When the roof falls in

When the final collapse in prices comes, it happens quickly.

Here are the asking and selling prices for units in a stacked-townhouse complex in Scarborough.

The condo corporation was badly managed for over twenty-five years, according to an ex-director, and the parking garage had work orders issued by the city that could no longer be ignored. The board and the owners were split into factions so one director along with a small group of owners made an application to the courts to appoint an administrator.

The appointed administrator raised the fees—he had no other choice. The number of units in arrears rose dramatically (about a third of all units) and the liens started; then the power of sales.

This is a chart of what happened to the unit prices.

Date
 Selling
 Bed
 Bath
 Fees
 Notes
Feb 14
 $ 85,000
 3
 2
 N/A
   sold as-is
Feb 14
 85,000
 2
 1
 $ 493.00
   plus hydro
Apr 14
 129,900
 3
 2
 607.41
May 14
 165,000
 2
 1
 466.72
July 14
 138,000
 4
 3
 858.00
   $3,000 a month in rent
July 14 149,000
 4
 3
 1,236.46
   2,240 square feet
July 14 142,500
 3
 2
 607.41
   $30,000 spent on renovations
Aug 14
 110,000
 3
 2
 607.41
The administrator dramatically raised the monthly fees
Nov 14
 $ 35,000
 3
 2
 $ 1,131.26
   Power of Sale
Jan 15
 55,000
 2+1
 2
 1,131.26
Mar 15
 55,500
 3
 2
 1,089.99
Mar 15
 45,000
 3
 2
 1,131.26
Aug 15
 43,000
 2
 1
 1,131.62
Oct 15
 85,000
 2
 1
 837.62
Oct 15
 50,000
 2
 1
 837.62
Nov 15
 58,000
 3
 2
 1,089.99
Feb 16
 40,000
 2
 1
 762.03
Feb 16
 48,000
 2
 1
 914.43
May 16
 65,000
 3
 2
 991.74

The units lost 50-66% of their value. The monthly expenses jumping up dramatically which drove down the selling prices.


 
Will prices recover?
Most likely. However it will take a few years. The financially weak owners will be forced out and within a year or two, most of the power of sales will end. Then prices will start to recover.

Also, the administrator will repair the brick and concrete so the buildings will be in decent physcial shape.

Once the loans are paid off and the fees drop some, prices will slowly rise. In three years, when the administrator is discharged and the condo corporation returns to democracy, the board will cut the fees and property values will rise some more.

In the mean time
A few owners abandoned their units and went into personal bankruptcy. Others, needing money to pay the monthly expenses, using studs and drywall, divided their units into two and are renting out half of their units.

Biggest challenge
The long-term concern is when the court-appointed administrator is discharged and the condo returns to self-governance.

Will the owners return to their old ways of low monthly fees, deferring major repairs and political infighting? To some degree this will depend on whether the administrator is as able to rebuild a sense of political responsibility and a sense of community among the owners as he is in repairing the parking garage.

Another example

Here is a condo unit in an Etobicoke apartment building that sold on a power of sale. It sat on the market for three months.

This condo has been managed by a court-appointed administrator for over four years. The already high monthly fees have been raised once again (early 2015) to pay for the second loan installment plus the units have just been converted to individual electrical metering.

Many of the owners are struggling. The corporation lawyer stated in court that the administrator expects that more units will fall into arrears in the first half of this year.

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