Chase your builder for first-year budget shortfall

Q. We are a new condominium corporation and have just completed our first-year audited financial statements. The amount of money spent in the first year of operating our condo corporation exceeds the amount that was budgeted by the builder. Is he responsible for reimbursing our corporation for the difference? A. Unfortunately, low budget estimations do occur from time to time in new condominium corporations. It can be difficult to estimate a first-year budget to cover all expenses, including any unexpected costs.

The condominium corporation should immediately send a written letter to the declarant/builder. This letter should be very firm as well as polite, requesting reimbursement for the shortfall. It would be wise to send it by registered mail so a signature is required. This procedure will ensure there is no question the letter was received.

If the declarant/builder refuses to reimburse the corporation for the shortfall, the condominium corporation can begin mediation and arbitration procedures set out in Section 132 of the Condominium Act of Ontario through the corporation’s lawyer. Prior to initiating mediation and arbitration, consider whether the shortfall is worth the effort of recovery, especially as this process can be very expensive. If your corporation is successful in arbitration, it can also claim for the reimbursement of the mediation costs.

Keep in mind that mediation and arbitration is not a quick process. The case of OSCC No. 815 against its declarant took almost three years and more than $100,000 in legal costs to successfully recover the first-year budget shortfall and most of their legal fees.