Loeb estimates that as many as 20 per cent of condos in the Toronto area are facing problems so severe that, in some cases, the province will be forced to step in and help residents dissolve the condominium corporation and sell the buildings.
Audrey Loeb—MacLeans's magazine
Starting in the next ten years or so, I believe that we may see a number of terminations of the forty to sixty year old corporations in the GTA.
There will be three issues that will force condo corporation terminations. The first will be when the buildings are so dilapidated, they cannot be renovated at a price the owners can afford to pay. Secondly, speculators will move into certain distressed condos and buy up all the available units with the intend of terminated the corporation, demolish the units and build a new higher-density project. Finally, companies will buy units in newer condos with the intent of terminating the condo corporation and turn the building into a purpose rental property.
It takes a long time for concrete to crumble so the underground garages and the concrete structures can withstand a lot of damage before it no longer can be hidden from the municipal inspectors and the insurance companies.
Underground garages, balconies, roofs and the exterior envelopes can be extremely expensive to fix. When the condo boards hire contractors to do cheap patching instead of more expensive renovations, they just by some time before the crumbling returns.
How bad can it get? It is not unusual for bricks to fall off the exterior walls on 25-30 year old condos.
Water damage from leaky roofs, poor window seals and leaks through the bricks and seals between the concrete slabs do more than wreak the drywall, they destroy the insulation and can badly rust the metal clips holding the exterior walls in place.
I believe that the present condo building boom will start to slow when the economy tanks. After a few years, the economy will bounce back and the developers will be looking for cheap land to develop.
By then, there will be a ready supply of rundown condo projects, both towers and townhouses, that will be selling cheap.
The builders will start buying units in these condo corporations and when they get control of 20-30% of the units, they will gain control of the board. Then they can hurry the process along by increases fees, vote in special assessments and start enforcing by-laws and rules for over-crowded units and quickly placing liens on units when they go into arrears.
In time, the speculators will gain control of 80% or more of the units and then they will apply to the courts to terminate the corporation.
The old 10-12 story towers and townhouse complexes can then be demolished and be replaced with new 20-30 story condo towers. Rundown townhouses can replaced by towers or stacked townhouses.
Why will it take so long?
There are several reasons.
The troubled condos are mainly in the suburbs and so the land is not yet in big demand. Yet, with the new subway extensions and new LRT lines being built in Rexdale, Etobicoke, Mt. Dennis, Weston and Scarborough, instead of benefiting the owners in these condos as they expect, it may speed up their corporation's doom.
Concrete is very durable and it takes a long time to deteriorate to the point that the underground parking garages, balconies and exterior walls become so badly eroded that the structures become unsafe.
Condo boards, the managers and the owners hide the building defects so the owners can sell their units to unsuspecting buyers.
Many low-income owner-residents in these poorly maintained condos get use to the leaks, roaches and unkempt hallways and closed amenities. If the rent gets paid, the absentee slumlords don't care at all. As long as the condo fees stay low, the lights work, the water runs and the elevators operate, the owners and residents will not make a fuss.
The city inspectors ignore condos because problems with rental and public housing takes up so much of their time. They take the position that if a condo owner has a problem, they should take it up with their board. They will investigate safety complaints and not much more.
Low-income owner-residents have nowhere to go if they are forced to sell their share of the corporation for little more than the value of the land. From the little they get, they have to pay off the corporation's debts, the cost of the demolition and legal costs. They may have a mortgage to settle plus they have their moving costs. They will need a down payment if they buy elsewhere or if they rent, the first and last months rent.
If they are broke, where are they going to live? In a tent under the Gardiner Expressway?