register | confirm account | forgot password
Linda Palfi
CNC Properties
Box 47033 Creekside, Calgary, Alberta
P: 403-998-7732
F: 403-592-8002
Email

The self-management option for condominiums

 

Although most Alberta condominium corporations are professionally managed, there is an affordable do-it-yourself option that will appeal to smaller communities of a handful of homes. Called "self management", it means that the Board of directors---often being all of the owners---personally administer their own small development.

 

Remember that a condominium can consist of as few as two homes, or "units", such as a duplex on a single building lot. More commonly, buildings containing from three to six homes are being built near downtown as in-fill developments, and owners in these small corporations usually run their own collective affairs without outside help. The cost of professional management is simply not justifiable for so few homeowners.

 

With the cost savings, of course, come the risks of self management. The dangers are that informality and trusting attitudes can lead to no leadership or financial controls at all. Let's review the balance of values between money saved versus the risks of funds perhaps being mismanaged and possibly no one taking charge.

 

As in a marriage, money management can be a stumbling block to collective success. While a 50-home building will have a professional manager handle its funds in trust, the volunteer chair or treasurer of a five-home building will be running the corporate books and have signing authority for spending. The best protection that the smaller corporation can initiate is telling the bank to require multiple signatures for signing cheques. As well, or as an alternative, the five-home condominium could contract out to a management firm or to an accountant the financial administration of the small corporation. The professional's signature could then be required in addition to those of Board members for access to the condominium's funds.

 

While discussing money, we should note that smaller condominium corporations often have disproportionately smaller reserve funds, compared to their larger cousins. Alberta law allows reduced standards for capital-needs studies for smaller corporations (12 or fewer homes). Regardless of engineered reserve studies, my experience indicates that apartment condominiums should not fall below $1,000 in reserve per suite. Because of the smaller funding base of self-managed buildings, I'd double that to $2,000 per home, so the five-home community would be wise to build up a $10,000 rainy-day fund. Because most don't accomplish that, I'd plan personally for your share of a special assessment when major work such as roofing needs to be done.

 

On the administrative side, the 50-home building's Board will have no involvement with hiring contractors to do the various mechanical and caretaking jobs. Next door at the five-home building, however, volunteer directors will be hiring (and perhaps firing) the roofer, the plumber and the gardening company that might charge too much and work too little. Someone; and it's usually the Board's chair; needs to have the interest and the time to perform these functions. Small corporations where no one wants this role could soon find roofs leaking, paint peeling and lawns untended. Leadership and clear decision making are required to get things done, and then to administer the work's performance.

 

Politics also require more attention in the smaller condominium community. While a few grumps and naysayers will have little impact at the 50-home building, they can approach a majority in the five-home community. Even one disruptive individual can be a plague among a handful of owners, as there's no professional person to act as the sounding board and intermediary. Small condo communities are best advised to involve everyone possible, unless they're disruptive. Up to seven homes, then, can have all owners on their condominium Board, although Alberta's Condominium Property Act allows as few as three directors. Heck, a two-home condominium is even allowed to have a Board of one, if only one owner is interested or has the capacity to serve.

 

In short, self management is a good low-cost option for most small condominium corporations. But I suggest that you choose to have more financial controls, rather than fewer. I also recommend an all-inclusive Board, rather than a smaller one. More formality and clear minutes are advised, rather than complete informality and no records of discussion and decisions. Keep in mind that a disagreement could arise at any time, so a record of votes taken and authority given could be important. Clear records and financial control, as well as a larger reserve account, will also impress prospective buyers, bolstering your home's resale value. Condominium self-management is the cheapest and often the only option, but you really have to perform the management.

This site's content is the responsibility of Linda Palfi, licensed Salesperson in the Province of Alberta.
The trademarks REALTOR®, REALTORS®, and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license.
The trademarks MLS®, Multiple Listing Service®, and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.

© 2020, All Rights Reserved | Privacy Policy | Mobile Site | REALTOR® Websites by RealPageMaker