On Jun 1, 2020, Service Alberta Minister Hon. Nate Glubish recommended these changes to Use of Reserve Funds by Orders in Council.
During the Covid-19 crisis, we received numerous emails from owners who are having difficulty paying their condo fees and special assessments and sadly we expect some condo units to go into foreclosure which puts pressure on remaining condo owners to come up with additional funds.
We understand the potential difficulty and why some boards may want to tap into reserve funds. However, this is not something boards should take lightly and our stance is that reserve funds should only be used for operating purposes as an absolutely last resort – if at all.
We read many condo documents and are sad to report that many complexes are already severely underfunded due to prior neglect of repairs and replacements of common elements and many condo owners are already overburdened financially. Owners are being squeezed to the point where they are walking away in some instances to avoid any further financial strain.
Throughout the Covid-19 period thus far, some owners are not getting rents paid by tenants, some cannot sell due to condo fees already being high, and some owners are also grappling with pending caveats due to being behind already on condo fees.
In prior articles, we have stated our various concerns about existing poor management of some condos and lack of board education within condo communities, and naturally this is an added concern that owners must be aware of.
The section of these Orders in Council that troubles us is that the decision of using Reserve Funds can be made by 75% of board resolution – not owners (section 4.b). This means if the board decides to transfer those funds and meets the requirements, majority of owners will have no say.
Also a reminder, there is no such thing as “condo police” in Alberta. If the board transfers reserve funds into operating account without meeting conditions, who will hold them to account?
We recognize that there are some prudent boards who currently use funds quite wisely, our concern is for condominiums who are troubled already. All owners should understand the ramifications of potentially reducing your reserve funds and how they can impact sales of condos.
COCOA was not involved in these discussions with the Alberta government and most likely would not have supported this amendment. We encourage boards and owners to learn their mandate to follow the Condo Act and be the best managers of their investment as possible. Positioning your condominiums to be a resellable commodity should be top priority for all owners.