1. |
When you do finally have an increase, the amount will be huge and you will have an owner revolt on your hands. You may have owners fall into arrears and their units could go on power of sale. This drives down property values. |
2. |
Cash flow issues start impacting routine maintenance that would normally get done. Too much deferred maintenance makes the day-to-day living in your community less desirable. |
3. |
The condo stops
paying its bills on time. Late penalties then kick in
and the corporation starts paying thousands in interest on the unpaid
balances. Yet the board may go this route as it is completely invisible to the owners and potential buyers. |
4. |
Not properly funding your reserves evenually harms property values. A condo with insufficient reserves may not be able to get CMHC insured mortgages. This means that all future buyers will need a minimum of 20% down payment. Fewer potential buyers mean downward pressure on property values. |
5. |
Once the building starts to slide due to underfunding, the more astute owners, who can see where this is going, sell their units. The lower values attract lower income purchasers and they add to the pressure to keep the fees low. |
6. |
When the owners finally catch on that their corporation is broke, the board will face criticism or lawsuits for not living up to their legal and fiduciary responsibilities. The owners will accuse the board members and the manager of corruption or they will claim, with justification, that the directors were stupid or incompetent. |