Seven Tips to Properly Manage a Condo Association
Whether you have a seat on the board of your condo association or are simply one of the co-owners, you have an important role to play within the organization. This means it’s important to understand how a condo association works and which elements need to be considered in order to properly manage its finances.
1. Understanding everyone’s rights and responsibilities
It is generally the responsibility of the board members to manage the association’s finances. For example, these individuals ensure that the association isn’t paying too much in monthly banking fees and they monitor any payments made and sums received.
It is the responsibility of every co-owner to attend the meetings in order to exercise their voting rights in proportion to the value of their share in the property and to find out about decisions made by and on behalf of the association.
Co-owners also have the right to require two signatures for every financial transaction made. This is a way of monitoring payments and ensuring greater protection against fraud.
“All co-owners must exercise. caution, whether or not they’re involved in managing the condo association. You need to be able to trust the person who is named the administrator. Keep an eye on finances and ask to see bank statements, budgets, tenders, etc.,” emphasizes Sandie Robert, Director of Business Accounts at the National Bank.
If you’re not familiar with the finer points of condo associations already, it’s important to learn the basics since it’s a complex subject. There is a breadth of documentation available on the topic. Condominium managers and legal experts also offer advice.
2. Clarifying the bank accounts
Condo associations generally have three types of accounts:
- The main daily account is dedicated to managing liquidity and a range of common transactions, such as payments for operations (snow removal, lawn care, wages for security guards, etc.), condo fee deposits, and the depositing of agreed-upon amounts into the contingency fund.
- The contingency fund is only used to pay for improvements and renovations affecting the building’s structure (such as the roof or foundation). Amounts available in this account cannot be used to cover current expenses or as cash advances for any other kind of activity.
- The self-insurance fund enables the payment of a deductible in case of damage requiring an insurance claim. It can also be used to pay for work to be done when you have already reached the maximum coverage amount provided by your insurance policy.
3. Conducting a study of the contingency fund
The key to creating a condo association that’s in good financial health is the contingency fund study. Whether you’re on the board or not, make sure your condo association has an up-to-date study available.
“The contingency fund study enables you to itemize upcoming work to be done and its associated costs, and to determine whether current condo fees are sufficient given the use and depreciation of the building,” emphasizes Laurent Philippe, Product Director at the National Bank. “This way you’ll protect your investment by ensuring the funds necessary for completing major work are available when needed. You’ll also avoid any nasty surprises, like a special premium of thousands of dollars, as well as facilitating the resale of your unit when the time comes.”
“A professional will come and inspect the building: They’ll verify the services offered in the building (elevators, pool, gym, etc.), its location, and the material used for its construction. With this information they will evaluate the depreciation of the building,” adds Philippe.
4. Optimizing the collection of condo fees
It’s essential to not only collect the condo fees used to pay for current expenses and future structural improvements, but also to determine the right amount for each co-owner.
Collect condo fees on a monthly basis is recommended in order to simplify management and to quickly spot any co-owners who may be having financial difficulties.
Payments by cheque can be tedious. Instead, you can opt for pre-authorized payments—a method that will ensure regular payments and avoid your having to remind co-owners not to forget to make their payment.
Read the complete article on National Bank website.