For the first time in almost two decades, the Board of Directors approved a 2% increase in the operating budget for fiscal year 2016/17. While many Boards across the City of Toronto, as a standard practise adopt increases based on the annual inflation figures published by “Statistics Canada”, our building’s Board established a tradition of imposing increases that have reached at one point 7%, and every unit owner was the victim of an unsustainable increase doubling monthly maintenance fees every 10 years (100% increase).
In a previous article titled Board Elections & Ethical Principles published on Monday, 2 May 2016 on this blog, we pointed out to our readers that the most common grievance expressed by unit owners signing proxy forms a few days before the AGM of March 2015, was the high maintenance fees approved by The Board, based on inputs solicited from “The Experts of the Industry”. A point even Mr. Hovsim Janovo (not the real name of the candidate), acknowledged during his election speech. With every complaint voiced about high maintenance fees, The Board was peddling fear to silence unit owners, and the tactic worked exceptionally well, especially with owners who never make an effort to check the financial statements delivered with the AGM kits.
The Board’s reply was very simple: “Our maintenance fees are within the averages of “The Industry”. If we don’t maintain the existing trend, we will have to impose a Special Assessment”. Not a single owner dared to challenge Board members on the spot by pointing out that, according to an article published on Friday Feb. 13, 2015 titled “Maintenance fees take a toll on Toronto condo owners”
many Condominium Boards, not only contain increases within the annual inflation rates published by Statistics Canada, they reduce/roll back monthly maintenance fees. The article highlighted the bold move made by Mr. Craig Gagliano , The President of The Board of Directors of the west-end Toy Factory Lofts, who rolled back the monthly maintenance fees for each of the building’s 213 units by a stunning 30 per cent.
The Toy Factory Lofts maintenance fees, at the time of the article’s publication, were just 31 cents per square foot, almost half the city-wide average of 59 cents per square foot for similar units. Not only unit owners were saving hundreds of Dollars every month on their monthly maintenance fees, the resale price of units consistently experienced a substantial increase compared to other buildings in the same neighborhood. “Our rate of property value increase has outpaced similar buildings and I believe it’s by virtue of the attractiveness of the low maintenance fees,” confirmed Mr. Gagliano to the reporter. Units in his building were the subject of an almost 21 per cent price appreciation between 2009 and 2014. While a similar building in the same geographical vicinity, The Indigo, where maintenance fees are 90 cents per square foot (compared to 31 cents), units sell on average for $229 less per square foot than others in the area, according to research results published by www.condo.ca
Mr. Gagliano’s arguments and moves undermine seriously our Board’s position that if certain averages p.s.f are not maintained, a special assessment will be needed and property values will go down. On the contrary Gagliano’s strategy means below average (maintenance 59 cents p.s.f) maintenance fees, automatically pave the way for higher resale prices and make the building more attractive to potential buyers.
Mr. Gagliano’s views are fully endorsed by the evidence gathered by Mr. Carl Langschmidt, a condo expert and co-founder of www.condo.ca “The reason The Toy Factory is so successful is that it has a board with smart, business-minded people,” says Langschmidt. “It is proof that maintenance fees can be kept in check.”
For the first time in two decades, our Board managed to keep the maintenance fees in check. Was it due to the organized efforts of “The Owner’s Alliance” movement, and the movement’s co-founders insistence that with fiscal prudence lower maintenance fee increases can be achieved? To answer the previous questions I conducted an email survey with 27 unit owners in the building who had provided email addresses under a variety of circumstances. Two prominent questions were promoted in the survey, (a) should we maintain the pressure to keep the maintenance fees at a manageable level? b) Should we seek election on The Board if The Board remains committed to 2% increases as part of a long-term strategy, not a short-term tactical maneuver to neutralize the popular anger with high maintenance fees?
Many owners believe that The Board relied on the 2% increase to diffuse the popular anger, and it is only a matter of time for The Board to slap all owners with a “Special Assessment”, and then argue: “We told years ago, low maintenance fees lead to “Special Assessments”. In other words, the answer given to unit owners a few days prior to the 2015 AGM will be turned into a self-fulfilling prophecy within the next couple of years.
As a co-founder, I will adopt a “Guarded Optimism” about the new direction adopted by The Board, but I will conclude my article with the analogy provided by a unit owner during the email survey. Imagine a person who experiences headaches due to a high blood pressure/hypertension. His/her family physician prescribes a drug that neutralizes the headache in a matter of a few weeks, and normalizes the blood pressure. Do you think the person who used the prescription drug should stop using it because the intended goal was achieved, or should she/he continue the use without any interruption because the goal cannot be sustained without the prescription drug?
If we apply the previous analogy to our maintenance fees, should we fold our tent and close our blog site because our goal (2% increase) was achieved, or should we keep everything intact because without our pressure the gain we made this year cannot be sustained in the future?