In September 2021, the owners of a large condominium in North York were collectively struck with an eleven million dollar special assessment to address structural building defects that had been neglected. Each of the 300+ unit owners faced an individual bill ranging from $30,000 to $42,500, with only fifteen days to pay.
For those unable to meet the deadline, Ontario’s Condominium Act allowed the condominium corporation to sell their units to recover the funds owed.
The Impact of Special Assessments
A special assessment—even a fraction of this size—can be financially devastating for condominium owners. To mitigate these risks, boards are responsible for proper budget planning and reserve fund management. While certain controls exist to prevent financial shortfalls, they cannot fully eliminate the risk of large, unexpected costs.
Typically, when structural defects are discovered, condominium boards develop a financial strategy to cover necessary repairs. Reserve funds undergo engineering assessments every three years to ensure they can accommodate upcoming expenses. However, in this case, the reserve fund analysis process failed catastrophically.
Economic Shifts and the Growing Risk
The Canadian financial landscape has changed dramatically in recent years. Interest rates have fallen, while construction costs and inflation have surged. The Canadian Institute of Actuaries has warned that many condominium reserve funds are dangerously low, stating:
"...in aggregate, not enough money is being set aside for future expected payments or to cover unexpected repairs..."
Many condominium corporations are not adjusting to these economic changes, leaving owners financially exposed to steep fee increases and unexpected assessments.
Proactive Reserve Fund Management
At Vertical City, our goal is to help condominium boards avoid financial crises like the one described above. By using our solution toolkit, condo boards can track reserve fund investments, maintain steady contributions, and ensure they are adequately prepared for future expenses.
Taking a proactive approach to reserve fund management can prevent unexpected special assessments, offering greater financial security to condominium owners.
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