Mandatory Budget Preparation

Thanks to Jill Mark, Property Manager of The Sonata for her contributions on this blog entry.
One of the most important jobs of the Condominium Corporation is the oversight of the collection and spending of the maintenance fees paid by owners. Those maintenance fees are based on the annual budget and the latest proposed revisions to the Condominium Act, 1998 finally make it mandatory for the Board of Directors to distribute an approved budget each year.
Informing owners of a budgetary increase days before their common element fees are due, is unfair, unrealistic and irresponsible. People have to budget their own life and they need information about an increase to common element fees to plan their own budget.
Many owners and Board members are surprised to hear that at present there is no requirement in the current condominium act to notify owners of an increase in fees. This is likely due to the fact that approval and distribution of an operating budget and notification of a fee increase has been common practice. It is also the course of action that responsible management and governance would dictate. Most management companies have usually followed the practice of doing the mail out anywhere from 2 weeks prior up to 30 days before the new budget year.
The Condominium Act has definite rules regarding an AGM and owner’s meeting mail outs but strangely has been silent on when a budget must be mailed out, until now. This will help owners budget their own life. It will also help decrease the amount of NSF’s. Management companies now have a definitive date and can work this into annual planning. It will also make both the management company and the board of directors more accountable in planning their budget meetings and delivering that accountability to owners.
The new Condominium Act (when enacted) requires that budget’s must be given to owners at least 15 days before the new fiscal year. Which means that management companies will plan to mail the budget to owners at least 1 week prior to that deadline likely the 25th day. Receiving the budget 15 days before the new fiscal year is reasonable and many parties will now benefit that this is a rule.
While this new standard will not require a change in the practices of responsible management companies and Boards, it will provide greater protection for owners of condominiums that are unprofessionally manager or governed.
In addition to this requirement of mandatory budget distribution will be the mandatory preparation of a reserve fund budget each year which must be sent to owners, and the obligation to notify owners of expenditures which significantly vary from those forecast in the budgets.
The definition of significant will likely be addressed in the regulations which have not been published yet. This will be an area of great interest for Board members, managers and owners over the next 18 months as stakeholders discuss the regulations with the Ministry of Government and Consumer Services.