QA with Real Estate Strategist Jeanhy Shim

NextHome: Maintenance fees are a top issue for condo dwellers. Generally speaking, are they trending up, or are developers able to control these costs?

Jeanhy Shim: If you break down the costs that make up your maintenance fees, the majority are “non-discretionary items” which neither condominium corporations nor developer are able to control in terms of future cost increases (such as utilities, staffing, service contracts and insurance). These types of costs generally trend up annually, at the rate of inflation at a minimum.

Condo corporations could try to mitigate the impacts of non-discretionary item cost increases by taking measures to help control the consumption of utilities in common areas, or choose lower cost service providers, staff or insurance policies, as some examples. However, there are also limitations to this strategy due to the virtual monopolies or oligopolies that exist in many areas, such as utilities and providers of certain items such as elevators.

Developers could help condo corporations to better manage and control their maintenance fees by incorporating thoughtful energy saving systems into the base building designs from the outset. For example, they can install more energy efficient base building heating and cooling systems; LED lighting and motion detectors for lighting in common areas such as hallways, emergency stairwells and garages; individual utility metering systems for water, gas and hydro) for suite consumption; shutters, blinds or heat gain film on south and west facing common area windows; and revolving entrance doors and double door vestibules.

NH: Energy costs are a huge part of a building’s operating costs, but consumers seem lackadaisical toward new and Green tech features that will help control these, or they’re not willing to pay more for them. What’s the solution?

Shim: This is a commonly held viewpoint, but I would argue that it depends on the target buyer. Generally speaking, a buyer who is purchasing a condo purely as an investment to rent out is motivated primarily by the “best price per square foot,” so paying more for Green features is not likely to represent the best value. However, for end-user buyers who are purchasing condos to move into as their primary residence, Green features that improve the energy efficiency of their suites and building (thus maintenance fees) are more likely to resonate positively, even if it means that end-selling prices are a few thousand dollars higher.

NH: Property managers are the de factor COO of condos, since they manage the building, budget and reserve fund. Who are these people? Are they adequately trained? How much will recent changes to the Condominium Act help in this area?

Shim: Recent changes to the Condominium Act mandating professional training and certification of condominium property managers have been long overdue and should have a positive impact on the good governance, management and operation of condominium buildings and corporations.

Although the elected condo boards make final decisions regarding budgets, capital expenditures, policies and regulations, their function is akin to a chief executive officer of a company – responsible for determining strategy and direction for the corporation. However, property management (COO) is responsible for executing on the strategy and direction provided by the condo board (CEO), and ensuring the smooth day-to-day operations of the building. They need to supervise and manage the myriad of people, trades and contractors providing services and maintenance to the building, plus they need to manage the numerous (and unpredictable) problems, issues, complaints and requests from owners and tenants; respond to any building emergencies; ensure compliance with regulatory maintenance and testing; and manage all administrative functions (as most buildings do not have budgets for additional administrative staff).

In short, this is a very complex job demanding a high energy individual who is customer friendly, action-oriented, calm under pressure, good people manager, organized administrator, technically and legally knowledgeable, multi-tasker, excellent project manager and creative problem solver.

NH: Why do you think the recent changes to the Condo Act were necessary?

Shim: These changes were necessary to respond to the exponential increase in the number of people living in condominium apartments over the past decade. Moreover, condominium buildings today are increasing in both in size and complexity in terms of its amenities and operations. Therefore, it was necessary to ensure that property managers are properly trained to manage and run these increasingly complex buildings with multi-million-dollar operating budgets.