Owner surprised he is responsible for financial shortfall

H.S. writes: Dear Paul: After buying into a condominium development, I was told that if we have a financial shortfall each owner could be held responsible for the expenses. Is this correct? Paul replies: Dear H.S.: When buying into a condominium we own a part of the condo corporation in the same way you would own part of your sister-in-law’s craft store in which you invested. If the store has expenses that exceed its revenue, the owners will have to make up the deficit. It is similar for condo owners. Let’s consider that you live in an older building with an elevator. The elevator stops working and you receive an estimate that it will cost $55,000 to replace it. After the Board decides how it will pay for the new elevator, it discovers that there is not enough money in the corporation’s reserve fund to pay for the whole amount and need to raise $15,000 to make up the difference. In this case, the Board would have to assess each owner of the 30-unit condominium $500 each. The owners would not have a choice, they would have to pay. If a corporation has enough money saved up in the reserve fund, owners may not have to pay the $500. A healthy reserve fund is like the rainy-day savings account. You hope you will not need it, but if you do, you will be happy. Yes, you can tell all your friends you are a business owner. Best wishes.

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