In the Nov. 25 issue of NextHome, in the debut of my Condo Board column, I wrote about maintenance fees and why they seem to rise uncontrollably.
In short, the best thing condo boards can do is actively manage costs on a regular basis, and involve residents in the process.
Easier said than done, right?
There are some very achievable best practices that boards can adopt to help manage operating costs:
- Establish clear goals from the outset, and review and revisit them annually prior to budget time. Such objectives provide the critical lens through which all spending decisions can then be considered.
- Know and understand your operating budget, line item by line item. This will be invaluable knowledge for reviewing the monthly financial statements of the corporation, as well as in preparing the annual budget, which establishes new or increasing maintenance fees. Exactly where, how and why is corporation money being spent? Is this a one-off unexpected expense? Is it part of an on-going expense that is growing? Or is this a new expense that you now need to start budgeting for?
- For non-discretionary costs, consider if there are opportunities to manage or control these costs through resident education or changing suppliers. And for discretionary costs, are there opportunities to manage or control these costs through changing suppliers, changing the scope of work or service providers or improving resident education?
- Proactively maintain your key building operations systems from the outset, both inside and out, to maximize their lifespan. This will have a positive impact on your reserve fund study and subsequent contributions.
- Undertake an energy audit of all major interior and exterior building systems and common elements, and then invest in long-term energy-saving upgrades to generate proven returns within a reasonable time period.
- Recognize and embrace the importance and potential impact of resident education in order to control all costs that can be controlled, no matter how seemingly insignificant. Every dollar saved through reduced or changed consumption habits adds up.
- Save your budget surpluses by using them as budget contingencies for subsequent years. Ideally, a budget contingency of three to five per cent of operating costs is good governance practice, particularly for younger condominium corporations. If any surplus remains after creating a contingency, plan for this amount to offset future reserve fund contributions or one-time special projects – not ongoing operational costs.
With such practices, condo boards and residents can all do their part to help manage operating costs, for the better of their building and the bottom line.