Why Condo Owners Cannot Refuse to Pay Increased Condo Fees

The annual budget arrives.

Your condo fees are going up again.

You disagree with the increase. Your neighbours disagree. You plan to attend the AGM and vote against it.

There is only one problem.

There is usually no owner vote.

In Ontario condominiums, the board of directors approves the annual operating budget and determines how much money the corporation must collect from owners. Once the budget is approved, each owner must pay their share of the common expenses according to the percentage assigned to their unit in the condominium declaration.

Owners can ask questions. Owners can demand explanations. Owners can criticize the board.

But they cannot simply reject the budget because they do not like the increase.

The condo budget is not a proposal to owners

This is the part many owners misunderstand.

A condominium is not operated like a club where members vote on every expense.

Owners elect the board of directors. The board then makes most of the corporation’s financial and operational decisions on behalf of all owners.

That includes approving the annual budget.

The board does not normally need owner approval to increase common expense fees or impose a special assessment. The Condominium Authority of Ontario specifically explains that owners do not vote on every financial decision.

The AGM is a place to review the corporation’s finances, ask questions and elect directors.

It is not normally a meeting where owners approve or reject the annual budget.

There is no legal percentage limit

Ontario regulates residential rent increases.

It does not place the same type of annual percentage cap on condominium fees.

A condominium fee increase is not automatically illegal because it is 5%, 10% or even higher.

The real question is not:

“Is this increase above inflation?”

The real questions are:

Why is the additional money required?

Were the expenses properly included in the corporation’s budget?

Did the board act honestly, carefully and in the best interests of the corporation?

A large increase may be unpleasant without being improper.

The condo corporation must collect enough money to operate

A condo corporation has legal obligations.

It must maintain and repair the common elements. It must insure the property. It must pay for utilities, security, cleaning, management, elevators, fire systems, mechanical equipment, audits, legal compliance and dozens of other services.

It must also collect the required contributions to its reserve fund.

The board cannot make those obligations disappear by approving an artificially low budget.

Imagine that the corporation expects to spend $3 million during the year but collects only $2.7 million because the board wants to announce a zero-percent fee increase.

The missing $300,000 does not disappear.

It becomes a deficit, a future increase, a special assessment, deferred work or a combination of all four.

Keeping fees artificially low is not always good financial management.

Sometimes it is simply moving today’s bill to tomorrow’s owners.

“But the reserve fund has millions”

That number can be misleading.

A reserve fund is not extra money available to reduce the operating budget whenever owners are unhappy with their fees.

It is restricted money intended for major repairs and replacements of the corporation’s common elements and assets.

Elevators, roofs, windows, garage membranes, boilers, cooling towers and other major building components can cost millions of dollars to repair or replace.

A reserve fund balance may look large today because the expensive projects are scheduled for tomorrow.

The important question is not only how much money is currently in the account.

The important question is whether the fund will have enough money when major repairs become due.

“Then what is the point of attending the AGM?”

Owners still have power.

It is simply not a direct vote on the annual fee increase.

Owners can ask the board to explain the major budget changes.

They can ask whether contracts were tendered competitively.

They can question unexplained increases, recurring deficits, unnecessary services and projects that appear to provide poor value.

Owners can also organize, requisition an owners’ meeting when the legal requirements are met, elect different directors or, in serious circumstances, seek to remove directors.

That is how owners influence the corporation’s financial direction.

Not by refusing to pay the approved fees.

By changing the people and decisions that create the budget.

Can owners legally challenge an increase?

Possibly, but disliking the amount is not enough.

A challenge may be justified where there is evidence that the board acted dishonestly, used condominium money for an improper purpose, failed to follow the Condominium Act or the corporation’s governing documents, treated owners unfairly, or approved expenses outside its authority.

That is very different from saying:

“My fee increased too much.”

Courts generally do not replace a board’s reasonable business judgment merely because another financial decision might also have been possible.

A legal challenge requires facts, records and a valid legal basis.

It should not be the first reaction to an uncomfortable budget.

What owners should ask instead

Do not begin with:

“How do we stop the increase?”

Begin with:

What caused it?

Which expenses increased the most?

How much of the increase is going into the reserve fund?

Is the corporation recovering from a previous deficit?

Were major contracts competitively priced?

Are there services that owners are paying for but no longer value?

Could energy-saving equipment reduce future operating costs?

Were repairs postponed in earlier years?

Is the current increase preventing a larger special assessment later?

Those questions can uncover weak management.

They can also reveal that the increase is financially necessary.

Refuse to pay is not a protest

An owner cannot deduct the disputed increase or continue paying the previous monthly amount while arguing with the board.

Unpaid common expenses can attract interest and collection costs. The condominium corporation may also register a lien against the unit when the legal requirements are met.

That makes withholding fees one of the most expensive ways to express disagreement.

Pay first.

Investigate properly.

Then use the governance tools available to owners.

Bottom line

Owners should never accept unexplained increases without questions.

But condo fees are not optional, and the annual budget is not normally subject to an owner referendum.

The board approves the budget. The corporation collects the amount required. Owners contribute according to their share established in the declaration.

Your strongest protection is not an angry vote after the increase has already been approved.

It is an informed ownership group, transparent financial reporting and a capable board that challenges costs before the budget reaches your mailbox.

Because the best time to fight an unnecessary condo fee increase is before it becomes part of the budget.