Condominium Contributions: What Are They For?
Condominium contributions are a hot topic for condominium owners. What are they? How are they determined? Why do they go up? If I am paying contributions, why did we need a special levy?
Every condo owner must pay condominium contributions (also known as condominium fees) to the condominium corporation. These contributions go towards the corporation’s:
condolawalberta.ca
operating account and
reserve fund
What are Condominium Contributions used for?
Condominium contributions are used to fund the needs of the common property. These funds contribute to the operating account in which all of the expenses of the corporation come out of. Business expenses such as accounting and legal fees, management expenses and any costs associated with keeping the business entity of the corporation in good standing come out of this account. General expenses such as maintenance, cleaning, supplies and general upkeep are a part of the operating budget, as well as utility payments. The operating budget is developed and then voted on by the members of the Board on a annual basis.
The reserve fund is a different fund maintained for larger capital investments that the property may need. This could be a new roof, flooring of the common areas, repairs to structural components of the property or any large scale upkeep that needs to be done. Every condominium corporation is required to conduct a reserve fund study every 5 years in Alberta. A reserve fund study is conducted by a professional to anticipate the future needs of the property and make recommendations on how to plan for the financial implications of upcoming expenses. A portion of condominium contributions get paid into this account.
I have been paying my condominium contributions, why do we have a special levy?
Special Levies are imposed by the board via resolution (voted) to the condominium owners to pay for additional expenses for the corporation. A special levy may be required to pay for unexpected maintenance expenses, shortfalls in the budget, or any needs within the reserve fund that may be identified by a reserve fund study. These special levies are paid above and beyond the condominium contributions.
How are condominium contributions determined?
Condominium contributions are determined by a number of factors and are contingent upon the financial needs of the corporation. Budgets should be determined by a professional. Previous budgets, upcoming expenses, inflation and a number of factors should be used to determine the needs of the corporation in the coming year and beyond. Once the needs of the corporation are determined, your condominium contributions will be calculated according to the unit factors that are attributed to the unit that you own.
Why can condominium contributions go up?
There are a number of reasons that can call for an increase in condominium contributions. Inflation does not just affect our personal expenses but they also cause an increase in how much it costs to operate and maintain a condominium property. A thorough reserve fund study may also recommend that the reserve fund have additional money added to it because of upcoming expenses. This is ultimately better for condominium owners, as this helps to alleviate the need for upcoming special levies. Contributions may also go up a little if the board is unable to meet the needs of the corporation and they need to hire a property manager like Key Investment Property Management Inc.
What’s the bottom line?
Condominiums are a lifestyle in which owners are looking for a low maintenance, easy living lifestyle. Many allow for owners to only be responsible for their individual units as they enjoy amenities that may include things like underground heated parking, gyms, grounds keeping, snow removal, common area cleaning and more. Some condominiums even pay a portion or all of the owners utilities. For the maintenance and upkeep of these amenities and lifestyle benefits, the corporation requires the owners to pay their portion of the expenses, that is why every owner of a condominium unit must pay condominium contributions.