The Business of Condo Corporations
Condo corporations play a pivotal role in creating and fostering a thriving condo community. Unit owners often wonder how closely their corporation should align its management tactics with tried-and-true professional enterprise practices
In other words: are condominium corporations like businesses? And, beyond that, does it make sense to treat them as such?
That sounds like a line of questioning that could go quite deep quite quickly – but luckily, we’ve got Angie Norman, Catalyst’s Managing Director and Broker and local Dr. Octopus fan (“He’s a brilliant multitasker!” 🐙), to help walk us through all the nitty-gritty details.
Breaking It Down: Are Condo Corporations Businesses?
In a Word: Yes. In Five Words: Yes, Condominium Corporations are Businesses
Yes, your condo association is a business. It’s right there in the name, isn’t it: condominium corporation. It’s hard to get much more business-aligned than having your efforts categorized under the umbrella term “corporation.” The word conjures up megalithic conglomerates full of people talking on conference calls about things like mergers, quarterly profit shares, and the like!
We imagine that that’s where people get tripped up when thinking of condo corporations as businesses, to be honest – the often simple, grassroots nature of the proceedings.
Condo proceedings rarely occur in the prominent, banker-style skyscrapers that most people associate with the term “business” in their minds. Instead, condominium corporation decisions are made around kitchen tables or over video conferencing. That doesn’t make the decisions being made any less business-oriented, though!
“When it comes down to it, condo corporations are businesses because they operate in the same way that any other business does,” Norman told us. This, of course, only encouraged us further to start asking: well, what exactly are some of those similarities?
Luckily, Norman was only too happy to oblige us – we guess we must have caught her on a slow day. 😆
It’s All About Balancing That Budget
One of the main overarching similarities that condo boards share with your more traditional business-type set-ups is the overall operational manner in which they handle their affairs.
Or, to put that all another way: money goes in, and money comes out.
“Like any other business, condo corporations have revenue that comes in and expenses that need to be managed,” Norman explained. “And just like any other business, you always want your revenue to be at least equal to your expenses.
“If your expenses start to creep up to the point where they’re outpacing your revenue,” Norman continued, “that’s how you end up with a deficit – just like with a business. In a condo community, running a deficit means one of three things: you’ve got to look at either cutting expenses back, raising revenue (i.e., condo fees), or putting out a cash call (such as a special levy) to get out of the red and back into the black. Whatever route you take, it’s important that at the end of the day, the numbers all balance out – although, of course, some options might be better received by your condo community than others.”
Building a Board that Works
The other side of the condos-as-businesses conversation centers squarely around the other very business-sounding aspect of condo corporations’ management: the board.
“Just like with a business, there’s a board that gets voted in to manage the condominium corporation’s path forward,” Norman detailed. “We just chatted about revenue and expenses – well, the condo board is the governing body accountable for maintaining that overarching budget. They make the decisions on how to spend that revenue to meet the needs of the condo community while recognizing the realities of the budget and additional expenses that need to be considered.”
That final point that Norman makes is an especially salient one. It’s that a condominium corporation most definitely functions similarly to businesses – and just like a business, the actions and motivations of the reigning board members have the potential to make or break your condo community’s success.
“Condo board members, like successful business leaders, need integrity. They need neutrality – and a bit of common sense doesn’t hurt, either!” Norman joked. “One way condo corporations ensure board members behave with integrity is through a code of conduct. Each condo board member is bound to a condo code of conduct that they sign and agree to when elected to their role – a document that mandates board members act in honesty and good faith, minimize conflict, disclose conflicts of interest, and more. That way, condo owners can rest easy knowing that their board members are making decisions based on the needs of the greater building – not just on what suits the whims of each member.”
Thanks so much to Angie Norman for taking the time to chat with us and share her knowledge about how condo corporations do business – and are businesses – here in Alberta. Want to learn more about what your board can do to get in touch with its inner Norman Rockwell and bring business-driven success to your condo community? Get in touch with us at Catalyst Condo Management today!