If you missed this story in yesterday’s Toronto Star (or don’t want to admit that you read this leftist rag), you’ll want take the time to read what is detailed below.
After hearing about the problems of a certain decrepit condo on Gerrard Street in the downtown core and wondering if/when they’ll ever go from “royally screwed” to legally screwed, I was very interested to hear about the issues at 40 Panorama Court.
This is amazing….and I don’t mean in a good way…
“I’ll Never Buy A Condo Again”: Years of Low Fees Lead to Condo in Crisis
Jennifer Yang
The Toronto Star
May 25th, 2011
Nothing seems to function as it should at 40 Panorama Court.
Not the concrete, which has been falling off balconies and threatening to break loose in the underground garage. Not the elevators, which are prone to breaking down and trapping residents inside. And certainly not the roof anchors, which have been unable to support the weight of window washers for three years now.
But perhaps the most dysfunctional element is the community inside the 32-year-old building’s dirty windows. The relationship between residents and building management is broken as well, with residents making accusations of corruption, whisper campaigns circulating the hallways and condo meetings so heated that the police have gotten involved.
York Condominium Corporation 506, located near Finch and Kipling Aves., is in crisis. The 202-unit condo building needs millions of dollars in urgent repairs — but at the same time, it has an operating deficit of $670,000, a depleted reserve fund and a community that can’t agree on a fix.
In August, a desperate board of directors took drastic action and hauled the building’s unit owners to court.
“YCC 506 is in serious financial and physical condition,” the condo corporation wrote in its court application. It continues: “The situation has become so urgent that even a well intentioned board of directors will be unable to take the immediate and drastic actions necessary.”
The corporation asked a Superior Court judge to appoint an outside administrator to seize control of 40 Panorama Court and whip its finances into shape. Veteran property manager Joseph Vero was given six months to perform the task.
On May 10, Justice George Strathy extended Vero’s term for another year. The judge attributed the condo’s problems to successive boards of directors who have depressed monthly fees while neglecting to make necessary repairs, aided in part by the support or indifference of unit owners.
“(They have been) postponing the inevitable day when the chickens came home to roost,” Strathy wrote. “That day has come and gone.”
Appointing an administrator is a “serious remedy” reserved for the most dysfunctional of condo corporations, said Armand Conant, a condo lawyer and past president of the Canadian Condominium Institute.
“The Condominium Act and condominium governance is based on democracy,” said Conant, who is a court-appointed administrator for two buildings himself. “To take that away and put an arms-length person in — it’s pretty draconian.”
Condos built in the 70s and 80s are showing their age. Conant estimates about a dozen buildings in Ontario are currently in a similar state of crisis, mostly in the GTA. Given that there are 9,000 condos in the province, some are bound to have dysfunctional communities who have neglected to do the necessary housekeeping.
According to the condo corporation at 40 Panorama Court, unit owners are mostly to blame. The court filing states that owners have largely blocked efforts to increase monthly fees, despite a growing backlog of expensive but necessary repairs. There have been minimal or no maintenance fee increases since 2004, the filing claims.
Condo board meetings have also been poorly attended in the past. Owners are mostly apathetic towards the building’s affairs, said Gerard Bisaillon in a court affidavit.
Others become board members expressly for the purpose of working to keep condo costs low, he said.
“They think that every major repair or replacement of the common elements is wasteful of their money,” said Bisaillon, an owner and longtime board member. “Many do not see things outside their own unit. They refuse to look at the big picture.”
Some owners also fail to make payments on time. As of April 15, 46 unit owners were in arrears of their monthly common expenses, some owing several thousand dollars, according to property manager Loucas Solomou’s affidavit.
But many owners at 40 Panorama Court blame the building’s management for getting them into this financial mess.
“We’ve been here 11 years and that’s what they’ve done to us,” said Jenipher Hazlett, who owns a two-bedroom condo on the first floor.
Like many in the building, Hazlett only learned the extent of her condo’s financial woes when she received a notice that her board was taking her and other owners to court.
Up until that point, all Hazlett knew was that she had been dutifully paying her condo fees, in addition to periodic “special assessment fees” for one-time projects, such as fixing the underground parking garage.
In 2001, the building collected $2 million from owners in special assessment fees to repair the crumbling underground garage. But today, hazardous sections of the parking lot remain blocked off, forcing residents to park on the lawn or fight over limited spaces in the visitor lot.
“They have collected money from us in maintenance fees and assessment fees every year,” said Roza Zarik, who owns a three-bedroom unit with her husband. “Where did the money go? Why did we get to this point?”
Suspicions and hostilities in the building are deep-seated. Some residents have accused property management and board members of pocketing the money and receiving kickbacks.
According to owner and building superintendent Visvalingam Kanapathypillai’s affidavit, owners have also used intimidation tactics to bully board members into keeping monthly fees in check.
“Individual unit owners with an agenda to keep common expenses low will knock on your door . . . or corral you in the hallway,” he said. “It can be very intimidating.”
Board members who attempt to increase fees or take necessary action also face the threat of removal, Kanapathypillai said in his affidavit. In 2009, the board discussed taking out a loan, which would require a majority vote from unit owners.
According to Kanapathypillai, however, the idea went dead when one board director began spreading rumours that a $1 million loan had been approved without the owners’ knowledge, prompting residents to petition for the board’s removal.
A meeting called to vote on the boards’ removal ended in shouting matches, threats and one allegation of assault. At the end of the night, police had to be called and have since become a regular presence at condo meetings.
Zarik acknowledges her condo’s community is in disarray but she understands why emotions are running high. Her monthly fees havenow reached $900 per month but at least she isn’t a newly-landed immigrant or low-income parent, like many of the other residents. In his affidavit, Bisaillon also wrote that each unit could be on the hook for almost $20,000 before the condo’s finances are back in the clear.
Those who want out are also having trouble selling their units. Zarik recently saw a three-bedroom unit in the building going for $110,000. She bought hers in 2000 for $124,000.
Both Zarik and Hazlett admit they have failed to pay attention to their building’s finances until this recent crisis. And now that they are, it could be too little too late.
“I feel like even though I own my unit, and I bought a piece of the building, I don’t really own it,” Zarik said. “I can’t leave it and I can’t sell it — I have to see it to the end now.
“I will never buy a condominium again.”
The last time I wrote about a building that was royall screwed financially, I got a letter from a lawyer, and I was forced to post a retraction.
Sooooo……I’m sure glad that the Toronto Star took the opportunity to publish this article!
In my introduction, I alluded to a building on Gerrard Street that is in big financial trouble. This building had a massive special assessment last year in the neighbourhood of $30,000 per unit, and is now tearing out their gym and party room to build three new condominium units to sell on the open market – with the funds going right into the condominium corporation’s pockets. Perhaps this is to stave off BANKRUPTCY?
This building is old, ugly, and very out of date. So add in these massive financial issues, and I think the units are almost unsellable. If the number of days on the market for the units that are for sale right now are any indication, I think I’m being proved correct…
I have nothing against “old” buildings, but I actively try and put my first-time-buyers into buildings that are less than ten years old.
“New” is what sells, and I tell my buyers that while they’re only just buying the unit today, it doesn’t mean that they shouldn’t think of resale potential down the road.
A two-year-old condo is only going to be five-years-old when you’re ready to move onwards and upwards in three years, and that’s a much easier sell than something old and decrepit like the building on Gerrard or the condo at 40 Panorama that is described in the article.
People often look at the “value” in older buildings, but it comes with a risk.
I also advise my buyers to stay away from “boutique” buildings with a dozen units. It might sound cool, exclusive, and unique, but if that twelve-unit building has a problem, the cost is only going to be split twelve ways.
I’m not going to blame the owners of 40 Panorama Court for buying into this building in the first place, but surely that decision has to hold some responsibility for the current predicaments they find themsleves in.
For those playing along at home – there are currently TWENTY units for sale at 40 Panorama Court, or approximiately 10% of the whole building.
Three of the twenty units are under Power of Sale, and six of the units have been on the market for 100 days or more.
Fun times!
Suddenly my life doesn’t seem so bad…
Graham
at 7:10 am
The Globe and Mail had an article about this condo on Saturday:
http://www.theglobeandmail.com/news/national/toronto/globe-to/faulty-towers-the-hidden-dangers-of-low-condo-maintenance-fees/article2030464/
Joe Q.
at 8:26 am
An almost identical story — about the same building — appeared in the Globe and Mail this past Saturday; they beat the Star to it by a few days. The same residents were quoted in both stories.
The whole thing makes me wonder about the long-term viability of Toronto’s condo craze. If there is a strong buyer preference for newer buildings, what happens to the city’s existing condo housing stock as it collectively gets older? Will reduced demand and special assessments on older or poorly constructed buildings push resale prices into the basement as new towers keep going up every year? What about investors who are already cash-flow negative on their units?
Kyle
at 9:17 am
I think eventually the units will be bought up by a property corporation and the building will eventually be converted to apartments. I think this is pretty typical of a condos life cycle. Inevitably over time a building’s maintenance fee increases and price (in real terms) decreases, as the building ages. No matter how fancy the launch party or shiny the marketing material, odds are in 25-40 years a unit in that building is going to be unsellable. In my opinion, when you have a huge cluster of 25-40 year old buildings in one block (i.e. City Place in a couple of decades), the life span of the buildings just gets shorter.
JG
at 10:06 am
Correct me if i am wrong here – but i think a great example of a properly run older building is the 20yr old (or so) building on the esplande. As i understand it, they recently (few years ago) underwent a renovation that cost into the millions BUT! they had excellent reserves which paid for it all. And the builidng is still on strong footing financially with great reserves, not too mention its a full amenity building, plus it looks great! (not for the glass tower lovers,) It doesnt appear at all to be the 20yrs that it is.
KDailey
at 11:23 am
Having grown up and lived much of my adult life in Manhattan and Chicago, I can testify that old–very old–co-op and condo buildings have an enduring (and quite costly) appeal in both those cities. There’s no reason to think the same isn’t (or won’t be) true in Toronto.
I live in a nearly 30-year-old condo building in downtown Toronto. Units in my building seldom come up for sale, and when they do they are definitely not cheap. Residents have undertaken extensive renovations to their units to maintain property values. My own renovation (done about two years ago) cost just under $100,000, and on the basis of past sales in my building I have no doubt that I will recoup most, and maybe even all, of that cost when and if I ever sell my unit.
My building has a very good reserve fund, and its maintenance fees compare favourably to fees in buildings years younger than mine. I believe that one must always do appropriate due diligence when contemplating a condo purchase. Examine the status certificate with the careful advice of your lawyer, and talk to people who already live in the building. Ask them about the number of renters, about the general state and upkeep of the building, and about the performance and qualifications of the board members and the management company.
Every building, every board, and every management company combine to make a unique entity. Generalizations (whether about old buildings, new buildings, or the makeup of condo boards) don’t serve anyone’s interests and certainly don’t help to educate and inform either buyers or sellers. Some people like the stability and verifiable track record of old buildings; some people like the shininess and up-to-date amenities of new buildings.
Speaking for myself, I would never buy pre-construction, and I have a preference for older condo buildings; but I know a number of well informed and experienced condo owners who will only buy pre-construction or very new units.
That’s what makes horse races, and that’s what makes for a healthy and diverse real estate market in Toronto.
Clifford
at 12:08 pm
Should be hearing more of these stories in about 20 years when these cheaply built glass buildings start falling over.
Marina
at 12:59 pm
David,
I have the same question as Joe Q. above. If “new is what sells”, what will happen to buildings that are now 3-5 years old as they get older?
Will they become slum housing?
Will they get torn down and built into more new shiny condos?
I’d love to get your long-term (10+ years) vision for the Toronto condo market, given how much is being built.
David Fleming
at 2:33 pm
@ Marina
I try not to predict the future, although I am predicting Vancouver will win the Stanley Cup…
We don’t know how the new-age designs and construction will hold up over time, but there are some older buildings that remain in fantastic shape. Take 25 The Esplanade, for example. This building is now 22-23 years old, and it’s in impeccable condition. The property management is great, and they’ve kept the building up-to-date. The decor in the hallways is current (I believe it was redone a couple years ago), and the maintenance fees are around $0.47/sqft. Keep in mind – this building has rental parking, which helps with the condo corp’s bottom line.
But knowing that most of my first or second time condo-buyers will only be in their units for 2-3 years, I advise them to buy NEW.
Nobody comes to me and says, “I want to buy a condo for $350,000 and I have a twelve-year plan.” People move around a lot in our city, and NEW is the easiest to resell.
Why take the risk with something older; perceived risk, or otherwise?
Goid
at 8:22 pm
Boy were you wrong, hahahahaha
Heather
at 1:42 pm
I am a new part of the Toronto condo craze as I recently moved into a 4K Spadina condo at City Place.
When looking for the perfect condo I saw some true beauties. It would be a shame to neglect these historic buildings by not providing the appropriate care and upkeep. I think they are an important part of Toronto’s heritage and should be maintained and treasured.
PGK
at 2:54 pm
David, I dunno.. Of all the takeaways from this article the building’s age wasn’t the key one for me. If I had to sum it up, it would be don’t buy a condo at Kipling & Finch or North Etobicoke in general if you care about resale.
In a condo, the buildings fortunes regardless of its age are tied in part to the people that live there. If the people are lower income, they won’t have the ability to maintain their building to the same standard as people in more affluent buildings. How about the people on the board? What kind of backgrounds, educations, etc are there compared to more expensive areas?
Why not look at a “new” building in North Etobicoke for example (Humberwood by Tridel) where a 3br listing is listed for under 345K with condo fees in the 50c per sq ft range. Then look at Palace Pier in Etobicoke of similar vintage to Panorama Crt where you can find 3br units for 1M with 2K/mo in condo fees. Which is more desirable?
Edmonton Real Estate
at 3:51 pm
We had a similar situation in Edmonton where a newer building was hit with $20,000 special assessment.
Derek H.
JG
at 5:14 pm
Canucks? *cough* *cough* – sorry I was just choking on my dinner….
Claire
at 7:49 pm
Costs around $60,000 per suite to repair leaky condos here in Vancouver. Eventually, it seems, every condo ends up with a bag over it.
J M
at 3:01 pm
I used to live a couple of buildings away from 40 Panoramo – I left 2645 Kipling which at the time was also doing the same thing. Recently I visited (April 2011) and discovered nothing has changed. Unusually low maintenance, board members keeping costs down and delaying repairs. The place is a dump and the neglect is incredible. A friend confirms that the maintenance is still really low. The underground guest parking was condemned and boarded off by the City of Toronto years ago and it’s that way. It’s not just 40 Panorama Court. All of the buildings around there are bad.
Vincent La Fiura, Broker
at 8:27 pm
Assessments are just one of the many surprises that come with owning/buying a Toronto Condo. Home buyers should always ask prior to signing on the doted line about occupancy fees when buying pre- construction and buyers should always ask for a conditional offer on lawyers review. Below is also another great article about the pro’s and cons of buying a Condo. Thanks everyone.
http://www.mytorontorealty.com/buying-toronto-condos
Taru
at 5:36 pm
Is there any solution to this problem is what most condo owners are looking for. I’m sure there must be a way to keep the maintenance cost down? Obiously, the owners need to team up and work together as a family looking after every owner’s interest when trying to work with the solution.
Any ideas?
Turfa
at 3:46 pm
All well and said that condos that are old have low resale value but is that true for all old condos? What about condominiums that are old (like 25-30 years) with high maintenance fees (500-700 range) but is extremely well kept? I’m condo shopping right now and I’ve seen an older building that is in better condition than a newer building. The older building is also cheaper and is located in York as opposed to the other one which is in North York. Every where I read and everyone I talk to says that same thing, not to buy such an old building because it’ll be harder to sell 5 years down the road, but what about price? It’s not like newer building are available in 250K with the convenience of location and square footage. The advice that first time home buyers should not buy anything older than 10 years. Well if the first time home buyer has other requirements like location and size in mind, a building older than 10 years is the only option.
So my question is, a building that’s old, with relatively high maintenance fees, can be a good investment if it is maintained, right? I mean it only proves that the management did an excellent job at keeping that condo looking brand new and the owners must be good people as well, having consistently paid the fees to keep up with the maintenance, right?
Charles Mac Leod
at 11:27 pm
I live in a 40 year old condo in Red Deer Alberta. My condo fee is high but it includes electricity, heating and air conditioning (& days per year!)We also have a swimming pool.
I would check what is included in the maintenance fees as it may include items like power and heating.
You should also check the price differentials. After 5 years the price difference between buying and selling for a new building might be the same as that for an old building. We have slight advantage as we are only one of three condos with a swimming pool. This has resulted in our selling prices being higher than that for newer buildings without a swimming pool.
And don’t forget the real estate mantra of location, location, location. If you have great location no problem in selling.
You may also find that pricing varies with the economic condition. In bust years we have had price decreases of up to 25 % and in boom years price increases of 25%.
I would also go through the reserve study fund report with a magnifying glass and a fine tooth comb, because that is where the hidden costs will be. A talk with a resident will also get you a lot of good gossip on the building.