Is an administrator the answer?

The courts see administrators as a temporary dictators whose mandate is to restore order and good government and then to turn the corporation over to a democratically elected board as soon as possible.

Presently there is no other instrument that can be used when a condo corporation's politics becomes too dysfunctional or when the owners refuse to raise the necessary monthly fees to pay for badly needed repairs.

Are they the answer?
I am not so sure. If the condo needs a roof replaced, balconies repaired and parking garages made safe and sound, an administrator can and will get that done. Those kind of problems just takes money and the the administrators, being answerable only to the courts, have the power to raise fees, levy special assessments and use the money to make the necessary repairs.

Perhaps the problem is that property managers are being appointed to the position and although building defects and underfunding are the immediate problems, and they are well suited to fix the physical damage, the long-term problems that needs to be addressed are political and social.

When a condo corporation starts getting into serious political and financial difficulties, the earlier the application is made for a court-appointed administrator the better.

If the administrator is brought in early, the fee increases are relatively modest, the needed repairs are quickly completed and self-governance can be returned to the owners within a couple of years.

However, if the board or the owners wait too long, then the property becomes seriously neglected and needs millions of dollars of repairs. Since the corporation is broke, the costs are crippling.

What about property values?
When the administrator assumes control, values sink like a rock with units selling under power of sale for as low as 30-40% of their previous value.

The values tend to rise only after the administrator leaves and the special assessments and high monthly fees are cut. This can take time as the repayment of loans can take years.

Property values do not immediately spring back. Here is one example at an Etobicoke corporation:

Prices for a 3 bedroom unit

put under administration

Aug 2013

Feb 2014

Feb 2015

still under administration
May 2016

out of administration

The administrator got the parking garage repaired but the corporation is still not back into the pink because it is still burdened with paying off loans.

A condo in Malvern (northern Scarborough) ran into serious financial problems due to low fees and a series of boards that could or would not raise the fees to make necessary repairs and run a balanced operating budget nor did they have adequate money in the reserve funds.

They had a court-appointed administrator for approximately 18 months. He was successful in improving the finances but the owners were resentful of his fees. When an owner sent him an e-mail, he charged the condo $100 for the time it took him to read it and send a reply.

When the administrator leaves
After the administrator leaves, it is very common for the new board to reduce their monthly fees, cut back on basic services and reduce maintenance.

At an east-end condo, when the administrator's term expired, the new board cut the fees but modestly. However within three years they replaced the property management company and many of the contractors and they went on a spending spree. A healthy operating fund balance turned into a $111,000 deficit.

The owners responded with the election of two new directors onto the board and the immediate removal of the property management company. A director formed his own property management company and assumed the management role as well as remaining on the board.

The promising start no longer looked so rosy.

Beyond repair
Some condo corporations are beyond repair.

If the main issues are political bickering, overcrowded units and/or owners with low incomes, then it may be impossible for an administrator to inspire the owners to elect a competent board and to give the new board the power to assess the fees that the property requires. (One concern is that I am not sure how much effort the administrators put into this.)

Would budget oversight work?
Once the administrator leaves, the property may remain in poor physical condition and the owners may remain divided into political, ethnic or religious factions. The political pressure to freeze, or even lower the fees, put on the newly elected board by the low-income owners may be unbearable.

If these conditions exist, competent and stable democratically elected boards cannot be hoped for.

In these cases, the condo corporation may need to have its budget and annual audited financial statements permanently overseen by an independent accounting firm, the courts or a government agency.

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