What Are Condominium Contributions?
Definition of Condominium Contributions
Condominium contributions are payments collected from unit owners to cover the costs of operating and maintaining the condominium corporation.
Contributions include:
Condo fees, which are regular monthly contributions which fund the day-to-day operations of the condominium corporation.
Special levies (also known as special assessments), which are additional contributions required to cover unexpected expenses or underfunded capital projects.
Contributions are mandatory and must be fairly allocated among unit owners.
Purpose of Contributions
Contributions fund the following condominium corporation expenses:
Day-to-day operating expenses (e.g., utilities, insurance, maintenance).
Contributions to the reserve fund for major repairs and replacements.
Legal and administrative costs associated with condominium governance.
Legal Basis for Contributions
Contributions must be collected in accordance with CPA requirements.
The board is responsible for setting contribution amounts based on the annual operating budget.
Calculating Monthly Condominium Contributions
Formula for Calculating Contributions
Each unit owner’s monthly contribution is based on their unit factor, which represents their percentage of ownership in the condominium.
Formula:
Example Calculation
A condominium corporation has:
A total annual budget of $500,000.
Total unit factors in the building: 10,000.
An owner with a unit factor of 100.
Owner’s Monthly Contribution Calculation:
Adjustments and Special Considerations
Contributions may increase or decrease based on changes to the annual budget.
If condo fees are underestimated, the board may issue special levies to cover shortfalls.
Compliance with CPA Contribution Requirements
Ensuring Compliance with CPA Contribution Rules
Condominium corporations must ensure that contributions are:
Collected on time and in full.
Based on a reasonable and approved annual budget.
Transparent, with financial statements provided to unit owners.
Red Flags for Non-Compliance
Contributions not collected regularly.
The board fails to provide a budget or financial report to unit owners.
Special levies used frequently due to inadequate financial planning.
Verifying Compliance as a Condominium Manager
Review annual financial statements to confirm contributions align with budgeted expenses.
Ensure contribution calculations follow the unit factor allocation.
Check if the condominium corporation has a reserve fund to prevent reliance on special levies.
