No doubt, compliance to the Condominium Act, 1998 regarding reserve funds, administration, maintenance, and capital improvements is extremely important
However, compliance alone isn’t enough to promote the financial well-being of condominium corporations nor does it define best practices in property management.
While it cannot be argued diligent compliance is important, it is not enough to achieve the challenges of upkeeping aging buildings and securing financial health for the years ahead. Instead, our case study shows why a creative, technologically driven, and professional property management approach is required.
THE CASE STUDY
1. The Challenge
In March 2019, CPO Management Inc. was contracted by a Vaughan condominium corporation to provide property management and financial services for the 200 unit building. A lack of scheduled reserve fund study projects in hand with poor financial management made it was impossible to maintain both the physical and financial health of the property.
2. The Scenario
At first glance, it appeared that despite its 25 years, the building had maintained reasonably cared for indoor and outdoor amenities. The Condo Fees ranged between $750 and $930 per unit with a reserve fund balance of about $4,000,000. However, upon further investigation CPO Management inc. discovered the operating account was sadly overdrawn thanks to what appeared to be an unusually high liability. The expense/revenue balance was also negative.
Adding to the challenge, CPO Management Inc. was informed that major components of the physical assets were significantly outdated. To make up for poor financial management they had reduced their maintenance program to a dangerously low minimum resulting in their capital improvement project plan being way overdue.
3. The Solution
An assessment of structural improvement projects revealed their required upgrade and replacement projects had not been completed for years, meaning far too many projects were in dire need of immediate attention all at once. Further investigation found the previous reserve fund studies overestimated the cost of the outstanding projects. CPO Management inc. performed a new RFS to confirm our evaluations were correct, allowing us to decrease the reserve fund contribution while still leaving enough cash available to cover operating funds.
4. The Results
Through financial reviews, assessments of required outstanding projects and accurate predictive costs associated with those projects, CPO Management was able to improve building maintenance substantially by adding numerous lifestyle and safety maintenance programs.
The following capital improvement projects were completed:
- Jacuzzi shell rebuild/renovation
- Concrete restoration of the 2-level garage, garbage compactor room and ramp surrounding wall
- Construction of the large concrete pad at the garbage pick up area
- Installation of a new electrical heating system for the ramp
- Waterproofing of the building subsurface walls
- New motor installation for the compressor, pumps, and garbage compactor
- Fitness room refurbishment
- Swimming pool facility mechanical upgrade
- Building access control system upgrade
- Parking lot re-pavement
Upon the successful completion of all projects, CPO Management was able to decrease the Condo Fees by 3.5% in the first fiscal year, which remains unchanged in the second. With all the expenditures the reserve fund balance still sits at around $4,000,000. CPO Management inc. have tendered out projects for lobby and party room renovations, without anticipating the need to increase Condo Fees or relying on the current reserve fund account balance. CPO Management works hard trying to make Condo Fees more efficiently. The process of condo service providers selection is based on open tenders at www.condo-fairtender.ca which is absolutely transparent and allows to reach more service providers, get the best quotes.
CPO management inc. strategy positively impacted the value of the property’s physical assets without depleting the actual account’s value.
These condo best practices demonstrate how property management provides exceptional improvements to aging properties without the need to charge high Condo Fees or expend a condo corporation’s reserve funds.
By using professional property management methods, condo corporations can remain financially sound, see increases in property value and avoid the need for special assessments to make up for poorly managed reserve funds.
CPO Management Inc. is a full-service property management firm serving residential and commercial condominium properties in Toronto and across the GTA. Experts in preventative strategies with a growth-focused mindset, CPO’s suite of services range from strategic and financial planning to accounting, building maintenance, and capital improvement project management.