I was just going over everything I think people should know before they buy a condo; this may take more than 3 issues to get through!
Last blog I talked about what a corporation and association is, and a little about what it does. A little more detail about the association and condo boards various functions….
AGM (Annual general Meeting) is a yearly scheduled meeting of all owners (who wish to attend). This meeting is used to bring owners together to go over the past years financials and operating reports. Owners are also asked to vote on a new board of directors and any other pending issues that require consensus to move forward on.
Annual Budget is a yearly plan of what the corporation wants to accomplish in the upcoming year. The budget will show where the money will come from (eg: contributions from collected monthly fees)and what it will be paid out as far as common expenses, yearly ongoing maintenance and any special upgrade or repair issues. Occasionally a matter of litigation or insurance can come up due to unforeseen circumstances.
Replacement Reserved Fund is a fund of money that is set aside that is to be used to replace and repair major parts of the common property. Reserved fund moneys are collected from a portion of the condominium fees and can only be used to repair or replace items that do not occur annually on a regular basis.
Reserved Fund Study is exactly that. It is an independent study of the corporations replacement reserve fund. An engineering study is done of the buildings various mechanical systems, like the roof, elevators, boilers, windows and parking structures etc. and a report is done that maps out what should be budgeted over the next 25 years to keep the proper amount of money in the reserve fund.
As of 2002 the government has required all corporations to do this, as a lot of unsustainably low funds were out there, resulting in financial carnage and consumer malcontent. Since then condo fees on an average are much higher, but there are far fewer associations getting into trouble by underfunding and unrealistic long term budgets.
Condo (or Maintenance) fees are contributions paid to the corporation by the owners for running of the building. Usually monthly and covers any and all expenses that are incurred by the corporation in the annual budget. Sometimes a one time cash call is invoked in the form of a special assessment.
Special Assessment; the most dreaded of all things that can happen to the condo owner. This usually happens when an urgent repair or replacement has to be done and has not been taken into account by the corporation. It can also occur when a the reserve fund study is done and the board (owners) decides that there is insufficient funding to maintain the building properly and also keep the reserve fund at a healthy level. These assessments can take place as a one time lump sum cash call, or as an increase to fees over a longer period of time (sometimes both).
Voting via Proxy, when you are unable to attend a meeting where voting is required, you simply appoint someone else to vote in your absence. In my next edition I will discuss purchasing a condo and the proper steps to protect yourself from an unstable condo association, or a problem building.
If this information is helping you understand the inner workings of Condo ownership, stay tuned for part III!