INFLATION IMPACTS CONDO BUDGETING If you’ve shopped at the local supermarket recently, you probably
BY SHLOMO SHARON
noticed items are more expensive than they were not too long ago. Or maybe you’ve ordered an item online for next day delivery, only to be told it would take much longer to arrive and at a higher cost than expected. Welcome to our new and unfortunate reality. This phenomenon of price increases and shortage of items is also affecting every aspect of daily life, including common element fees, which are paid each and every month to both new and old condominium corporations. A short time ago, corporations were preparing their yearly condo budgets, relying on historical actual expenses, which were almost in line with past expenses. After taking into consideration a reasonable inflation rate, such as C.P. I., a new budget was created.
As well, the reserve fund contribution, representing one of the largest expense items in the budget, was based on the reserve fund study, prepared by the corporation’s engineer. This deals with the major repairs and replacement and is updated every three years, based on the costs available to the engineer and taking the inflation rate into consideration. However, the corporation’s engineer will have to update the study in order to reflect the new reality of costs, of which there are various contributing factors.
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The pandemic has heightened the cost and shor tage of labour, in turn impacting deliver y and cost of materials, as well as other company ex p e n s e s like w a g e s a n d s a l a r i e s . Boards and management companies are now required to reduce and control the impact of these costs on common element fees. To start, they should identify what expenses they can control, while at the same time, recognizing costs such as insurance which
