Findings on Condos from the Auditor General of Ontario

The Auditor General of Ontario (AGO) examines government programs, agencies, certain public-sector organizations receiving government grants and Crown-controlled corporations to see if their administrators have spent money with due regard for economy and efficiency and have satisfactory procedures for measuring and reporting on effectiveness.

Here is a brief summary of their findings:

  • The initial developer-set condo maintenance fees (for pre-construction condos) were typically understated
  • Those responding to their survey, “experienced significant increases in condo fees, ranging from 10% to over 30% in the first 2 years after the condo’s registration”
  • The majority of condo boards surveyed were required to increase reserve fund contributions by an average of 50%.
  • The Ministry of Government and Consumer Services would like to implement a set of standard terms and forms for key documents relating to the purchase of new condo units, such as the agreement for purchase and sale, declaration and disclosure statement. The AGO found there has been little to no progress on this initiative.
  • Require developers to place money in trust to be available to condo corporation if the developer understates common area expenses, or that developers have to pay a penalty if they were found to understate condo expenses by a set percentage compared with their budget statements. The AGO found there has been little to no progress on this initiative.
  • Extend reserve fund studies of condo buildings to include the cost of repairs and replacements looking forward 45 to 60 years, instead of 30 years. The AGO found there has been little to no progress on this initiative.
  • Looking into removing the option of developers basing reserve fund contributions on 10% of operating expenses and replacing this option with a requirement to have the contributions be supported by a third-party reserve fund study. The AGO there has been little to no progress on this initiative.

The AGO has made some very interesting observations. Many of these recommendations that have had little to no progress would greatly help the transparency for consumers buying pre-construction condos. It’s something the industry desperately needs.


Guess what makes up 30% to 50% of your maintenance fees?

Reserve Funds in Maintenance Fees

Your condo Reserve Fund makes up 30% to 50% of your maintenance fees.

Not enough attention is paid to the importance of condo reserve funds but given that they make up such a significant portion of maintenance fees, it’s crucial to appreciate its importance.

When a condo is purchased pre-construction, the often quoted amount for maintenance fees is usually drastically understated. Once the new board hires an engineering firm to undertake the reserve fund study, the maintenance fees are usually increased significantly.

Every 3 years, condo corporations are required to complete a new reserve fund study. If a condo building doesn’t complete a reserve study on a regular basis, unit owners will face issues selling their suites. During the sale process, a prospective buyer’s lawyer will request a copy of the status certificate (which includes the financials of the condo corporation & the reserve fund study). If the lawyer notices that the reserve fund study hasn’t been completed in a reasonable amount of time, they will raise a red flag to the buyer which will affect the sale of condos in that building. This will force condo corporations to maintain regular reserve fund studies if they want owners to be able to sell their suites.

If a condo corporation realizes they have a shortfall in their reserve fund – as long as they are a responsible board – they will impose a special assessment on each suite owner to make up the difference.

I’ve heard of special assessments as low as $3,000 per condo based on unit size, and up to $30,000 and more. This can be an incredible hardship on owners who have not budgeted for this kind of expense. In fact, the condo corporation has the ability to place a lien on the suite, forcing the owner upon the sale of their condo to pay the condo corporation.

Owners that vote for board members who promise not to increase maintenance fees are doing themselves a disservice. They are setting their condo corporation up for failure. Eventually, it could cause their building to require a special assessment some day in the future. It’s much better for owners to swallow that small pill each day as opposed to pushing the problem down the road for others to deal with years from now.

Remember the cautionary tale of the Surfside condo building in Miami which chose to ignore reports and ongoing repairs to the point where their building collapsed, and many lives were lost. It’s okay if your maintenance fees go up each year. An owner should be concerned if they do not go up.

As an owner, it’s important to pay attention to what the board of directors are doing, and if necessary, run for the board. It’s a thankless job but an extremely important one.


Thinking of buying or selling your home?


Reserve Funds Represent 30%-50% Of Your Maintenance Fees (Jon Juffs, Director, McIntosh Perry)

Reserve Funds Represent 30%-50% Of Your Maintenance Fees (Jon Juffs, Director, McIntosh Perry)

Jon Juffs, Director of McIntosh Perry, joins me to discuss how Reserve Funds work in condo buildings and the state of disrepair of condos.

Jon Juffs, Director of McIntosh Perry, joins me to discuss how Reserve Funds work in condo buildings and the state of disrepair of condos.






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