on their home. If an owner wants to sell their condo, they must disclose the special assessment to potential buyers, which may scare them off or result in a lower offer.

“It’s a loophole they have to take a look at,” said Springer of the provincial government. “A lot of people believe it’s a legal imposition.”

Although owners were not able to remove their board members, changing the board would not necessarily have meant they could change the special assessment. Azzi said she thinks this might have been a reason the vote was not successful.

“People think with the old board or a new board we still have to pay,” she said. “Some people didn’t like some of the new board, and some people didn’t like some of the old board, so people got confused.”

In the meantime, owners are already paying up. The first doubled monthly payment was taken out of owners’ accounts on April 16.

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