Richard Bergeron

When you are looking to purchase a condominium it is important to make any offer subject to your review and approval of the condominium corporations documents. Part of those documents will include the year end financial statements along with the most current unaudited monthly balance sheet. If you are not an accountant by trade, what do all these numbers mean? And do they really matter?

The year end financial statement looks at the financial health of the condominium corporation over the past 12 months, comparing the year end figures to those of the previous years. The amount of income generated through condo fees and other sources is compared to the total expenses (budget) of the corporation. Any shortfall or surplus is noted. The amount contributed to the reserve fund is also noted along with whatever was spent during the year and disclosing the total amount present in the fund.

It should be noted that not all year end financial statements need to be audited by an accountant. The Alberta Condominium Property Act does not specify this requirement. A condo corporation bylaws will dictate if this is a necessity, although even if the bylaws don’t require it, it is a good idea for transparency to have this done. It is not unusual for smaller, self managed buildings to not have the year end financials audited. Also keep in mind that year end financials can take several months to be reviewed by an accountant and the final report prepared. If the corporation’s year end is December 31, the financials for that year may not be available until March!

Given that the year end financials can be several months out of date, it is important to verify the financial health of the corporation by reviewing the most current monthly unaudited balance sheet. This document will outline how much cash is in the corporation’s general operating account as well as the reserve fund account balance, what bills are outstanding (liabilities) and what accounts receivable are outstanding.

As with many things, looking at only one or two documents alone will not give you the full picture. The year end financials and monthly balance sheet must be viewed in the context of the entire package of documents provided. For instance, the balance in the reserve fund may look like a lot, but if the amount is less than the reserve fund plan specifies, you may want to ask further questions. A low operating account balance may not be as alarming if a special assessment has been called to address the shortfall.

As always, it is prudent to utilize the services of condominium specialists, both in the buying and selling of condominiums and in the review of the condo corporation documents. Good luck with your condo purchase!

If you own a condo you pay condo fees. It’s a necessary part of condominium life, given that common property expenses, management and reserve fund contributions need to be jointly paid by all owners. But not many of us are fully acquainted with some of the nuances behind the fee.

Most owners assume that the condo fee amount they pay is based on the unit factor of their unit and that is based on the size of their suite compared to all the others in the building. The larger your suite, the larger your unit factor. But this is not always the case. In fact, there is no regulated standard for how unit factors are determined. They can be up to the discretion of the developer. This leaves the door open for a developer to assign unit factors based on the approximate market value of each unit. This could mean that the higher a unit is in a building, not only does the price go up but the associated condo fee would also go up compared to a similar sized unit lower in the building. Or in the case of a townhouse complex the developer could give each unit the same unit factor irregardless of the size of each unit. Each unit would then pay exactly the same condo fee as each of their neighbours. This is quite customary in bare land condos.

Of course the fee you pay is based on your proportional share of the annual budgeted amount for the building. If you don’t like the fee you are paying, there isn’t much you can do about reducing the number of unit factors you have. The only variable to manipulate is the budgeted amount. I have seen many condominium boards take an aggressive stance when it comes to the budget. Many cost saving measures can be implemented if a board is savvy. Look for opportunities to reduce energy costs, renegotiate contracts for management, janitorial or landscaping positions, look at fixed contracts for utilities, all which could lower the total budgeted amount for the building. If you have some ideas on how your building can save money why not volunteer for the board? Condominium boards are always looking for enthusiastic, solution oriented owners.

And remember that condo fees are not optional! In the rare instance where an owner does not pay their fee over a period of time, the board has the power to caveat an owner’s property for the outstanding amount. In the event the property is sold, the outstanding balance is the first item to be paid from the proceeds of the sale, before any outstanding property taxes or mortgages! Condo fees carry a lot of responsibility and clout. They ensure your condominium communities ongoing financial feasibility and look after you and your neighbour’s mutual investment.

It has been yet another wet and rainy June in Calgary. We have all been impacted by the amount of water Mother Nature has thrown our way this past month. For Southern Alberta, too much water is not a typical problem. Our semi-arid climate can leave us prone to droughts as we experience several years ago. Finding ways to preserve the ground water and implementing methods to minimize water usage in the province is a hot topic. The City of Calgary is proactive in encouraging water users to reduce consumption.

A huge water waster is hiding in every residence. The average toilet can waste thousands of litres of water a year. With water and sewer costs metered in condo buildings, this can cost you and your condo corporation thousands of dollars a year as well. Toilets account for an average of 30% of the total water usage for a residence. Conventional models can consume up to 18 litres per flush, as compared to 6 litres for the new low flush models. That’s over 66% savings in water and cost per flush!

The City of Calgary offers a $50 rebate for every conventional toilet replaced with a low flush model. Some modes cost as little as $150 and each will save you up to $100 in water cost the first year alone. Each year thereafter you are saving not only water but money, too. Dual flush models will save you even more money and water, and are included in the rebate. For more information call 311 or visit www.calgary.ca/waterservices.

Although this is an excellent way for individuals to do their part, imagine if an entire condominium building embraced the rebate program. As most condo buildings have only one water meter, the corporation pays the water and sewer cost from the condo fees collected. A large building can have water and sewer annual bills of $45,000. If 30% of that water usage is from toilets ($13,500) and installing low flush toilets in the building would save 66%, the corporation could reduce it’s budget by nearly $9000 a year and collect the $50 rebate per conventional toilet replaced.

This is another example of an idea making green sense, and dollars and cents, too!

Spring is a busy season for most of us. We shed off the short days and long nights of winter and embrace the longer daylight hours that accompany spring. With these extra hours of daylight we fill up the time quickly. The road construction season is in full swing and home and garden centres have people lined up at the checkouts! It seems we all realize there is work to be done after the long winter months.

Your condo building is no different. Maintenance and other jobs that have been waiting to get done since the fall now press for attention. Also, spring is a prime time for condo corporations to have their annual general meetings held. As a condo owner, spring is a busy season for you, too!

Maintenance work that needs to be completed can affect you, individually. Several, standard, annual items may include parkade cleaning (do you need to be home to move your vehicle), window cleaning (maybe keep those blinds closed), and exterior building maintenance (some building exits may be inaccessible). It is important to be aware of what is happening around your building and when so as not to experience any unnecessary surprises. Most management companies do an excellent job of keeping owners informed of spring maintenance activities happening around your building.

There may be a need for the management company to have access to your unit for some maintenance items. These could include fire protection equipment check-ups, heating system maintenance, window replacement or other items. It is important that the management company have key to access the unit if you are not going be there. Most of these activities will occur during business hours so leaving a key with the building manager will help expedite the work to be completed.

If spring is when your building holds its annual general meeting, plan to make room in your busy schedule to take part. AGM’s are a great opportunity to meet your neighbours, the building manager and hopefully offer you an opportunity to get more involved in your condo community. Consider volunteering for the board or one of the committees, perhaps the landscaping committee! If you have green thumb and feel it is not getting enough use living in a condo, why not flex that thumb muscle for the benefit of the whole building. Your neighbours will love you for it and you will be enhancing your investment at the same time.

Springtime in your condo building can be a very busy and rewarding season. Why not make the most of it!

The excitement you have been feeling the past few weeks as you have been shopping for your new condo has turned to apprehension. Why? Now that you have an offer on a unit you have to review the “Condominium Documents” and you are expected to somehow know what they all mean. How do you know where to look to determine how financially sound the condo corporation is (aside from having the documents professionally reviewed which is always a good idea!).

The first place to look is the reserve fund study. Some questions to ask are: when was it completed, is it less than 5 years old, was the proposed 25 year plan and maintenance schedule adopted and adhered to and is the current balance in the fund equal to the projected amount. Looking at each factor alone will not give you the whole picture. Each must be analyzed in relation to the others. A large reserve fund balance might look good on paper, but if required maintenance issues have been deferred over the years, that balance may be inadequate to deal with work that still needs to be completed. If a reserve fund was completed 5 years ago, the effective age of common property components (ie boilers, elevators, etc) will have changed and need to be re-assessed. There is always the possibility some items will need to be replaced or repaired sooner than expected. Will the fund be adequate?

In today’s economy of rising costs, deferred maintenance is a double edged sword. Deciding to delay maintenance doesn’t make the need go away. It will still need to be done. The problem arises when next year it costs even more to do the same job because labour and parts have increased in cost. The corporation is no further ahead by deferring the work that needs to be completed.

The two words no condo owner (or potential buyer) wants to hear are “Special Assessment”. But wait! This isn’t always a bad thing! Although this topic could take up several articles by itself, special assessments are a corporation’s way of getting the wheels back on the cart, so to speak. It is beneficial to look at special assessments as an investment in the corporation’s and each individual owner’s financial future. When special assessments are used for improvements to the common property or to increase the reserve fund, everyone wins as a healthier financial picture for the corporation is created.

Get that excitement you have been feeling about condo ownership back. Make informed decisions about your potential purchase after analyzing the components of the reserve fund study, plan and fund balance.

Maybe you have heard of the residential rental crunch the city of Calgary is experiencing this year. According to Canada Mortgage and Housing Corporation, Calgary’s vacancy rate is below 0.5%. The situation has been so extreme the U of C’s student union put out a call for Calgarian’s to consider housing a student for the year, due to the remarkably low number of affordable suites available for students to rent. Obviously there is a need for more rental suites in the city and not just the “affordable housing” that is in the headlines.

Combine this with the large supply of properties currently for sale in the city and the savvy investor will see an opportunity in the market. In the inner city alone there are nearly 200 condos for sale under $300,000, many of which would make excellent investments as rental units. Finding a tenant is not a problem in today’s tight rental market and there are solid investments to be found with the abundance of properties to buy.

Given the real estate environment in the city you may be looking to expand your investment portfolio into real estate. Of course the question becomes where to start. Begin with a call to your banker or mortgage broker. You may also want to speak to your tax accountant to explore how owning a rental property will affect your tax position.

Once you know what price point to focus on, start looking at properties. But why look to condos and not single family houses? Several reasons jump to mind: less property to manage and maintain (ie roofs, fences, furnaces, etc), the initial investment is lower due to the lower price point compared to single family homes and typically there is less wear and tear on the suite based on renter demographics. Proportionally, the rent received per dollar invested can be greater in inner city condos compared to single family homes.

If the condo rental market looks good to you, find a realtor who specializes in the condo market segment to guide you through the purchase process. You may also want to explore the option of having a management company look after the property, find tenants, collect rent, etc. Consider the option of renting the property fully furnished, which will bring in much larger rental income. Find out what different types of properties are renting for; a one bedroom suite verses two, with parking and without, one community compared to another, etc. In addition to looking in the classifieds section of the local paper for this information there are several online classified rental sites for the Calgary area that are excellent, including pictures and greater detail than the paper offers. In addition, once it is time to find your future tenant you can utilize these sites at a very reasonable rate.

It is important you familiarize yourself with the laws pertaining to landlords and tenants in Alberta. Check out www.servicealberta.gov.ab.ca as well as www.landlordandtenant.org for more information. Good luck with your income property!

Imagine flying over the downtown core and below you is a checkerboard of green gardens and oasis’. Sound improbable in our highly populated inner city? Calgary has a surprising amount of wasted open space. In the densely packed downtown core including the areas of Eau Claire, West Downtown and the Beltline, prime real estate space atop roof tops is given too little consideration in a city that values each square foot so highly. These unused spaces can offer extensive benefits to city dwellers, developers and concerned citizens alike when retro-fitted as “green roofs”.

A green roof consists of a waterproof, root-repellent membrane, drainage system, filter cloth, lightweight growing medium and vegetation ranging from grasses and plants to trees. A few of the benefits green roofs offer include:

• Providing much needed amenity space for building users
• Increasing the roof life span
• Reducing storm water run off
• Providing noise insulation
• Filtering pollutants and CO2 out of the air
• Providing locally grown food (from roof-top vegetable gardens)
• Increasing habitat for birds in built-up areas
• Reducing heating (by adding mass and thermal resistance value) and cooling (by evaporative cooling) loads on a building
• Reducing the urban heat island effect

For the vast majority of people, emerging technologies and new ways of thinking need to make economic sense in order to be embraced. True, the construction of a “green roof” can be as much as twice the cost of a conventional roof, even though the public and private benefits are numerous. Successful “Green Roof” initiatives in Toronto, Chicago, Portland, Minneapolis and New York have implemented incentives for developers to incorporate at least 75% coverage of new building roofs as “green” in exchange for increased zoning density. Other initiatives could include tax incentives to retrofit existing buildings to “green roofs”.

Could this type of policy driven change be adopted in Calgary? Calgarian’s are quick to apply the spirit of “because we can” to a situation to improve it for the better. Our cities high rates of volunteerism is a great example of the “Because We Can” spirit so prevalent here. Why should our city’s stakeholders look to green the rooftops of Calgary? Simple answer:

“Because We Can!”

Condo living means many things for many people. Simplified maintenance, more personal time, ease of part-time residency, co-operative management of shared common property, increased safety, affordability and many more, as varied as the people who own and live in condos. One important aspect of condo living that will be gaining greater attention is the positive impact condominium buildings, condo owners and condo corporations can have on our environment.

The impact of global warming on our environment is in the news daily and it is impossible to avoid or dispute that it negatively affects each and every one of us. Every Canadian is responsible for contributing an average of 23 tonnes of green house gases into the atmosphere every year! To help combat this, the Federal government has recently announced several initiatives for home (condo) owners to help reduce green house emissions by “greening” their homes through reducing the amount of energy consumed. Although firm details will be announced later in the spring, the government is proposing a $5000 rebate to home owners to cover the costs of increasing their homes energy efficiency. Presumably this could go towards the purchase of a high efficiency furnace, increasing the insulation in the home, installing more energy efficient windows and other similar “green” upgrades. But how can condo owners take part in this and make a difference?

Condo living already means owners work as a collective to focus on the needs and goals of all owners. It is an easy step to direct the same collective energy to find ways to reduce the carbon footprint of a condo building. If individual condo owners pool their $5000 rebates and put those funds to greening the building as a whole, the financial impact on individual owners would be quite minimal. Initiatives could include the installation of motion sensor lighting in hallways and/or parkades that only come on when someone is present, replacing old windows with double or triple pane windows, changing incandescent light bulbs to lower energy consumption florescent bulbs and reducing the temperature of the parkade. All are substantial steps a building and condo owners can collectively take to address the issue of reducing carbon emissions. As if saving the planet were not enough reward, there is the potential for condo fees to decrease when less energy is used in the building!

Enmax and Direct Energy, two of the leading energy suppliers in Calgary, already have programs in place to help condominium buildings analyze and reduce the amount of energy consumed. I encourage each and every condo board in the city to take on the challenge of reducing the amount of energy used for their building.

June 30 has come and gone and along with it the deadline for paying our property taxes in Calgary (if you are not on the TIPPS program). Most of us know that our taxes are based on the value of our property as of the previous year. Take a moment and think ahead to, June 30, 2007. The amount of that tax bill will be based on the value of your condo now. We all know what has happened to property values in Calgary over the past 12 months. If the average price of property has increased 40% it stands to reason that your tax bill will go up 40%, as well. This doesn’t take into account the planned increase the city has already budgeted for.

Does the Fair Market Value method of taxation calculation put an unfair burden on condominiums, especially inner city condos? The values of inner city condos have seen phenomenal increases over the past 24 months, due in large part to their proximity to the city core. Have these properties put any additional strain on the city budget? Do they require or need new roads to be built, new utility services installed, new schools built, additional transit and garbage pick up planned, or even shopping centres to be developed as is the case in numerous subdivisions being constructed around the city? The obvious answer is no. The inner city condos already have infrastructure in place to accommodate the residents in them. It seems inequitable then that the tax collected from them is being used to subsidize further urban sprawl.

Our city is grappling with the growing pains of a successful economy (road congestion, children being bused long distances to school, longer commutes to work, etc). What if City Hall were to turn the question around. Instead of focusing on better ways to move people into the suburbs, why not find a way to get more people closer to the core, where they obviously want to be!

If you want to people to pay attention, make it financially attractive to them. One suggestion is to offer a reduction or subsidy on condominium property taxes if the condo is located within a certain distance from the city centre. This would encourage people to look at property ownership closer in nd would help alleviate the strain on the city of providing additional infrastructure in outlying communities.

This may seem a controversial option now. 12 months from now, when a 900 SF 2 bedroom condo in the Beltline is saddled with a $4000/year property tax bill, this option may gain a great deal of support!

Are we there yet? On March 28, the city’s Standing Policy Committee voted in favour of a “new” curbside recycling program policy, which is to be voted on by city council on April 16, 2007. This new and improved version will see 300,000 homes (including up to 4-plexes) see weekly pick up of recyclables, including plastics, but excluding food and yard waste. The existing city run recycling depots, totaling nearly 50, located across the city will continue to be operated. This is a great step towards achieving the city’s goal of recycling 80% of the city’s waste material by 2020.

The 2006 city civic census reported a total number of 408,543 residential units. Yet only 300,000 residential units will be served by the new recycling policy, if adopted. More than 25% of the city’s residential units will not have curbside recycling offered to them. It is safe to assume that this number encompasses condominium buildings over 4 units and their residents.

What recycling options are there for condominium dwellers? The city has said the existing recycling depots will remain in place. However, how practical is it for a person who may not have a vehicle to transport their recycling materials to one of these depots, either by foot or on the bus? Other options must be analyzed. Condominium corporations need to look at implementing a recycling program of their own.

As the city has found, there is a monetary cost that accompanies any recycling program. It must be taken into account, however, that an expenditure outlay for a recycling program is accompanied by monetary savings in other areas (not needing to build and maintain another land fill for example). The same is true for condominium buildings. Keep in mind the City of Calgary does not pick up waste from condominiums. This expense is paid for by the owners through their condo fees and can range from a few thousand dollars a year to tens of thousands of dollars for large buildings. By decreasing the amount of “waste” picked up at a decreased cost and allocating those funds for “recyclables” to be picked up would most likely not be any more expensive for the average condo building.

There are already numerous buildings doing exactly this. If yours isn’t, ask the question why. Then put a plan in place to begin. Recycling in condos: Because we can!