Is There a Condo Crisis Coming?

[whatnext]

There's a very interesting article in the Globe & Mail today about the perils of condo living and maintenance. Though it refers to Toronto, Vancouver has gone just as "condo crazy", if not more so. One has to wonder if we'll see the same kind of issues.

Faulty towers: The hidden dangers of low condo maintenance fees
STEVE LADURANTAYE — REAL ESTATE REPORTER

The three-bedroom condominium unit at 40 Panorama Ct. has everything a prospective owner on a budget could hope for – en suite laundry, two washrooms, an eat-in kitchen and access to a parking space all for less than $150,000.

But in a city that is crazy for condos, the unit has been on the market for more than a month. Nobody is calling – there are 17 other units for sale in the 200-unit building, and the agents trying to sell them aren’t doing any better.

The lack of interest has nothing to do with market conditions, and everything to do with a 30-year history of indifference by the residents who were content to keep condo fees low at the expense of necessary maintenance...

http://www.theglobeandmail.com/news/...2030464/page1/

[Yume-sama]

The lack of interest has nothing to do with market conditions, and everything to do with a 30-year history of indifference by the residents who were content to keep condo fees low at the expense of necessary maintenance...

If a building / unit is in bad shape it's very hard to sell whether or not it is a condo or single-family home. There are certainly buildings in Vancouver that have a bad reputation.

You just hope the people in charge of the strata / condo board are somewhat competent.

I'd be more worried about shoddy construction during boom times (the OV, for example).

[whatnext]

Originally Posted by Yume-sama

If a building / unit is in bad shape it's very hard to sell whether or not it is a condo or single-family home. There are certainly buildings in Vancouver that have a bad reputation.

You just hope the people in charge of the strata / condo board are somewhat competent.

I'd be more worried about shoddy construction during boom times (the OV, for example).

Yeah, but imagine combining shoddy construction with poor maintenance!

From my stints at condo ownership, I can see how this happens. A lot of owners don't care about the running of the building, don't want to invest more than the bare minimum or have poor understanding of how strata corporations work. Many think thay just pay their fees and the rest somehow takes care of itself. Even when the strata council is well-meaning, they are not professional property managers.

[biketrouble]

If a building / unit is in bad shape it's very hard to sell whether or not it is a condo or single-family home

This statement seems really obviously untrue for SFHs, because you can in the worst case sell for the lot value, which is normally far in excess of the building value except in the case of relatively new homes.

[delboy]

having bought condos in the past, I was always more cautious around low monthly fees than higher ones. Low tends to mean reluctance on strata to raise enough funds to maintain the building. New buildings also have lower fees the first year to suck in buyers.

My old apartment 130 a month......contigency funds: $25,000 and lots needed doing. Needed new carpets, paint, furnace, roof, plumbing issues, garage door.....the list went on and on.

Present condo: 400 a month (although comparable sized unit would be around 270)...Contigency 350,000....nothing needs doing.

There also tends to be corruption on strata who conspire to hide issues and then sell their units.

I did read that there are proposed changes to the strata act that will be coming into effect to address buildings that are not effectively managing on-going maintenance schedules.

Just like a car, costs can be predicted, such as when the roof will reach its end of life, or balconies etc.

Our strata paid 15 k for a 30 year analysis of expected costs and how to lower costs with regular ongoing preventative maintanence. There is a forecast for everything that needs doing each year, based on inflation.

Bottom line, you need a transparent and pro-active starta council and be wary, very wary of older buildings with low fees.....

[Millennium2002]

Yeah... btw out of curiosity what are the proposed rule changes regarding poor-performing stratas?

[delboy]

Originally Posted by allan_kuan

Yeah... btw out of curiosity what are the proposed rule changes regarding poor-performing stratas?

not sure. I remember reading something about holding stratas more accountable and the need to provide financial and disclosure statements etc. There were some signficant changes to the act which came into effect last year and more changes to come.

I'm not on the strata but do take the time to read statements and chat with the president who lives next door.

It does come down to the state interferring more with the lives of the average Joe, but as someone noted, most on strata councils are not experts and the state is also addressing corruption that certainly takes place. I feel we have and are addressing this better than Ontario has.

[wrenegade]

I believe at least one of the changes requires a minimum (or larger minimum) number or percentage of operating budget for the contingency fund. My strata just had to vote on allowing our contingency to exceed 100% of the operating budget. Seems weird to have to vote to make it bigger, but it passed unanimously. The fees may be a little high ($223.97 rising to $244 per month for 625 sf) but there is no structural deficit and the contingency fund will stand at around $340k at the end of the year (we're adding $75k per year). The building is 13 years old and will probably need its roof repaired in another 5 or so. If you have good management and a pro-active strata corp there really should be no crisis. It is important to read those minutes when you're looking to buy something!