Know your condo lingo
What’s the difference between ‘levy’ and ‘special assessment’?
Q: Can you explain the difference between a special assessment and a levy?
A: The terms “levy” and “condominium fees” are usually used interchangeably. A levy is simply the amount that the condominium corporation charges on a monthly basis to operate the corporation. Many people would call that their monthly condominium fee (or condo fee). A “special assessment” would be the imposition of an additional fee for a specific purpose.
Helpful hint: The language in the Condominium Property Act is somewhat antiquated. However, when boards use terms, they should be using them correctly.
Q: Our condo board recently sent out a notice that there would be a large special assessment to each owner due by way of post-dated cheques within two weeks’ time. The letter, written by the property management company, did not provide a reason other than the board’s previous budget, which was over by $32,000, and some of the assessment would be used to cover that. Does the board have to provide specific information about what the monies collected are being used for? Our building has approximately $600,000 in the reserve fund, with no major project on the table at this time. A: Your question indicates that your condominium corporation had a shortfall in its operating funds (its expenses exceeded its revenue), and that the special assessment was going to be used to cover that shortfall. If that is correct, then there are serious issues that need to be handled within your condominium corporation. First, your monthly condominium fees may be too low to cover the monthly operating costs. Was there an unusual one-time operating expense for which the corporation did not budget? If in fact there was a budget shortfall, I would strongly urge you to engage the other owners and call an extraordinary general meeting to address this issue. Budget deficits are serious and would indicate to me that there is a significant problem within your corporation. Helpful hint: I know I have said this before, but at the end of the year, there is no prize for the lowest condominium fees in Alberta. There is no race to the bottom. Condominium fees should reflect reality. The monthly amounts collected should be sufficient to pay for operating costs and put some away for the reserve fund. A well-managed condominium corporation will never have to ask for a special assessment for planned expenditures. Q: Our condo board is considering buying one of the units in the building as an investment. Is this allowed? A: Subject to your bylaws, the answer may be yes. However, there are some serious considerations before going down that path. I would strongly urge you to seek legal advice and also speak to the condominium corporation’s accountant. There may be tax consequences that could have an impact on the non-profit status of the condominium corporation. For example, the Canada Revenue Agency may look at the investment as taxable income for the corporation. Helpful hint: Why would the condominium corporation need to purchase a unit for investment? Is it not generating sufficient funds on a monthly basis through condo fees? Q: Our condominium corporation elected a new board at its AGM, consisting of nine directors (six returning and three newly elected). I recently discovered that one of the board members is not an owner, but a renter. Is this allowed? Can renters attend or participate in the AGM without a proxy? A: Whether a renter can or cannot sit on the board will be determined by your bylaws. Generally, there is nothing wrong with having renters on a board, provided of course that your bylaws allow for this. With respect to your other question, a renter who does not have a proxy would generally not be permitted in the meeting. The AGM is for owners or their proxies. However, I have been at meetings where renters are allowed to attend to create that inclusive atmosphere. It is really up to the board and the owners to determine how they wish to deal with that issue. Helpful hint: Generally, people should not look at renters as outsiders. Renters can play a valuable role in the quality of life within the condominium corporation.