Condo assessments

Almost all of my blog posts are inspired by recent transactions or activities related to my involvement in real estate, and this one is no exception. I bought my first condo in 1992 - back then condo sales made up about 5% of the residential market in Edmonton. Today about 1/3 of the market is made up of condo sales. With that growth comes a myriad of issues, including the dreaded word “assessment.”

Assessments are feared by buyers and REALTORS® alike, and have become common place in our market. In fact, you may have a tough time finding a good condo in Edmonton that has not had, or will not have, an assessment. Here are a few quick facts about assessments (keep in mind that in March it is anticipated the long overdue overhaul of the Condo Act should become a reality, which will change some of these answers).

Q. What is an assessment?

A. In short, it is where the owners or executive management of the association determine that the condo corporation needs a cash injection. It could be due to work that needs to be done, or it could be that the reserve fund is not sufficient to cover upcoming operating expenses and future obligations.

Q. Does an assessment mean the condo association has been poorly managed?

A. On the contrary a good deal of assessments are made proactively to ward off significant future pain and deterioration in value. The devil is really in the details.

Q. Does the size of the assessment make a difference?

A. Size certainly does matter. The larger the assessment (generally) the larger the amount of work that is required. Sometimes this work is done over a period of time, and therefore the total cost of the assessment isn’t always known. Often this type of assessment is sold to the owners by saying “that it will improve the value of the property." In most cases this is true, but a lot has to do with the management of the project and money. I have been involved in projects where the concept of the scope of work of the assessment was fantastic and would definitely add value to the property once it's done. However, if the project is not managed properly it can lead to further assessments.

Q. If the value is only going to improve why would people be nervous about buying a condo with an assessment?

A. Fear of the unknown. In my experience buyers fear that unknown quotient - how it will turn out, will there be additional assessments, will the project well be well managed? They are also comparing the properties that they are looking at now in their current state, and it is often hard for people to conceptualize the work that needs to be done. Again this depends on the size of the assessment. If the assessment is only $1500.00 and the seller is willing to pickup the tab it is a lot more palatable than something in the range of $20,000. Even if the larger sum will be due and payable in installments. It is because of uncertainty that buyers will stay away. The more detailed the plan, the lower the uncertainty and the more likely the buyer will consider the property.

Q. How do I sell my property if I have had a large assessment?

A. Information is important:

  • Having as much documentation about the “why, how and when” will certainly be helpful. 
  • Details about the scope of the work will help buyers understand what inconveniences they may have to endure.
  • Financial details of when the money will be due. Will it be lump sum instalments or added to the existing condo fees?
  • Discuss with your REALTOR® potential strategies and how they will market this information to the public and other REALTORS®. (If you don’t have a REALTOR® talk to one of our Liv condo specialists).

About 

Sheldon is very familiar with the ins and outs of real estate; he has been licensed to sell Real Estate in Alberta for over 20 years. Sheldon has served on the Real Estate Council of Alberta, the Real Estate Insurance Exchange and the REALTORS® Association of Edmonton. Find Sheldon on Twitter @edmontonsheldon.

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19 Responses to “Condo assessments”

  1. Karl HungusNo Gravatar 18. Dec, 2013 at 11:51 am #

    Whether you own a house or a condo, you are gonnna have to spend money on maintenance at some point.

    How long does the bad aura of assessment stay with the condo? If the work is done and paid for, does it have any effect on selling in the future?

    • wsnNo Gravatar 18. Dec, 2013 at 1:36 pm #

      The difference is that, with a house, you have total control. With an apartment, you are dealing with a special interest group called the board.

      • GregNo Gravatar 19. Dec, 2013 at 11:01 am #

        Sure, but that special interest is also your special interest.

        I got a $3k assessment from my condo board this past year for repairs they are now suing the original developer for not building to code. Would be nice to get my assessment back with a successful lawsuit, but not holding my breath.

        • wsnNo Gravatar 19. Dec, 2013 at 1:47 pm #

          Not always. I have watched CityNews that some condo members gave repair contracts to their friends at inflated price. When other condo owners questioned the practice, the board used the collective fund to sue those who raised questions.

          • mikeNo Gravatar 19. Dec, 2013 at 5:07 pm #

            I think your getting the news article mixed up. Property managers typically control the quotes boards receive as well as any kick backs(recent articles from Toronto show this is a concern there). I dont see why a board would pay inflated prices to contractors as they could pay themselves a salary if they wanted some sort of kick back or $$.

            I’m on a few condo boards myself and speak to many other boards… I personally don’t see too many issues arising like this nor hear of it ever.

            Bigger issues are underfunded condo fees, ignorance of repairs, lack of educated board members…

          • wsnNo Gravatar 20. Dec, 2013 at 9:28 am #

            @ mike:

            It’s in the TV news, with interview of the victims.

            Just because some people can theoretically given themselves more pay, doesn’t mean it’s their preferred way of getting it. Witness the numerous heads of states around the world getting involved in corruption charges. Getting paid by passing a motion would enrage people they govern, causing them lose their job; getting paid by kickbacks won’t, as long as it can’t be proven.

          • GMNo Gravatar 20. Dec, 2013 at 10:18 am #

            Kickbacks, corruption, special treatment…

            Reminds me of the new Oilers… er… Rogers Arena.

          • mikeNo Gravatar 21. Dec, 2013 at 3:11 pm #

            @wsn – Kickbacks would still go back to the property management not the board as the odds of having an entire board collude to cash in on higher kick backs and fraud is very slim.

            Even if you get an entire board to take kick backs your property management company would still need to turn a blind eye. Then If your property management company is that shady to let a board do that do you not think they would be well ahead of the board and already cashing out themself? Why let the board steal money when they could be stealing it them self.

            Fortunately we haven’t seen the issues like toronto but if i were to guess i bet most condo boards get over charged more often then we suspect.

  2. JoJoNo Gravatar 18. Dec, 2013 at 1:56 pm #

    Sometimes taking control really isn’t meant for everyone. People who live in a condo generally doesn’t like that kind of responsibility.

    • edmontondownNo Gravatar 19. Dec, 2013 at 9:44 am #

      can’t agree with you more

  3. mikeNo Gravatar 18. Dec, 2013 at 5:12 pm #

    Is it true a property manager must disclose an assessment no matter how small or large it may be? For example say a board did a special assessment fora few hundred dollars to cover fluctuating energy costs from the year.

    If these assessments must be disclosed are their timelines to this? For example if a condo was sold 6 months after the assessment or 12 months later.

  4. DaBullNo Gravatar 19. Dec, 2013 at 10:02 am #

    Here are some articles relating to this topic

    link to condo-check.com

    link to condo-check.com

    I would say a majority of assessments are caused by cheap arse condo boards. They think they are saving money, when really their tripping over dollar bills trying to pickup shiny dimes. I have dealt with such boards (along with the management company) in the past and almost had to stage a coup to have them replaced. Some people just love Oligarchy’s or just wanna be self appointed dictators I guess. Luckily, in my case, a majority of the condo owners felt the same way. They were just afraid to act, because of the wrath that would have been inflicted on them by said board.

    If you currently own a Condo and think that things are being run properly or you have a dictatorial board. Act now or it’s going to cost you more down the road.

  5. TarazNo Gravatar 19. Dec, 2013 at 10:38 am #

    More importantly, be suspicious of low condo fees. I was on a condo board because they hadn’t been increased in a decade or so. Consequently, there wasn’t enough money in the reserve fund for upcoming repairs.

    We had to basically double the condo fees in a few years and take out a loan to fund siding and window replacement.

    Also, if you’re ever on a condo board, make sure your fee increases are keeping up with inflation.

    • Sean DeSilvaNo Gravatar 19. Dec, 2013 at 7:50 pm #

      Excellent point, I now know to check with the condo board to see the last time fees were increased, and maybe even the reserves they have on hand if they’re willing to disclose to a potential buyer.

    • GMNo Gravatar 19. Dec, 2013 at 10:19 pm #

      Better yet, don’t buy a condo. Buy a house instead.

      Can’t afford it, you say? Well then rent out the basement or rent out rooms.

      • GregNo Gravatar 20. Dec, 2013 at 11:33 am #

        Not everyone wants to live in a house. I have a town house that works just fine. I’d rather be doing fun stuff than my own maintenance and yard work.

  6. SantaNo Gravatar 20. Dec, 2013 at 3:27 am #

    Thanks for the given information! It’s very useful for condo owners! As far I know condo communities generally use condominium associations to properly maintain community common areas such as building exteriors, roofs and roads. However, it costs money to maintain a condo community, and all community members pay for such maintenance through assessments, fees or dues. Generally, members pay a condominium association’s regular assessments on a monthly, semi-annual or annual basis. Condo assessments, fees or dues are an expense separate from any mortgage payment you have. Assessments are calculated (in most cases) by calculating the total square footage of the condo building times the percentage of ownership a particular unit has in the entire building. Hope this information will be also useful for someone!

    • JimNo Gravatar 20. Dec, 2013 at 11:41 am #

      “Generally, members pay a condominium association’s regular assessments on a monthly, semi-annual or annual basis. ”
      is this true? which complex you are talking about? every one want stay away from it.

  7. katelouiseNo Gravatar 07. Jan, 2014 at 1:57 am #

    Buying condo with assessment is better option always because it resolves many related issues.