Proper planning will ensure that money is always available to meet the maintenance challenges that every single building inevitably faces. Responsible maintenance and prefunding of the Reserve Fund is absolutely essential to condominium owners.
Assessments resulting from Reserve Fund shortfalls are always the result of incompetence or naive and uninformed planning. Toronto Condo News & Resource Guide
Unfortunately, such assessments are standard practice at Spadina Condominium Corporation.
Condominium Corporations follow fund accounting to segregate the operating fund and reserve funds. The Reserve Fund is a restricted fund for capital replacement spending. Condominium Corporations adopt the restricted fund method to report the financial statement elements by fund in such a way that the organization reports the operating fund and the capital replacement fund. All capital expenditures must be recognized as such to ensure appropriate supporting resolutions.
Residents must be informed of the serious state of the Corporation’s Reserve Fund and the most troubling absence of any responsible funding plan. Please review the attached Reserve Fund Analysis which clearly illustrates the severity of the issue. Given current contribution levels, the reserve fund will be pretty much depleted over the next year. Why has no responsible funding plan been presented?
With no changes to current contributions, we will be facing a total projected reserve fund deficit of approximately ($471,000) by the end of 2023. Unfortunately, the Board has neglected to provide a responsible funding plan and residents are about to pay dearly for this neglect.
In order to avoid this projected deficit and ensure a responsible rebuilding of the reserve fund balance to a reasonable level of some $300,000 within four years, a responsible 48 month funding plan must be implemented immediately with ADDITIONAL reserve fund contributions of approximately $770,000 over the next four years. The coming updated Reserve Fund Study may require even more. That translates to ADDITIONAL reserve fund contributions per residential unit of several hundred dollars per month per unit over the next four years. Unfortunately, these estimated fees are necessary to make up for neglect of the reserve fund for a number of years. Such irresponsible neglect must no longer be covered up with the continued use of surprise cash calls versus a responsible funding plan.
To help mitigate the serious impact of this issue upon residents, drastic measures must be taken immediately including cost cutting in operating expenses such as caretaking and other excessive operating expenses that could easily result in annual savings of $25-50,000. Who else pays a caretaker $80,000 a year ($60 K plus housing & benefits) and then hires contractors to conduct his duties? Substantial reductions to the budget for proposed but very excessive residential common area “improvements” ($65,000) would certainly help as well. These “improvements” should at the present time be limited to correcting the last “improvement” by replacing the existing hallway carpets which are an embarrassment to any resident owner who respects their property. Tenders and multi quotation requirements should also be implemented immediately for all reserve fund expenditures of $10,000 plus and all operating expenditures of $5000 or more in order to address excessive spending.
A General Meeting to advise residents of the facts of this very serious situation should take place ASAP and include presentation of a responsible funding plan. If nothing is done, you can be assured that a qualified assessment through our updated reserve fund study due in March of 2020, will confirm the serious lack of preparedness for what is coming. Its presentation will reveal this very serious situation at Spadina Towers and suggest corrective and responsible funding measures.
Reserve Fund – It is important to note that all proposed capital repair or capital replacement (reserve fund) expenditures be included in the Reserve Fund budget with both the expenditure and its means of funding confirmed with resolution approvals by UNIT OWNERS, NOT BY THE BOARD. More than $2 million of reserve fund expenditures have been unlawfully approved by the Board without unit owner approval. The Board refused to respond to this statement and related questions at the AGM.
Sometimes, it’s not the plan that is at fault. I can think of a number of examples where the reserve fund plan recommended a reasonable contribution, but for some reason the condominium board decided to set it lower. If a short term perspective is taken, this may seem to make sense – lower contributions helps property values and sales. If a long term perspective is taken, this is pretty irresponsible. Someone is going to pay for it eventually, and it won’t be pretty. It may also require some effort to educate the condominium board on the pitfalls of short-term thinking.In essence, the common problems noted above can be easily avoided by a qualified person that puts in the necessary work, and a condominium board that takes a long term perspective. The sooner you ensure the contributions are sufficient, the less painful it will be. If you don’t, it’s gonna hurt. Source reservefundguide.ca
In conclusion, as a result of the Boards neglect of a responsible reserve funding program, unit owner property values have been severely impacted given the unfortunate marketplace perception of constant and irresponsible cash calls to cover up this neglect. The Board refuses to respond to resident questions and concerns. RESIDENTS SHOULD BE CONCERNED WITH BOARD REFUSAL OF RESIDENT DEMANDS FOR TRANSPARENCY AND BOARD ADHERANCE TO THE LAW THAT REQUIRES UNIT OWNER APPROVAL BY APPROPRIATE RESOLUTION OF ALL RESERVE FUND EXPENDITURES.
The only means of reestablishing respect for condo values at Spadina Towers is to ensure adoption of a responsible funding plan implemented by the Corporation that will not subject an owner or purchaser to unknown and surprise cash calls. It is hard to imagine any resident who would not be supportive of such a responsible funding plan and Board adherence to our Bylaws and the Act. Should the Board refuse to implement an immediate and responsible funding program to address the imminent shortfall in the funding of near term reserve fund obligations, residents will be subject to special assessments resulting from irresponsible Reserve Fund shortfalls that are as previously quoted, always the result of incompetence or naive and uninformed planning.
Dennis M. Tofin #603