Condo finances and chargebacks

Common element fees are derived from the Corporation’s annual budget. The annual budget covers all the operating expenses of the corporation and contributions to reserve funds, as dictated by the Corporation’s engineer and required by law.

Each unit’s common element fees are calculated by multiplying the annual budget requirement by a factor defined in the declaration. This factor depends on the size of the unit. Parking spaces and lockers also have a (smaller) share of fees. 

The condominium’s declaration mandates that owners are financially responsible for the repercussions of their actions, as well as the actions of their family, guests, tenants, visitors, tenants’ guests, etc. For example, if a tenant breaks a rule that requires the corporation’s lawyer to send a letter to the owner, the lawyer’s fees are charged to the unit owner. This principle applies irrespective of whether the owner was involved in the problematic incident or tried to mitigate it.

A core principle of condominium financial management is to avoid cross-subsidization. Cross-subsidization occurs whenever people paying for a cost do not receive a proportional share of the benefit. Continuing the example in the previous paragraph, if costs are incurred to send a legal notice to a unit owner, it would be unfair for these costs to be paid by the Corporation (funded by all owners), because only one unit caused the issue.

From time to time, unit owners appeal the Board of Directors to waive a chargeback or fund repairs that are the owner’s responsibility, on grounds of compassion. The board is unable to approve such requests because doing so results in other owners paying a cost that doesn’t relate to them.