This Toronto homeowner was shocked when her condo fees jumped more than 30% in two years. Province’s Auditor General wants better disclosure rules for developers

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When Danila Zeneli saw the listing for what was to be her first home in Toronto, the one-bedroom downtown condo fee was just $ 287.34 per month.

But by 2017, when she moved in, those fees had already increased. And in 2018, they jumped again, to $ 381.75, an increase of over 30% over the cost of its list.

“It’s obviously frustrating, because you’re not budgeting for this increase,” Zeneli said.

She had predicted that the fee for the 570 square foot unit would increase over time, since she bought it when he was about a year old – but didn’t expect the climb to be so steep, so quick. .

Many Ontario condo owners are in the same boat. In her annual report this month, Bonnie Lysyk, the province’s auditor general, found that the system does not adequately protect condo owners, who often face unexpected fee increases. She recommended that the province introduce “best practices” from other jurisdictions, as well as new disclosure rules for developers.

In his case, Zeneli said the fees had increased because there was a need to increase the building’s reserve fund in 2018 – set aside for future repairs and replacements – as well as the additional costs for insurance services. and contractual.

“It looks like it’s bad planning,” Zeneli added. “It is already very expensive to own a house and buy a house in Toronto… (The rising costs are) an additional expense that is very difficult to control – and to pay – because it is not in something that your mortgage pays.

By law, developers must provide new condo buyers with a budget estimating common expenses and fees for the first year after registration.

“However,” Lysyk wrote in his report, “some developers have omitted, underestimated, or carried over maintenance costs to subsequent years, to underestimate condo fees in their budgets.”

When this happens, the condo company must redefine the budget for the excluded costs – which, if condo owners were aware, may have factored into their purchasing choice. The situation can lead to significant cost jumps from the first years of a building to the following years.

In a survey of 64 registered condominium boards in 2016, Lysyk said 47 – or 73 percent – reported an increase in fees within two years of listing; 29 reported an increase in the condo’s first year over their developer’s budget. Three of 29 did not provide an exact percentage, 15 reported an increase of 10-29%, and 11 said fees had increased by more than 30%.

Although Zeneli did not allege that the developer of her building had deliberately hidden costs, she was frustrated by the unexpected need to increase contributions to the reserve fund, among other surprise expenses.

The developer and building management did not comment on the Zeneli case when contacted on Tuesday.

Forty percent of boards participating in Lysyk’s survey said the increase in their fees came after a reserve fund study. More than a quarter reported increases due to costs that had been deferred or were not payable in the first year.

A condo owner alleged that an elevator maintenance contract and mortgage payments for a guest suite were not included in his developer’s budget – adding payments of $ 15,000 and $ 40 $ 000 for the second year.

Looking at the second year audited financial statements of seven condominium companies registered in 2016, Lysyk said only one had a 10% decrease from the developer’s fee forecast. The other six were higher, with an average increase of 77% over budget figures.

“The cynical part of me reads that the developers speak nicely to you in the auction room and underestimate to get you in the door,” said Toronto real estate agent Scott Ingram.

Lysyk’s report also notes concerns about unforeseen fee increases affecting the resale of condos, a possibility hanging over Zeneli.

Her monthly fee is currently $ 469.94 – and she worries that she might not be able to resell the unit, at her size, if her fees exceed $ 500.

“I wouldn’t want to buy a condo that has so much upkeep costs,” Zeneli said.

Other provinces have rules in place to protect owners of new condos from unanticipated fee increases – from the ability for developers to put money into a trust that the condo association can access if expenses are under. -estimated, to penalties which increase according to the severity. Lysyk presented these examples of “best practices” that she would like to see introduced in Ontario.

A review of Ontario’s Condominium Act in 2012-2013 resulted in several changes regarding unanticipated fee increases, Lysyk noted. But several of those changes – from extending the timeframe for condominium corporations to file claims against their developer for additional costs, to requiring developers to disclose expenses they expect to occur after the first year – had not been adopted by the province at the time of its audit. .

When asked about these suggested changes, a spokesperson for the Ontario Ministry of Government Consumer Services said the government plans to adopt them based on the “evolving needs” of the condominium industry, while taking into account the possible impacts of ‘a change on things like affordability.

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The government recently passed one of the changes to that review, the spokesperson said. Beginning in January, developers in Ontario will be required to provide a “plain language guide” to new and pre-construction buyers to provide additional information.

Zeneli said she struggled with where to find information about the fee increases in her first home – and what is and isn’t allowed.

“There absolutely has to be something to protect the owners,” she says. “Because it’s the biggest expense we’re going to have in our lives at this point.”

Victoria Gibson is a Toronto reporter for The Star who covers affordable housing. His reporting is funded by the Canadian government as part of its local journalism initiative. Contact her by email: [email protected]
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