The Ugly Truth About Toronto Condos – Engineer Tells All

Summary

In a revealing discussion, the intricate details of Toronto's condo market are explored, shedding light on hidden truths about reserve funds, the increasing complexity of new constructions, and the financial pressures exacerbated by inflation. The conversation delves into how these factors contribute to a broader reevaluation of condo values across the city. The dialogue emphasizes the need for prospective buyers to be well-informed about these financial and structural considerations, highlighting both the challenges and strategies involved in navigating this dynamic real estate landscape.

Highlights

• Reserve funds often appear lower than needed due to delays in crucial upgrades, impacting future financial stability. ⚠️
• Inflation has led to a considerable disparity between projected and actual operational costs in condos. 📊
• Modern condos are built to much higher complexities than older ones, resulting in increased maintenance difficulties and costs. 🏙️
• New energy-efficient measures could further strain condo budgets due to expensive retrofitting needs. 💡
• Many condos in Toronto might face a significant devaluation driven by rising operational costs and outdated pricing models. 📉

Key Takeaways

• Reserve funds are chronically underestimated in new condos, which can lead to significant financial challenges later. 📈
• Inflation has severely impacted both operational and reserve costs for condos, making budgeting complex. 💸
• The structural complexity and operational demands of modern condos surpass those of older constructions, leading to higher maintenance costs. 🏗️
• New building regulations require costly upgrades to improve energy efficiency, adding to the financial burden on condo associations. 🌍
• There's potential for a repricing in the condo market as quality, complexity, and maintenance fees increasingly influence condo values. 🔄

Overview

The conversation unveils the lesser-known challenges of owning a condo in Toronto, especially in light of the financial complexities that have been unfolding due to misestimated reserve funds and the lagging implementations of regulatory amendments. With significant expertise in the field, the speaker highlights how these oversight issues can dramatically inflate condo fees, posing unforeseen financial burdens on owners and potentially causing market shifts.

Newer condos face unique challenges not just in reserve funding but also in their very construction. Increased complexity in building designs, necessitated by modern urban demands, adds hidden costs over time that are often not accounted for during purchase. These complexities are exacerbated further by legislative requirements for energy-efficient upgrades, making existing condos potentially high-risk if not managed with precise future planning.

Looking ahead, there's a noted potential for the market to rebalance itself. Distinctions are being drawn between more costly-to-manage towers and those positioned with better sustainability and financial foresight. Prospective buyers are advised to consider these factors extensively to avoid being caught by unforeseen expenses and overlaps in financial responsibility, especially as Toronto's dynamic real estate market continues to evolve.

Chapters

• 00:00 - 00:30: Introduction The 'Introduction' chapter opens with a warm acknowledgment of the reader's time and enthusiasm about uncovering the hidden gem of condos in mainstream real estate. The chapter highlights the author's excitement about discovering an intriguing book that addresses numerous questions related to condos, questions that often aren't discussed openly. This book seems to offer valuable insights and answers about the often-overlooked topic of condos.
• 00:30 - 01:30: Background and Career of the Engineer This chapter dives into the engineer's extensive background and career. It sets the stage by discussing the book authored by the engineer, a complex and dense text that empowers readers by providing them with the knowledge to ask pertinent questions, even if they don't grasp every detail. The chapter hints at the engineer's decades-long experience, and teases a deeper exploration into the reasons behind writing the book, the journey leading up to its creation, and the engineer's role and activities within the condominium space.
• 01:30 - 03:00: Involvement with Amendments and Condo Boards The chapter titled 'Involvement with Amendments and Condo Boards' discusses the speaker's extensive experience working since 1990 as an engineer. They specialize in reserve studies and cost sharing agreements, particularly within the context of condominiums. The speaker describes encountering challenging situations in this field. Additionally, they mention their public speaking engagements and involvement with the government, stemming from their professional work.
• 03:00 - 04:00: Role in Education and Directors' Training The chapter discusses amendments to an act in 2015, which involved extensive public consultation. Although many changes were proposed, they were not fully implemented. The speaker has been closely involved in this process and has significant experience on various boards of condominium associations, particularly with CCI Toronto from 2008.
• 04:00 - 05:00: Synergy Partners and Work with Tridell The chapter discusses the author's involvement with CI Canada and community associations institute, highlighting their advocacy efforts for the condo industry. It touches on the educational roles these organizations play for directors and managers in the sector. The narrative reflects the author's deep involvement and leadership roles within these organizations.
• 05:00 - 06:00: Condos: General Market Insights The chapter titled 'Condos: General Market Insights' reflects on the experience of being exposed to various aspects beyond one's expertise, particularly in the realm of condominium finances and governance. In 2015, the speaker was involved in overseeing financial committees and expert panels tasked with implementing amendments, dealing with legalities, meetings, and requisitions. This exposure led to involvements beyond their usual scope, similar to their experiences on the CCI board where they contributed to new initiatives.
• 06:00 - 08:00: Reserve Fund Studies and Budget Overages The chapter discusses the establishment of an educational program for the Condo Authority of Ontario. Initially, CCI (Canadian Condominium Institute) had comprehensive education materials, and despite not being a consultancy, they took on the project management role for this educational initiative. Tanya Hock collaborated on managing the project, assembling the educational content that CAO used for its early years. Though the CAO has since modified the content, the groundwork set by CCI was crucial in the formative years of the program. Additionally, there is mention of an Ontario-wide educational chair who continued to oversee education efforts beyond the initial setup.
• 08:00 - 10:00: Building Construction Price Index vs CPI The chapter is titled "Building Construction Price Index vs CPI" and contains a personal narrative about involvement in a committee for CCI, where directors are trained through an educational program consisting of eight courses leading to a CCI certificate. The speaker shares their experience of reviewing reports and materials on diverse topics unrelated to their engineering role, appreciating the chance to learn from professionals like lawyers and accountants, and addressing varied challenges. This setting provides an enriching opportunity for broadening knowledge and skills beyond their primary field of engineering.
• 10:00 - 12:00: Impact of COVID on Reserve Funds The chapter discusses the role of Synergy Partners, where the speaker is a managing partner, in conducting various studies related to condos, specifically focusing on performance studies and reserve fund studies. The discussion draws an analogy comparing Tridell, known for its high reputation in condos to a Mercedes-Benz, implying that Synergy partners could be seen in a similar light for its contributions to condos, particularly in the context of reserve funds.
• 12:00 - 14:30: Severe Underfunding and Special Assessment Case Study The chapter discusses a personal anecdote from an individual who, after reading a specific book and having a conversation with the engineer, decided to purchase a unit for a client in a building managed or evaluated by the engineering team. The building mentioned is 88 Grand View in North York. The individual trusts the reputation of the engineers, likening them to the 'Mercedes-Benz' of engineers, which reassured them about the investment's wisdom. Their client is satisfied and pleased with the acquisition.
• 14:30 - 16:30: Framework for Evaluating Condo Risk This chapter discusses the importance of understanding condo risks from both real estate and engineering perspectives. It highlights how real estate professionals often lack the necessary engineering background to evaluate the risks associated with condos. The chapter sets the stage for conversations with engineers who possess the expertise necessary for a comprehensive risk assessment, emphasizing the value of interdisciplinary discussions in real estate contexts.
• 16:30 - 18:00: Old vs New Condos: Risk Analysis The chapter discusses the differences in perspective between those involved in the engineering and maintenance of condos and those involved in buying and selling them, such as brokers. It highlights that brokers may not always have the full picture regarding issues that condos face, as they are not typically exposed to the day-to-day challenges and operational concerns. This results in a gap of understanding between the 'old' and 'new' approaches to condo management and investment.
• 18:00 - 20:30: Complexity in Modern Condo Construction The chapter 'Complexity in Modern Condo Construction' discusses the intricacies involved in purchasing a condo, particularly focusing on the importance of a status certificate review. It highlights the role of real estate professionals and emphasizes that real estate brokers or salespersons are not permitted to provide advice on the status certificate; instead, it is the job of an attorney. The chapter notes variability in how different lawyers handle the status certificate review. Some lawyers thoroughly investigate the certificate, while others may simply provide a summary, indicating a wide range of diligence and approaches in the process.
• 20:30 - 22:00: Impact of Complexity on Maintenance and Resale The chapter discusses the challenges and complexities involved in the maintenance and resale of properties. The speaker shares their personal experience of identifying a gap in the availability of detailed property information and how they have been diligently saving status certificates over the years. The purpose of collecting these certificates is to have a contextual understanding of various properties, such as the number of units and the age of buildings, which is crucial when considering buying or selling properties, especially when comparing them to others of similar age. This meticulous documentation helps in making informed decisions in the real estate market.
• 22:00 - 24:30: Flight to Quality and Future of Condos This chapter delves into the comparison between a modern and an older building, highlighting the importance of context and thorough research when evaluating properties. The discussion stems from the author's efforts to understand and address legal and structural issues. It conveys the author's journey of discovering deeper complexities in the real estate realm and emphasizes the continuous learning process involved in understanding the nuances of building qualities, particularly in the context of evaluating condos.
• 24:30 - 27:00: Preconstruction Condos: Risks and Misconceptions The chapter begins by discussing the impact of COVID-19 on the real estate market, particularly focusing on pre-construction condos. The pandemic caused delays in reserve fund studies and other critical assessments, leading to incomplete works due to restrictions like the inability to bring in necessary trades. This lack of completion and oversight has resulted in significant financial issues surfacing over the past 12 to 18 months.
• 27:00 - 28:30: Vancouver's Repricing as a Case Study The chapter "Vancouver's Repricing as a Case Study" discusses the changes in reserve fund maintenance fees relative to pre-COVID times. It highlights the dramatic differences and increased chaos in current budgeting practices. Issues such as budget overruns, whether on the operating side or total fees, are questioned. The text specifically refers to a hypothetical status certificate from 2021 and the challenges in projecting future budgets accurately.
• 28:30 - 32:00: The Role of Amenities in Condos The chapter discusses the true costs associated with condominium living, focusing on the operational side such as service contracts and maintenance schedules. It highlights how unforeseen expenses can lead to higher fees or depleted reserve funds, illustrating the complexity of financial management in condos.
• 32:00 - 34:00: Elevators and Building Code Issues The chapter discusses the impact of inflation in 2023, particularly highlighting how it has significantly affected operating and reserve aspects. The speaker mentions having brought images to illustrate the issue further, suggesting the use of slides to share these visual aids. The chapter underscores the complications inflation adds to managing operational and reserve domains, hinting at the complexity of financial management under inflationary pressures.
• 34:00 - 37:00: Owner's Role and Participation in Condo Management The chapter discusses the financial metrics of condo management, focusing on the consumer price index and the building construction price index. It highlights the historical trend where building construction costs generally surpass consumer price index increases, with an exception noted during the 2008 financial crash, emphasizing the owner’s role in understanding these economic indicators for effective condo management.
• 37:00 - 40:00: Future of Condo Boards: Professional Directors The chapter discusses the fluctuations in construction costs between 2020 and 2024, describing it as a 'one-time blip.' It suggests these costs have settled in 2024, and the chapter might imply a shift towards professional director management in condo boards amid these economic changes.
• 40:00 - 43:00: Conclusion In this conclusion chapter, the focus is on the increasing costs in various sectors, notably in construction and consumer prices. The construction expenses have surged significantly, and these are anticipated to be mirrored in the operating budget. Additionally, wages are rising to align with the consumer price index, which has also seen considerable increases. These cost hikes are reflected in the graph discussed, highlighting their impact on operations. Utility costs remain under governmental influence, with the fluctuations in the consumer price index considerably affecting the overall economic scenario.

The Ugly Truth About Toronto Condos – Engineer Tells All Transcription

• 00:00 - 00:30 Thank you so much for making the time. I am I'm honestly very excited about this because the more I thought about it, I think you're like the hidden gem of condos that in the mainstream in real estate, nobody really knows. And obviously like I want to start off by obviously this is how I found you through this this exciting book. So, this book is actually really interesting because, you know, first of all, I didn't even know it existed. And then there are so many questions when you're going through condos and stuff where this book literally addresses almost
• 00:30 - 01:00 every single thing. It's very dense. So, it's not a quick read, but it does make everybody very dangerous in in the sense that you know the questions to ask. You may not understand everything, but it gives you the insight. So, I guess what I wanted to start off with is um you've been at this for a few decades. I want to kind of give people an understanding of why uh you've written this book. I mean, how we got to this book and kind of what you do in the condo space and uh yeah, maybe just start off there and I'll have some specific questions for
• 01:00 - 01:30 you. Sure. I mean, yeah, I've been working since 1990, so it's been it's been a few years, that's for sure. And you know I'm an engineer so I work in the field doing you know doing reserve studies for clients also do a lot of work on cost sharing agreements and so I get into the sort of some of the worst circumstances in terms of difficulty in terms of condos. So that's always interesting. Um, and then over the years I've been involved. You know, I do quite a bit of public speaking. So when I'm, you know, that gets you out and kind of known and then I got involved with the government
• 01:30 - 02:00 when they were doing the amendments to the um, act last time in well they weren't doing did they do amendments? We'll call it doing amendments in 2015 where they did a lot of public consultation and made some amendments but didn't proclaim many of them. So there's a lot of changes that have been in the act for a decade that haven't actually been implemented which is too bad. So I've been heavil he heavily involved there. Um and then I've been on several of the boards of the the condominium associations. So CCI Toronto I was on from 2008 till probably three
• 02:00 - 02:30 or four years ago now. Um including as president for a term and now I'm also on the board at CI Canada where I'm currently the board which is community associations institute. So both of those are associations that sort of advocate on behalf of the condo industry to the government but also um you know do they educate directors educate for CI directors and managers for CCI directors so I've always been kind of heavily involved and somehow I always managed to land in the place where um I would get
• 02:30 - 03:00 exposed to a lot of things outside of my realm right so I would you know when I did the consultations in 2015 I was chairing the finances committee because of my reserve fund exposure, but I was on the expert panel which was overseeing all of the amendments. So legal and you know things about meetings and things about um requisitions and whatever was happening and in terms of topics. So I kind of got dragged into areas where I sort of had no right being and then same thing happened when I was on the board at CCI. We took on the creation of the
• 03:00 - 03:30 director's education for um this the condo authority of Ontario when it came on. We were sitting in CCI. We had a lot of education materials. they went out to the market saying who can do the education for us and we said why don't we do it like CCI was not a consultancy but they had all of the people in place to do that so um Tanya Hock and I project managed that together and we put and we assembled the education that was used by the CAO for the first few years they've modified it since but and then I also chair an Ontarowwide education
• 03:30 - 04:00 committee for CCI currently and in that we've developed the education for directors so there's eight courses that directors can take to get a CCI certificate basically as a director. And so again, I'm in reviewing report um like handouts and all this content about topics that are far outside of my engineering role. So it's been really an interesting path and I love it because I get, you know, I get to know all the lawyers, I get to know all the accountants and kind of have to deal with their challenges as well as my own. So it's been a neat opportunity. It's
• 04:00 - 04:30 been fun. And now I think is it fair to say that synergy partners where you're a managing partner right now you guys do performance studies, reserve fund studies, all the good stuff related to at least condos is one aspect of it. Would it be fair to say and to contextualize this Tridell used to still kind of does the reputation of being the MercedesBenz of condos. So could we apply the same uh analogy to synergy? Because I got to say, so it's funny
• 04:30 - 05:00 after I read like I read the book, we briefly spoke, I ended up buying actually a unit for a client of mine like we just closed on a two week a couple weeks ago, one of the buildings that you guys manage or do the reser you're the engineer on the status certificate. So I kind of told my my client, I I think this might be this might be an indication that this is like the Mercedes-Benz of engineers if you see them on this condo board. So I think we're in good hands. We're really happy with the building. It's uh I'll just call it's 88 Grand View in North York. Um but anyway, so I think uh yeah, I
• 05:00 - 05:30 think based on that, you're probably very qualified to talk about a lot of things that I want to talk about. And again, this is coming from a real estate perspective. Think of think of me. I'm just a regular person that I see a lot of condos. I see a lot of stuff, but obviously I don't have the engineering background to understand things. I've built stuff, but again, I'm not a professional. So, well, it interests me to have a conversation with you because you're you guys are the players who were ne who are never around in my conversation. Of course. Why wouldn't Yeah, that's
• 05:30 - 06:00 right. I get it. No, look, we I deal with the engine. We deal with everything once the condos are in place and everybody's living in them and dealing with everything, right? You're putting people into them or taking them out of them and it's it's just a different perspective, right? Well, I think sometimes people get answers from their brokers that are not necessarily factual or even that the brokers won't be aware of a lot of the issues that condos face because why would you like how you're not exposed to the other end of it? So, I think it's so yeah, here's the here's a very interesting perspective. I'll tell you when the typical process when
• 06:00 - 06:30 you buy a condo is you make it conditional on status certificate review and it's in theory based on education you know that you get as a real estate broker or salesperson is you're not allowed to advise on the status certificate. that is not your job. You go to the lawyer. Now, what's interesting with the lawyer is obviously I've worked with probably two dozen lawyers that my clients have introduced me throughout the years and it's every status certificate review varies greatly. Some will dig, some will not. Some will basically summarize the status certificate and just there's no
• 06:30 - 07:00 advisory. It's just a summary. So, I saw this gap very early on. So, for me, I started saving status certificates over the years. I have hundreds of them at this point. Oh, interesting. And it became a a painstaking task to save all of this. But the reason I was doing it is to contextualize. Okay, if I want to buy at 501 Adelaide Avenue West, for example, this how many units, this is how old the building is, I need to compare it to something similar of that vintage because I can't
• 07:00 - 07:30 compare it to 88 Grand View, which is an older building, completely different, different area. So I needed context and this is why I started saving them so that I can be like look this is what the lawyer said these are the issues but here's what other buildings of similar I guess that are similar to this one look like just so you have context of where we stand. So this is how this whole thing started then I started deep diving it and then I realized the more I was learning the more I realized I knew nothing. It's just you just dig deeper and deeper and deeper and it's like this is insane right and then I'm like I need to find something and then I saw this
• 07:30 - 08:00 book and I I devoured it because I'm like this is great. So the first thing I want to start with just something that's more recent is during COVID I guess um I feel like a lot of reserve fund studies either got delayed things weren't done in completion maybe because of restrictions they couldn't bring trades in whatever the case may be and I feel that now over the last 12 to 18 months everything's come to a head we're seeing these massive overages in budgets we're seeing these massive maintenance fee increases there's just a bunch of stuff
• 08:00 - 08:30 happening all at once and I just wanted to get your perspective maybe how do you feel or like what what is your take on the current state of reserve fund maintenance fees and all that stuff and maybe relative to precoid is it the same or are things a little bit more chaotic right now yeah things are dramatically different when you see that when you say budget overruns are you saying on the operating side or a total fees you mean so so let's say um if I had a status certificate on a building from 2021 and they assume this is the budget going forward whatever the budget is when you
• 08:30 - 09:00 get the actuals 2 years later on the same building where I'm looking to buy, it's like you're looking at completely different actuals on the operational side. So whether it is service contracts or whether it is a complete miss on scheduled maintenance that was supposed to be done and obviously that translates into higher fees usually or sometimes they just run the reserve fund lower. But it's just there's so many variables. So I just kind of want to know just overall how do you feel like where where are we right now? I'm thinking where to where to start? Where to start? Because
• 09:00 - 09:30 obviously we I mean everybody knows there's been a lot of inflation in yes inflation to 2023 let's say we've had massive inflation and so on the operating side it's been a big deal right but on the reserve side it's been a massive deal I actually have I brought up a couple of images that I use can I share those here absolutely please do let me see if I can uh sorry I should have thought of that see the slide okay perfect um this is kind of interesting
• 09:30 - 10:00 because what this is a graph that's showing year-over-year what's the percentage change in consumer price index in the orange line or in what's called the building construction price index which is for new construction right so that's what it costs to build let's say a new condo residential construction and um and so what you see is that historically you know building construction costs were higher than than uh CPI increases consumer price index except in 2008 where the crash happened
• 10:00 - 10:30 right and then they pop up again and then basically between 2020 and 2024 they just went crazy, right? So the cost of construction now that was co it was a lot of things kind of hitting all at once. It seems to have settled down again in 2024 and so that looks like a kind of one-time blip but if you look at that if I oh here we go if you look at that cumulatively over time. So this is saying, you know, something that cost $100 in 2001 on the consumer side would now cost, you know, 160, but on the
• 10:30 - 11:00 construction side would now cost 300 and something. So there's been massive increase on those construction side. So, so the consumer price is probably what's going to be reflected through the operating budget. You know, wages have gone up to match consumer price index. So you get those bumps and they've been significant. Like if I go back to this graph, you know, this is not insignificant this bump we had on the consumer price index, but that's going to hit your operating. Utilities are whatever the government does to them basically. But on the construction side, what's interesting is that um if I look
• 11:00 - 11:30 at it, so if I look at the building construction price index, so the new construction between that period, it was that particular window Q4 2020 to Q4 2023, right? at right sort of co like once co hit hard um it went up 69% over three years consumer price index went up 15%. But everybody's yelling about this, right? This is your price at the grocery store. Like, this is making people panic. What they don't realize is that reserve funds are much closer to
• 11:30 - 12:00 construction than they are to CPI. So, all of the costs in the reserve funds have gone up a lot. And so, we have this double whammy. We have the operating budgets coming up because of CPI, right? Inflationary impact on wages and those sorts of things. And we have this huge increase in construction. And so, people sort of think, well, oh, good. the you know the inflation if I go back to this graph the inflation's come back down but that doesn't mean the prices have come down right that cumulative impact of prices is still there unless we start to have deflation of those prices and so
• 12:00 - 12:30 what happens is basically if I um here I think I have another one that shows another view oh no oh no it's not here okay um so basically what's happened is we have this reserve fund concept where we do a reserve fund study every three years in this province for every for every corporation And we have a window where depending on the timing of the study in a particular building, their last study will have caught one, two or three years of that inflation,
• 12:30 - 13:00 right? And so some that just caught the first bit and even I have to say by 2022, early 2022, we were all saying maybe this is just a COVID blip. You know, prices are way up, but they're going to come back down. And then further into 2022, we're like this is not coming back down again, right? We are not seeing deflation of these prices. So we started, so even the studies done in 2022 were probably tentative in their acceptance that this inflation was real.
• 13:00 - 13:30 And so they, you know, they will have had a big increase but not everything. So it means that every study that's been done basically since 22, 23, 24 into 25 are all getting hit by this huge inflation. And how a reserve fund stud is calculated is we calculate the cost to do every project as if it were be being done this year, right? And then we inflate it to when it to its future. Yeah. So all of that inflation gets built into those prices, the current prices and then future inflation which we may be forecasting we'll go back to a percent above CPI as a kind of
• 13:30 - 14:00 reasonable basis. they'll get inflated from there, but they get that big bump up. And so that's going to translate through on the maintenance fee side in a big way because suddenly you have, you know, all of the costs in the whole study have come up by, let's say, 30, 40, 50%. Now, so that means that every study I'm doing right now, we're seeing increases of 20, 30, 40, 50%. And it can get much worse than that if the condo is very old. And I'll give you an example.
• 14:00 - 14:30 Let's say um well, you know what? I'm going to jump down to this, which I put in here. Um this is a I I thought I would put up some data that says here's this here is a study. This is just a study that I did last week. That's awesome. And I said to myself, how you know where do the costs come from? If I look at a study and you're going to see windows, do you see down here how windows in this building are over $20 million to replace on an uninflated basis. Okay. So, if they were done today, got it. As opposed
• 14:30 - 15:00 to a lot of other projects, you know, elevators are expensive, right? But look at them relative to windows. They're next to nothing, right? And so, in the scheme of things, and here's what the big challenge is, is if if you're a newer building and the cost of your windows just went up by 50%. You still have 30 or 40 or 50 years to save for that. So, the increase is tempered. If on the other hand, you're in an old building and let's say you were planning to do the windows 8 years from now and now the prices have gone up 50%. You don't have much time to save all that
• 15:00 - 15:30 money and it's very significant relative to the other costs. And so then that can drive that contribution way up. Now in most cases what a board is going to do is they're going to move the timing of that window project, right? They're going to say, "What can we do to keep these windows alive? Can we change the weather stripping? Can we change some of the operables? Can we target, you know, what can we do um to try and defer that? But it's still a big impact. I So, just on the topic of windows, cuz um I I know some places do them on an as needed
• 15:30 - 16:00 basis. So, like I just sold a condo last year. It's like, hey, my my seals busted. I want to sell it. Please change it. So, they came and did it within a month. But they do it only if you ask, right? There's you can see kind of looking at the condo in certain units, people just don't don't do anything about it, which is interesting. But my question is as follows. So I actually walked away from purchasing a unit for a client a couple of months ago, older building. And here is what happened. We purchased it and then just as this was happening, they issued a special assessment and they had to borrow $11
• 16:00 - 16:30 million to do a big job. And that job was the windows. So apparently they had actually gone ahead and taken out a loan. This was approved. They've gotten the loan. They had done the windows and then when we were buying basically it was like how are you guys going to pay for this to the owners. So they everybody got hit with like a $25,000 special assessment. This building was I believe built in ' 89. So let's call it roughly 35 years or something. So my question is okay the logically speaking
• 16:30 - 17:00 layman's person I don't know anything about building management. I'm thinking to myself the risk here is not that there was a special assessment the donor just paid. The risk is that they knew this huge expense was coming for years. How is it that in 2024 when you did the window replacement? You didn't have the money. Like what were you doing for the last 20 years leading up to it? And then what does that mean for the next 5 10 years for every every other thing? So like can you shed some light on an example like this because I see it all the time. Yeah. Okay. So I'm going to take two things apart. One you mentioned
• 17:00 - 17:30 replacing the glass. So there's a big difference between replacing the glass and replacing the windows. So when you replace the glass, you're just coming in, you're taking out a sealed unit, there's retainers that pop off, the glass comes out, the new glass goes in, the retainers go back on. Cheap and easy. And if anybody has a failed unit, they should report it to management and management should deal with it, right? So that's not that's kind of one issue. When the building gets old enough that the windows have started to get rattly or in that building there were probably the frames can sometimes start to sag,
• 17:30 - 18:00 you know, you can start to get way too many failures. You know, where they're just spending way too much money each year on failures. they're leaky, they're drafty, they're rattling, you know, there's some problem that's happening. The finish is gone on them. Um, that's when you're going to do a replacement. So, that's replacing the glass and the aluminum, all the framing around it, right? So, it's a much more in that's the expensive project. I mean, the replacing of glass is expensive, too, but it's just kind of an annual churn. It's not it's not a big cost. So, then here's where the problem lies is if if a a lot of buildings came into COVID
• 18:00 - 18:30 saying we need to replace our windows next year. Then COVID came along. They didn't want anybody in their suites, right? And so they put the project off. Well, what they didn't realize was that by putting that project off, the price was going to go up by 50%. Or more. The window prices have gone through the roof. Like I've been at Synergy now, you know, we started Synergy 10 years ago and I've been there for 10 years and um when we first started there, we were budgeting something like $300 a square meter for windows. And now when we're closing windows, they're coming in at $15 or $1,700 a square meter. Wow. in
• 18:30 - 19:00 just 10 years. Substantial. Yeah. Oh, it's huge. And the frustrating part is that the biggest increase is on the most expensive component, right? Yeah. Well, yeah. Looking at I didn't even realize I was going to ask you about it. So, for example, I didn't realize windows were orders of magnitude more expensive than everything else. You know, they talk about underground garage membranes, flat roofs, and all this stuff. But yeah, I guess it does make sense. Those are big, too, right? Those are big projects, too. It's the windows
• 19:00 - 19:30 are almost always the biggest, but they're a long way out too, right? You know, they're going to be out at 40, 50, 60 years. They're not in the first 20 years. So, you have lots of time to save for them. The problem is it's been such a moving target, right? If the price is increasing, you know, if if if windows are inflating by 10% a year and the study is assuming that on average everything is going to inflate by 3%, then you're going to be short at every turn, right? Yeah. So, in the case of this particular building, obviously I don't want to give the building name away because I don't want to get a cease
• 19:30 - 20:00 and desist because there the condo boards love sending those out and I want to play it nice. And by the way, it's not a bad building, but I just do I do want to kind of like you obviously don't know anything about the building. I'm just giving you the facts. $11 million hit comes special assessment for everybody. Good thing is, you know, there's lots of equity in the building. The the owners generally seem to have money. It got paid out fine. But how what would you attribute to be to like they literally had nothing in the reserve. So it first of all $11 million hit and then there was like $300,000 in
• 20:00 - 20:30 the reserve. That's unusual. I mean I've seen things where they're replacing the windows and they've saved up 10 million for it but now it's 20, right? And they'll special assess the difference. It's unusual to go from zero to 11 like like then doesn't make sense, right? What have you done? But you never know what's happened in the past and right you you don't you don't know that something else terrible didn't befall them recently. But more often what happens is that is that
• 20:30 - 21:00 the so b you have to look at the history. If we go back the the condo act that we're following currently came about in 2001. So it's called the 1998 condo act but it didn't come into force until 2001. At that time, condos were given 3 years to do their first study. So for condos that were built before 2001, before May 5th, 2001, they would do their first study by 2004. Okay? So now some of them were doing studies before that, but there were no uh kind of restrictions on funding, right? You
• 21:00 - 21:30 didn't, you know, how you funded it wasn't governed. So now the act says do your study by 2004. And by the way, for you old condos, we're going to give you 10 years to become adequately funded. Okay? which makes no sense. It's like saying to someone, I know you're going to retire at 65, but we're not going to make you start saving till you're 50, right? Like, don't worry about it. Which is mathematically dumb, right? But then, just to make it better, when the HST came out, they increased that to 15 years. So now 15 on 2004 means that condos, the older condos didn't have to
• 21:30 - 22:00 be adequately funded until 2019. And adequately funded is not defined. Okay? And so, nobody really knows what it means. Does it mean don't go negative ever? Does it mean increase should be limited to inflation? Like what does it mean? It does it's not defined in the act. And so the it's a wild west out there to a certain extent. And so what happened was a lot of these condos would do their first reserve fund and the reserve fund study would say you need to be putting away you know 500,000 a year and but we're putting away 30,000. You know we don't want to put away 500,000. So they delay defer you
• 22:00 - 22:30 know we'll phase it in. We'll ramp it up. We'll delay it. We'll do whatever. And they mess around. And what ends up happening is you get a building that's 35 or 40 years old with $500,000 in the bank. But a 30 or 40 year old building of significance, you know, of 150 units should have many millions in the reserve. Wow. Okay. This is very I had no idea that this So this is Okay, so this I have way too many questions. I'll just try to keep myself contained. So let me
• 22:30 - 23:00 again I'm always keeping a client's hat on like if I'm a buyer or a seller of a condo because ultimately this is who this is to benefit right so let's think as a buyer I always had this I guess in my own head based on what I had seen I had developed this framework where to me the most at risk condos to buy were either the really new ones so let's say less than 5 years old less than 10 years old because there's not enough historical precedent in terms of how it's managed So that's number one. And the other
• 23:00 - 23:30 group was a really old condo, right? And that's because you just like you said, you know, you'll you have a bunch of deferred maintenance and you have like 800k in the reserve fund, like something's not right. I always thought the sweet spot was about 20 years old, 15 to 20, because I felt like within 15 to 20, you weren't paying the newness premium on a per square foot basis cuz they were already discounted cuz they're, you know, 10 years old. They're not new anymore. But you also had this runway of like 10 years where you should be risk-f free. Nothing major should
• 23:30 - 24:00 happen because if anything major did happen, it should have been addressed by now. And the big things usually start hitting at like 30 35 years. Tell me how wrong like this is very very high level. I mean it's not you're not too you're not far off but I think that the I think what people don't realize is the reason for it and I don't want to be all doom and gloom. So so I will say one thing and that is when you look at older condos there are some very well-run condos, right? So, you can go into a condo that has only $800,000 in the bank, but if they have a new roof, new
• 24:00 - 24:30 windows, new boilers, new chiller, the garage is in good shape, you know, and the plants look nice outside, the carpets look good, the amenities are, then they're doing everything right. They don't need a big balance because they've already renewed everything. Right. Right. If you go into an an older condo and it has $800,000 in the bank and you can tell that the place is falling apart, then that's a different kettle of fish. Right. Yeah. So, they both exist there. Okay. So, that's one point. The other one would be let's talk about new ones. So right now the condo act says until you do the first reserve fund study you can put in 10% of the
• 24:30 - 25:00 operating budget into reserve. And so what happens in this province and some builders will go higher than that but 10% is not enough by a long shot. Okay that number should be much closer to 25 or 30% of the budget. And so every single reserve fund study that's done in the first year says your fees are onethird of what they should be on the reserve contribution. So the and so you know we should yank you up. I'm looking at one yesterday. They were putting in I
• 25:00 - 25:30 think $900 a unit a year and they need to be up at $3,500 a unit a year. Okay. Wow. Now 3500 a unit a year is a normal that's a good reserve contribution. That should be where condos should be. If you're in a house, that's what you spend, right? On on your roof and your pavement, your windows, etc. on average. Um, so that's the right number, but they're not there. So now what do I do? I say to the board, you're way underfunded. We need to get you up, but they have 20 years where they don't need to spend anything. Like there's nothing that needs to be replaced. So it's just
• 25:30 - 26:00 putting money in an account for the future. And so almost all the boards, very with very few exceptions, they want desperately to avoid those fee increases. And I totally get it. Like people have just been lied to about what it's going to cost to live in this building. Yeah. You know, and now they're being told the truth and they don't like the truth. And matter of fact, they can't afford the truth because a lot of them are young and they're stretched to the limit. And the whole thing is I mean, I've been yelling about this for since 2015, you know, when I kind of really got my arms around it to say like if we if we tell people
• 26:00 - 26:30 that it's 10% of operating and they go to the bank and say, "How much can I borrow?" And they say, "What are your maintenance fees?" and they tell them this number which is artificially low. Guess what? The bank will lend them more. And now the bank lends them more. So now they have more mortgage than they should have. Then the fees get rightsized because there's all and there's a lot of other pressures on first year to second year transition as well, not just the reserve, but the reserve goes up and the operating budget gets made realistic and there's such a
• 26:30 - 27:00 huge increase in fees. So now their fees are much higher. The bank wouldn't have lent them that much. Yeah. Right. if they that's what those fees were. So then you've got these people kind of trapped. So they're trapped. They're in for, you know, it's too expensive and so the board wants to smooth out the increase in the fees, right? So they want to blend it, avoid it, do something. And so what's interesting is that you and you don't know that you're off track. So let's say you're a board and you're happily putting money in the reserve for the first 15 years and
• 27:00 - 27:30 you're following some plan that says go ahead like defer on to future owners. Do you know what I mean? Let's if if your inflation assumption is is 2% or 3% let's increase the contributions by 5% or 7% a year right and so that lets you start low and get high and but for the first 20 years it's painfree right there's no expenditure so you don't know you're underfunded but all it takes is one early expenditure you know something fails an HVAC expansion joint something you know that needs a big spend your fund gets depleted you think uhoh we're
• 27:30 - 28:00 in trouble and then you get a serious reserve fund study and suddenly you're seriously underfunded. So 17 to 20 is actually from a reserve perspective if they transition to someone who's actually making sure that they're properly funded. That can be one of the most painful times on the reserve fund front which can have a big obviously because what's interesting is you know then you know when you get the status certificate it has the notice of future funding on the back. Y and you know how it always has like in early increases are bigger and then they get smaller,
• 28:00 - 28:30 right? Yeah. 25 years out and the precision is amazing. So, here's what's dumb about those forms is we have to print 30 years of data. Yeah. But the only ones that you can count on are the first three years. Oh, that that makes sense cuz it's two and a halfutions for everything else. Yeah. Yeah. Because after that you need to do the next your next study, right? And then there's a whole bunch of courses that are going to drive up those costs, you know. So, um so if you're looking at it, don't ever tell somebody, you know, oh, once you
• 28:30 - 29:00 get through this tough time, it's going to be fine because that's not true. Once you get through this tough time, you're going to do the next update on the reserve fund. So anyway, so new ones risky because the reserve is low, the first year budget is low. The sec the second year budget should rightsize things on the operating side. On the reserve side, you want to watch for boards that are doing big deferrals. Now depends on your time horizon. If you want to live there from year 1 to six, then fine, right? You're you're good. If you plan to stay longer, you may get into the painful period. In that 15 to
• 29:00 - 29:30 20 year period, what you want to look at is have the are they following a notice that is deferring onto future owners. In other words, is that year-over-year increase for the 30 years a lot higher than the inflation assumption? Okay? Right? which is basically saying rather than us increase to match inflation, we're going to let those fees rise faster than inflation, which is then has the net effect of having current owners put in less and future owners put in more. I see. And it only,
• 29:30 - 30:00 you know, it only works in that first 20 years when you don't need to spend much, but it leaves you very short of money by year 20. You like you kind of keep deferring and deferring at each update to avoid paying. And so you want to see a study that has that more characteristic, you know, three increases above inflation and then inflation matched. If you're seeing a condo at 17 to 20 that's doing that or 15 to 20, that's that, you're probably okay. If you're seeing one where you see two or 3% above inflation for the whole thing, then that will come to roost
• 30:00 - 30:30 fairly soon because once they start to spend it, it has to come to roost. That's okay. That's very enlightening. It's complex, right? It's tricky. Like it's tricky. It is tricky, especially if you're not if I don't have the stuff in front of you. But I understand exactly what you're saying. It's just cuz I'm just thinking to all of those funding pages and they all vary, but I understand how the deferral would work. Just I'm trying to think if there's an easy way to spot it, but that's for another time. Let me ask you, um, you know the saying, they don't build them
• 30:30 - 31:00 like they used to, right? And it goes for everything. Like old stuff's better, new stuff's not as good. I want to just get your take on like new construction. There's like, you know, condos are coming up. There's tens of thousands of units that they're completing this year and next year. And then in 27, there's literally nothing because nobody can launch and sell a project right now. So, it's going to be an interesting time. But for the ones completing right now, I've done some uh PDIs, like some inspections before closing and stuff. And I mean, it's normal to have like over 100 deficiencies, and these are
• 31:00 - 31:30 small cosmetic things, but I'm just wondering from your perspective, like how do you feel about things built in the last 5 to 10 years? Is it as good as before? Is the quality lessened? What's the What's the takeaway here just in terms of general? I know it will vary between builders as well, but I'm just wondering how do you feel about quality in general? Um, it's it's a really difficult question I would say because there's so many different forces acting on the
• 31:30 - 32:00 marketplace. So, for example, you know, the the average condo 25 or 30 years ago was a was a single tower in a field with a parking garage, right? Right. Simple, like anybody can get their head around it. The average condo now, 40 stories, tight to the sidewalks, you know, commercial on the ground floor, no sight, complex deep parking garage or automated parking system, you know, like they are chaotically more complex, right? So, it's hard to compare them. They are much more challenging buildings
• 32:00 - 32:30 and financially they're much more challenging like they um if I have 200 units in a in a 20s story building it's much cheaper to repair than 200 units in a 60s story building it's just so difficult to work on those buildings. So there's so there's that influence like the kind of increased complexity and then there's been a burdening of condos. So we we have we've decided in our wisdom um you know when cities and developers are negotiating the the the new condos. The one person
• 32:30 - 33:00 who is not at the table is the condo owners who are going to pay all of the bills for that building. Right? And so in those negotiations everybody gets what they want. The city gets the new daycare. The city gets the the commercial units on the ground floor. The builder gets more density or he gets whatever he gets out of it um to be able to build it. and the but the condo owners end up holding the bag at the end of the day. And so they're faced with very very complex cost sharing agreements, you know, that they're barely intelligible, right? Because if
• 33:00 - 33:30 they are even intelligible, like they're they don't match the building as it's built. There's a lot of problems with cost sharing. They may also have, let's say, um an obligation to maintain a public park that's accessible to everybody else. They may have an obligation related to say a daycare center that's in their building where they actually pay a lot of the costs related to that facility. Um there may be an affordable housing provider co-housed in the same building. There will be going forward on many of them. And so all of these things make that
• 33:30 - 34:00 build that new building just significantly more complex. So we have a huge increase in complexity. And then we have the construction. Let's start. There's two parts to that. One is quality, right? where in the old days we build out a brick or pre-cast and pre-cast concrete and it was pretty simple and could you screw it up? Obviously, right? There's some lemons always, right? Where somebody did something wrong and they did something to accommodate it. Um but
• 34:00 - 34:30 generally they were just boring simple buildings. You know, today we're getting much more complex um in the materials that we choose. You know, like as of January this year, we can only buy condensing boilers, whether or not your HVAC system was designed for a condensing boiler. A condensing boiler doesn't last as long as an old atmospheric boiler. Now, an old atmospheric boiler is terrible from an energy perspective. So, what's the improvement, right? You know, like I have a a crappy old boiler that uses way too much gas or I have a fancy modern boiler that uses much less gas but
• 34:30 - 35:00 doesn't last as long. And so, I don't it's hard to answer if that's an improvement or not. Right. Okay. So, you know, you know what? This actually answered it. I was asking the wrong question because it didn't dawn on me. This is not a question of perceived quality. This is exactly a question of of complexity. And the easiest analogy to use here is cars. I'm obsessed with cars. I can talk about cars all day long if you'd like, but the way my 1992 Honda Civic hatchback CX when I was in high school, you know, I used to work on, I
• 35:00 - 35:30 could do it with just a basic tool set from Canadian Tire fix it up. It would get me a tob. It was great. And whereas the car I'm driving now, like I I don't do anything because it's it's a computer. It's literally a computer on wheels. So I think that probably makes sense, which which then is the the bigger risk now is that these more complex things become like with cars, they become throwaway items because sometimes it's just not worth fixing because it is so complex. So I wonder that is probably going to be very interesting to see how it u pans out in
• 35:30 - 36:00 the future. It's not about quality. It's about the ability to service these things in a cost-effective manner. And reading in between the lines, the cost effective part is likely not going to happen because Yeah. And and it's going to get worse going forward because we have this now this push to net zero, right? So we're going to decarbonize. So a little bit like your car, go back to the car example. You know, you used to have a gas engine now. Now you got a big battery pack and a computer. Yeah. And so go in and fix that battery pack, would you? Well, you can't, right? No.
• 36:00 - 36:30 And exactly. And so it's and now we need to do the same thing with the building stock is from here in the next 20 or 30 years we need to get the gas out of those buildings. So we have to convert all of the buildings over to electric. And what's interesting about that is that when you do that you basically have to put in more high-tech equipment. So you know heat pumps rather than boilers. And they can't manage the coldest days in the winter. So you get to put a boiler in a gas boiler in as well. So now you're twice as much equipment that's worth more money as well. So it's
• 36:30 - 37:00 it's going to get even more complex unfortunately. Now I mean it was a net improvement to the planet. So there's an upside to it. But from a pure cost perspective the condo is going to have to own more stuff like more equipment to do that. So it's it's and I worry about that. You know I really I have a 25-year-old daughter who I wish could afford to buy a home but she can't, right? She's not paid enough to to rent, right? So, it's um and and I think we're
• 37:00 - 37:30 gonna, you know, we keep making this housing more expensive. Let's put the affordable housing in and and those units can't have big fee increases so everybody else will subsidize them. Let's put a public park in and this unit can maintain these condo owners can maintain it instead of the city maintaining it. It was putting cost cost cost into what should be the most affordable form of housing, right? Rather than getting cost out of it. And so that stinks for the young folks because it doesn't work. And then and then we need to, you know, if I rightsize those fees, imagine if I could
• 37:30 - 38:00 go back in time to 2015 and I actually convinced the government to change that 10% of operating to 30%. Which would have driven up fees in condos, which would have driven down values because the banks wouldn't lend us much, which would have helped us not get where we are now, right? But we deliberately decided not to fix that. Well, exactly. So, this is why condos uh create such a big risk for buyers and sellers and owners. So, I've been very vocal about this that in the next 5 to 10 years, I
• 38:00 - 38:30 think it's already happening. We're going to have a massive repricing of condos in Toronto simply by way of quality or flight to quality versus things that are complex, things that, you know, going to go over budget and things. I think the repricing is going to happen to I I'm kind of watching the Vancouver market. So in Vancouver, this has been happening for different reasons. They have insurance reasons. They have, you know, a lot of them are stick build versus concrete, the older condos. And they've had condos, I think, at scale for longer than we have.
• 38:30 - 39:00 I think they started with the condos earlier than we did. At least my understanding of it. And they have been going through a repricing right now. Some condos there right now are just land value. Whatever the land value or the gross floor area you can build on, that is how they will allocate whatever the unit is worth. And and that's it. You just kind of sit. you pay your maintenance fees, you bite your time and eventually all of them get bought out and somebody a developer will buy it. So I do worry that this is going to happen or it is happening slowly here in Toronto, especially in the core. Like if
• 39:00 - 39:30 the going rate on a per square foot basis for for a half have decent condo is let's say 900 to,000 bucks and you have a lot of this pre-construction stuff that's sold at $1,600 per square foot that's coming online now. And there's no way in hell they're going to get 1,600. Like they're selling for 1,100 foot in the assignment or in the offmarket which is another craziness because people are losing their shirts. So, I think this repricing is going to happen by way of obviously aging stock, but also by way of certain buildings, for example, low-rise or mid-rise lofts
• 39:30 - 40:00 and nice locations that you simply cannot afford to build ever again just because, you know, they have good floor plates, they take up a lot of land. I think those will preserve value. But all these skinny complex towers with the quote unquote dog crate condos where there's it's just commodity stock. I don't know how they fare long term because it's like that there's nothing of value here realistically cuz they're not very livable. The layouts are just long skinny things that nobody want. There's no windows in the bedrooms and
• 40:00 - 40:30 things like that. So I do think there's going to be repricing by way of quality complexity and what's going to happen with these maintenance fees. So I don't know what what your take on that is. Yeah. I mean, I don't play in that side of the world, you know. I don't know pricing of condos. I know. Think of it from maintenance fee. Think of it from a maintenance fee perspective because the second maintenance free skyrocket, it's over. The only saving grace, sorry to interrupt. The only saving grace that how they're getting away with it right now because condos have become so much smaller on a per square foot basis. You don't feel the fee increase. Oh, with
• 40:30 - 41:00 500 bucks, but you're in a 310T condo that's 2 years old. Like it's it's way like it's insane. Give me the shivers. Yeah. So, you know, when I first started working, I started working September 1990, which was just after the crash, like so in '89, there was a big crash, right? Huge condo boom. Um, they stopped building basically same very similar. It feels it feels the same now as it did in 1990. By 1994, I think prices had dropped about 40% basically before we started to build again. So, you know, I
• 41:00 - 41:30 suspect it it it's I feel like that's a good educator perhaps is looking back at that 89 to 94 period. Um, I do I think that, you know, maintenance fees, there is going to be significant upward pressure on maintenance fees, especially if we if net zero is forced on condos. Um, so it's not just the carbon tax, it's actually the cost of retrofitting these buildings to get the gas out of them is is not insignificant, right? Um, so that's expensive. the reserve the the cost increases on the reserve side are significant. You know, obviously we want
• 41:30 - 42:00 the governments to get inflation under control, but then here we're having these tariffs and how do we protect Canadians from tariffs, we give them money. Well, when we ever the government gives you money, that means that the value of your money is going to go down. So, and when the value when you know when there's when there's too much money, we're going to get inflation again. So, so it's just like I just feel like it's just keeps going from bad to worse. And I wish there was a way to solve it. And you know, it's funny. I you know I personally regret not yelling louder to to make a bigger scene about the first year reserve contributions
• 42:00 - 42:30 because it was so easy to see the writing on the wall. You know what I mean? That we I can remember sitting you know some place at a conference saying but if they let the fees be like if they lie about these fees being low for then the people are borrowing too much money like we need to get them not able to borrow the money because basically whatever you're able to borrow the builder will sell the unit for. Yeah. Right. can borrow more, then the builder's going to sell for less. And either he can make it work at that point or he can't. But we let it get out. And then how do you correct it without, you know,
• 42:30 - 43:00 if you improve it for the young folks so that they can afford something, the folks who bought it in the last 5 years are in a complete mess. It's just a we've created a very nasty problem. Like I wouldn't want to be the boss of the world trying to sort out how you extricate yourself from this cuz a lot of people get hurt and that stinks, right? Because nobody nobody buys their home hoping to lose a fortune on it. I saw an article this morning about Terion paying out 80 million in deposits that have been, you know, related to builders gone bankrupt or illegal building and
• 43:00 - 43:30 stuff and it's like that's a huge number, right? That's a terrifying too. So, but I think you're right. I think things have to I mean there is a things have to get right sized. Right. Yeah. Yeah. Repriced. Right sized. the the you know I am not a fan of pre-construction condos at all. I never have. I just I have not been overly vocal because I don't want to argue with people and because I understand their point of view. Pre-construction condos have minted more millionaires probably in the
• 43:30 - 44:00 GTA than anything else. I just don't know anything else. So, and it's just appreciation over the last 20 years. So, even when builders were selling at 1,600 ft² or 1,700 ft² and I had friends asking me, should I buy this? is this a good deal? And I'm like I'm laughing. I'm like, of course it's not. You can go down the street even then buy 1,200 bucks a square foot in the resale space on a somewhat vetted condo. So why would I go and spend this? But because it's all about the payment plan. You don't need the money up front. You're going to hang out for 4 years. It's going to
• 44:00 - 44:30 appreciate into the price, all this stuff. And I remember even university when I was graduating in 0809, I had friends using OSAP money to buy pre-construction back then. But that's when pre-construction used to cost on par or sometimes less than resale stock. And then it made all the sense in the world because you buy pre-construction at Highway 7 in Warden back then where nothing was built in Markham and then you know four years later you've graduated everything is good and then you've made literally 100 grand on the 20 you used from OSAP like it was just nuts right so it's so ingrained that to
• 44:30 - 45:00 this day people are you know they're willing to just put their blinders on and forget about the resale market but I think now a lot of people have been hurt like thousands because thousands of units are coming online and they're all underwater water. Every single one is underwater. Obviously, it's not people don't want to talk about it cuz nobody wants to talk about this type of thing. But it is very unfortunate because it was clear, at least to me, it was clear that it was going to happen at one point. We just didn't know when. But we had a great run while it lasted for those I think what's interesting too is
• 45:00 - 45:30 people sometimes get confused like in in Canada, I'll hear about people saying they're going to walk away from their deposit. You know, they bought something and now it's coming to closing. They'll walk away from their deposit. So, they're going to lose $400,000 or something and walk away. Um, but that what what I don't think they realize is that when even when they walk away from that, when it comes time to close, they're still obligated to their purchase and sale agreement, right? So, if you said you were going to spend 1.2 million on this unit, you may have walked away from your $400,000 deposit, but if the builder can
• 45:30 - 46:00 only sell it for, you know, less than the 1.2, he's going to still come after you for the delta. And so people get used to, you know, in in 2008 when the US markets were kind of crazy, people were walking away from their homes, you know, leave the keys and walk away. And they can do that in the States, we can't do here. Even when you leave the keys and walk away, you're still on the hook for how much is owed to, you know, to to either the vendor or to the to the mortgage lender. So you don't walk away. No, there there's no walking away here. There's precedent. There's case law. It's super simple. Uh, I mean, the only
• 46:00 - 46:30 way you walk away is if you want to declare bankruptcy and literally just put your life on hold for the next 10 years, but even then there's going to be pain, right? No, you're not walking away here. Definitely. And you know, I get so worried about the kids who bought in like 22 or something. I just think Yeah. And I can tell you I can tell you lots of stories because most of those condo, okay, I don't want to speculate most, but from what I know, a lot of them are bought with equity from homes. So, it's like they just basically, it's not like the money was there free and clear where
• 46:30 - 47:00 you just went and purchased. They didn't have 200,000 cash on hand. It was borrowed. Parents, I've had to sell parents' homes who had reverse mortgages because they gave money to their kids and then the rent rates went up and then the mortgages are coming up and then they're going to take more of your equity. It's like, oh my god. So, there's all kinds of stuff happening on the on the It's It's unfortunate. Obviously, not everybody. And I think for the most part there's still a lot of people that are mortgage free, but the ones that have participated in the real estate market in the last 5 years um that were ill- advised or decided to
• 47:00 - 47:30 just put the blinders on uh unfortunately there there's nothing. It's just a lesson. Time goes on. You're going to figure it out and in 5 years hopefully, you know, you're fine. But there's going to be pain on the way there. Um stinks. It stinks for those folks. That's for sure. But but we could use lower prices. Like you know, I have kids. They're much younger, but I do I I I do hope that they will be able to live here. So, or at least I hope as a family we can kind of live close to each other, not them living in a different province or something because they can't afford
• 47:30 - 48:00 housing, which is which is the biggest issue, right? Like pricing is still very expensive. So, I do I would like impossible. The 20somes I I look at them, they're just in an impossible position. Even if you have a great salary, there's not enough money to buy a home. And that stinks, right? It does. It does. and and without them like where is this place gonna go? Yeah. Um I think you've answered this question. I was gonna ask you but it seems like it's probably a drop in the bucket here at this point. So amenities just in what's
• 48:00 - 48:30 your general take on amenities in general? Like how do you cuz I know it's a loaded question. I think it come for example, I'll give an example. I love buildings with no amenities but that's because I generally skew I'm biased towards smaller midsized buildings. So less amenities but less units. And then you have places with a lot of amenities but a lot of units. So you have the economies of scale to absorb the cost. So I'm just always kind of confused but I want So I am amenities phobic. I don't want them. I want nothing to do with them. I don't want to pay for a swimming
• 48:30 - 49:00 pool I'll never use. I don't want to pay for any of the stuff. But what's your take? Am I is that an overreaction from my end? So two things. One, there's a there's a tricky thing that happens. So amenities I don't you know they are expensive. I mean, and I've been through so many condos would have swimming pools, and I have seen probably three swimmers in my 35 years looking at residential condos. So, they I think the pool is your biggest um expense from like, you know, there's operating side expenses as well as reserve side
• 49:00 - 49:30 expenses. But if I look at reserve side, so let's just focus on reserve for a minute because that's my thing. If I put up this graph again, you you can see the graph again. Is that right? Yeah, I can see it. Those expenditures. So, look at those windows up at 23 million. Look at the interior. So that's all your interior finish renewal, right? So that's look at just under 15 million. So not insignificant, right? But if I look at that on a let's see if I can do this on a percentage basis, interiors in this building were about 12% of the total cost. And then if I break down interiors, I get amenities are about a
• 49:30 - 50:00 quarter of that. So on a reserve perspective in this building, the amenities represent sort of 4% of the cost. Like they're not going to move the needle. Wow. This is very enlightening for me. I did not. So, so, so to me it seems um very gross generalization. Amenities are not as material as I I thought. I thought for sure they would obviously depends on the number of units, right? So, this one let's say this might be this one's probably around I don't remember exactly but about two just under 200 units or something, right? So,
• 50:00 - 50:30 it's 4% roughly and it's a complex building has a lot of roofs and stuff. So, it's an it's a high-end building. It's an expensive, you know, nice condo and it's 4%. You could go obviously if you had 50 units in an indoor swimming pool, it's going to be more material, right? Yeah, that that makes sense. Or if you um and then but there's another interesting twist and I'll tell you another interesting twist. There are some buildings that have the um that
• 50:30 - 51:00 have no amenities, right? and you'll buy in when they're new, but because they have no amenities, they have a very low operating budget, right? Like you'll go into the building that has no security, no amenities. It's just like go in, there's an elevator in a parking garage, and you think to yourself, well, that's good. It's going to be much cheaper to run. And it is, but the shock from first year to second year is going to be higher because the reserve is now based on 10% of a tiny operating budget. M I see. So that reserve contribution is probably going to go up by a factor of three or four rather than a factor of
• 51:00 - 51:30 two or three. Now it's not I mean again it's everything is relative but sometimes the the delta the percent change on those buildings is actually worse on the new ones than on the ones that are amenity rich and have a high operating budget. So it's kind of there's a kind of perverse um aspect to it there. Um the amenities, you know, I always look at the amenities to me are just like um they're the they're the curb appeal. You know, when everybody's selling their unit, they're going to show the pool and the sauna and the this and the that they've never used themselves. And for some reason, when
• 51:30 - 52:00 people are buying, they like them, right? But I agree with you. Like, if I were buying a condo, it would be amenity light. Yeah. Well, this is just like cars. It's they always advertise the feature. It can tow 11,000 lbs. It can. But you're never going to do anything. You're going to get a bag of moltra, no frrills, and you're going to go back home like settle down, right? So, this is what we're doing. me my my my van when I had the kids with the you know a power door and need to push the button to open the door. Okay. All I want to know is when the button doesn't work, can I just open the door? Yes. Okay, fine. I'll take this. That's That's
• 52:00 - 52:30 funny. That's so true. So, let me Okay, so here's I'm going to ask you to I'm going to ask you the impossible question. Let's say you're 25 and you're making a ton of money right now and you're looking to buy a condo in the city of Toronto. How are you going to go about like I guess what are you what are the considerations you're making as you're shopping for a condo whether it is amenities whether it is years like how do you approach this entire thing let's say we're location agnostic like you can buy anywhere you're just and and let's say obviously you want a nice
• 52:30 - 53:00 floor plan and you want this you have your little things but when you're looking at these condos and you're looking at 10 15 20 30 condo units how like what are you thinking of in your head how what's the calculus with everything you know in terms of that I know this is very hard to answer because it's very general and it's but I'm asking you to do the impossible just to kind of let people know how to think that's what I want how do you think about this so amenity light I like I like I like also unique because from a resale perspective I feel it's hard to
• 53:00 - 53:30 nobody's going to build a nice loft n story loft now it's impossible you got to go 40 stories 60 stories you just can't do so for me this is all good uh you floor plate. You know what I think I worry about? I mean, if I were buying it, I'm very reserve biased because I live my life in reserve funds, right? So, my instinct is always to see whether or not that's in hand. But partly because if I look at a notice and I see, you know, they're supposed to have a reserve fund study within three years, but they're
• 53:30 - 54:00 past due. Yeah. Something's up there, right? Yeah. Or they, you know, they got huge increases going forward that don't that are above inflation. Something's up there. like I and and to me it's kind of a a measure of the mismanagement of the board. If they're mismanaging that which is very tightly regulated, what else are they mismanaging? Right? So that's I don't know how you judge the boards because you don't get to meet the board to know if you've got you know solid hardworking great volunteers or you've got some crazies who hate each other.
• 54:00 - 54:30 Like I don't know how you judge that. I think I would like you know I a lot of the complaints are are noise transfer and odor transfer. So, obviously, I don't particularly want a, as much as I like pizza, I don't want a pizza oven right under my unit. Do you know what I mean, right? Um, I don't want a gym that's two stories below me because the the dropping of the weights is going to drive me crazy, but I don't know how you judge that. I mean, I personally would look to make sure I have concrete shear walls between me and the adjacent units and not just drywall separations. Although some drywall separations are
• 54:30 - 55:00 great, but the building code doesn't require much sound transmission resistance between units, right? So, that's my biggest pet peeve. And then I don't want to, you know, no smoking for me would be absolute, you know, like nobody. What about pets? How do you feel about no pet building versus pet restricted buildings? Do you know what? I always thought I was a dog person my whole life because I had a dog when my kids were little and I loved her. But then my daughter convinced me the other day, I'm not a dog person after all. I only like my own dog. Um, do animals are interesting. I
• 55:00 - 55:30 feel I feel like it's part of the sad equation in a sense is that if young people can't afford homes and then they can finally afford homes but they can't afford a family, they get a dog and so a lot of the buildings are completely overrun with dogs and that causes some problems, right? There's just too many. Yeah, we had one where the they had a fire in the elevators and so you had to walk down and when you have to get an old dog out of the 10th floor of a high-rise in the morning, it's tough, right, to get them out of time to get to the grass. So, it's tricky. I mean, and so you don't I don't love I don't love
• 55:30 - 56:00 them, but at the same time, you know, people love their dogs, right? So, you're not good. Well, there's also the rules I've seen imposed like if if you have a dog, like certain condos won't allow you, they can't walk. You got to carry them through the common areas. If you got a Labrador or something, good luck. Yeah. Yeah. Good luck. Maybe the Labrador is going to carry you. It's It's crazy. So, I know two things that are just non-engineering related in terms of how to get inside Astro the condo. And I think I might have mentioned this to you before. I'm probably on hundreds of Facebook groups
• 56:00 - 56:30 for specific condos. And if the biggest like thing people watch for that like I had one client recently, she she's awesome, but she's very thorough, which which is really good, but it's sometimes challenging because you can't answer all the questions, but she's very thorough and it not in the sense that she's picky, but she wants to know what she's getting herself into right out of the gate. And I I really respect that. So ultimately if like for example her thing is cockroaches she owns multiple units and once you get a cockroach right
• 56:30 - 57:00 let's especially with these commercial like mix mixeduse buildings let's say there's a Tim Hortons at the bottom or a longos I' I've personally owned units like that where I know that these things can happen and then how the condo board handles that you know it it will vary greatly some of them immediately they're going to come and fumigate stuff like the whole building some will just fumigate one unit some will do nothing so I kind of creep on these Facebook groups and it's hard to get into them because you have to be an owner or a tenant. But, you know, if you're a realtor, you can kind of weasle your way in. And then, you know, I think one of
• 57:00 - 57:30 the safest ways to look at things is just the owner to tenant ratio. That has always been the golden rule. The more owners you have in a building, the better it's it's going to be. Generally speaking, it hasn't failed me just yet cuz the more like if you have most buildings downtown, downtown specifically, if you're 50/50, you're doing good. If you're if you have more more than 50% owners, you're doing very well. But you know, you go to Missaga or Markham, like you know, 70% of the people are owners, not tenants, right? And the pay depends on the age of the
• 57:30 - 58:00 building. So that's where it gives me a little bit of comfort. But then there's building is like, you know, uh 80% tenants and good luck. Like you know what what your deal like it's anything that potentially is an issue is going to be an issue and you can search the Facebook groups and you know there's not not as much involvement. People don't care as much cuz you know they're there temporarily. Well, do they care about somebody on the fifth floor with a cockroach? It's like I'm out here in 5 months. I don't care. So, those have been, you know, the renters. I don't, you know, I know some I, you know, I
• 58:00 - 58:30 know some buildings where the renters are great, you know, like they're, you know, but I think it does depend. Go ahead. It goes back to that 25-year-old conversation. Not only can my daughter not afford to rent, but the only way she could rent is if she had a roommate or two. Yeah. And so you're kind of cramming a bunch of people in together who don't really want to be together into a lot of units that weren't meant that aren't big enough for that many people. So you get a lot of population, I guess, in those buildings. A lot of Airbnb, so a lot of transient folks. Yeah. I don't know. And then the pest stuff. I don't see a lot of problems with pests in condos. Um or certainly
• 58:30 - 59:00 that aren't flagged to me. You know what I mean? I do in some of the rental buildings more, but but even that is a tough gig, right? you say to the landlord or the condo board, you know, we have cockroaches and they want to come in and fumigate, but the very places that need the fumigation the most are the ones with the mess that can't be fumigated. Yeah. Right. Right. That's true. I dealt with it. I dealt with it. The other lesson that's striking to me is the more units I go into in my life, the more I realize that most people are not very neat and tidy. Oh, I Yeah, we
• 59:00 - 59:30 we can stop to me. You know, I live in a world where the world is fairly pristine. My kids are growing up. I have lots of time on my hands. So, you know, my world gets to run like a clockwork machine. And so, I go into some people's houses and I and the disarray is significant. And that's obviously that's when you start to get the cockroaches. You know, you can't you can't fumigate a place that's in a mess, right? Where you can't get. So, anyways, but I don't hear about it much. I really don't hear about that much in condos, but not that they would come and tell me. Yeah. Right. So, that's not your problem. That's not a problem for you to solve anyway for
• 59:30 - 60:00 them. Yeah. I mean the way you're going it might start becoming your problem because you are solid. I hope not. Okay. But I do think I you know what I mean going back to what I would choose I would look for I think low complexity you know and and I also have this theory that says you shouldn't be too high in the building unless you have your own AED which is a terrible thing to say but you know your defibrillator because if you have a heart attack up too high in a building how are they going to get to
• 60:00 - 60:30 you in time right? So, oh, things I did not consider. Yeah. Well, especially now, look at the traffic, right? Okay. Call 911 at a high-rise building downtown. Oh, you you're familiar with ICE condos, I'm assuming, at on street. Not terrible. So, I mean, it's it's it's no surprise, and please don't sue me, but you know, like if you go there to uh look, so ju just to preface this before anybody gets upset. I I have nothing against them, but there are some big issues there. And the big issue is
• 60:30 - 61:00 exactly what you just said. Like if you go there during rush hour, especially precoid, I haven't been there in years. The last time I was there like 22, but even then you could the lineups for the elevator are literally outside the building. Like there's a single file of of people waiting 15, 20 minutes to just get to the elevator because, you know, I think they have in one of the towers I think they have like I don't know what four or five uh cars. One's down, one's in service. I don't know what the but it's like always something and you're
• 61:00 - 61:30 dealing with they're very tall. Like you want to get to the 46th floor and then there's like seven people that are getting off before you. I mean there's the weight downstairs and then there's the way just to get up to your unit and huge issue. Huge issue and I don't know how you solve that. I really don't. But that's that's just the quality of of living. It's it's not the best. And uh that is a predominantly Airbnb building. Um there there's some good about them as but it speaks to a code problem. Because the our building code says if you're going to put in an elevator, you have to comply with this standard. So there's a
• 61:30 - 62:00 standard for elevators, but the code doesn't say how many elevators you have to have. That's crazy. Yeah. So there's this kind of rule of thumb where they say we'll put in one elevator per 100 units or something, you know, it's kind of a rule of thumb that gets used. Yeah. Which is too too little in my opinion. And I don't in some cases it's not enough because when you have one down, you know, or two down, you're really short service, right? Yeah. And and then also there's the elevator management part that I've seen. Some condo boards, you're not allowed to book the service elevator between 3:00 and 7:00 just no
• 62:00 - 62:30 matter what. No matter what, you have some places where the elevator always there's always an elevator at the first floor automatically coming and waiting, right? And and I don't know the like I don't know how much programming goes into this stuff, but it's like you there are ways to do it better. I don't know if everybody does best practices, but I've done I've seen buildings that with two elevators and I haven't had to wait and it's like they're not. You know what's funny? It's funny. I know I' I've dealt with quite a bit of rental in my time, too. And if you talk to the, you know, the kind of the traditional old boy who owned rental buildings, he knew
• 62:30 - 63:00 the one thing that always had to work was the elevators. Yeah. Because if a tenant has to wait every time or gets trapped in an elevator, they're moving. Yeah. Right. They're not staying. And so they knew we have to have good elevator service. They have to be up, right? And so they spent their money making sure elevators were up. The condos are different. You know, the condos have managers and they have service contracts and they have all of this, but it it seems to be um that, you know, I guess
• 63:00 - 63:30 if you're the landlord and if you don't keep your elevators up, your tenants go away and so it hits your bottom line. So it's becomes very important. I think in the condos it's just one more thing in a barrage of noise. Yeah. I think maybe they should be paying much more attention to elevators. Now, if they're underserved for elevators out of the gate because of the design, then you can't fix that, right? Yeah. Right after the fact. So, that part stinks. But yeah, I don't know. There are some buildings where we get in the performance audits when we do the warranty reviews and right after
• 63:30 - 64:00 construction, we get a lot of complaints about weight times at elevators. Yeah, that makes sense. Frustrating. Final question for you. So, we've talked about all the I don't know, not the nice parts, but it's the parts that people need to be aware of. And I know in your book, you do have actual actionable advice. So, can you just maybe go over that in terms of if I'm an owner of a condo or let's say I already own it, I've already bought and I want to obviously things are not going to be in my control, but what can I do to to be more informed, maybe guide people in the
• 64:00 - 64:30 right direction, maybe insulate the condo from bad decisions? Like, what can I do as an owner of a condo right now in the GTA? I don't want to be trit in this answer. Um that it's important to be involved, right? So, in other words, like I'll go to AGMs at condos with 200 units and they there's hardly anybody in the room, right? Like this is a big investment. Show up. Show up and hear what's happening. You know, the president's going to give a report, this sort of thing. Get involved. Um but then the people who do come to those
• 64:30 - 65:00 meetings, sometimes I feel like they come with an agenda. You know, they come pissed off at the board. you know, I'm going to take him down. And it's like, hold on, time out. Time out. This is one of the owners who's volunteered their time to take care of all of this junk for you for the year. And if you just go headtohead with them, it's like that's not very nice, right? So, it's like I mean, in my world, it's about be thankful to the board, right? Now, assuming you don't have a okay, in
• 65:00 - 65:30 the world of condos, we have kind of we have buildings where you have an an okay board and okay owners, right? And life is good or a great board and okay owners or great board and great owners and those things are all good. But the odd time you get a bad board and the odd time you get bad owners, right? And when either of those exist, it's much more difficult. But assuming that you're in the 70% where you have a fine board, you know, they're doing their darnest, it's like, how do you support them? be thankful that they're there, right? They are spending probably 20 or 30 hours a
• 65:30 - 66:00 month taking care of the building so that you can just show up and and open the door and walk in when you feel like it, right? And so be thankful to them, be supportive of them. If you notice something that's not right, politely tell the management office about it, you know, like don't don't sort of judge them for not having picked it up, right? Like be helpful, right? I was in one building one day. I remember it was a building that was actually under quarted administration, which means it's at the end of the rope, right? They're at the
• 66:00 - 66:30 knot at the end of the rope hanging on for dear life. Quarterappointed administration. They have no money. They have no room in their budget for anything. They've had to cut all their services. Like they're in really sad shape. And a lady gets up and says, "You know, for the last seven days, I've gone down the corridor and there's been a coffee cup sitting in the corridor for seven days." And and the manager is kind of like the cleaner. And I said, "You know what? pick up the coffee cup and put it in the garbage. You're an owner for God's sake, right? Like, start acting like you own the building because
• 66:30 - 67:00 you do. And they're all in it together. So, it's like, how do you be supportive? How do you help provide information? How do you volunteer your effort? I go to so many AGMs where I'll show up because I'm going to present and they're putting out the chairs. I'll help put out the chairs and at the end of the night, I help put away the chairs. Well, do you know who puts away the chairs? The board. Do you know who doesn't put away the chairs? the owners who just showed up at the meeting who have the exact same responsibility as those people, right? Ask owners. So, it's like recognize that you're an owner. Participate in the
• 67:00 - 67:30 community, you know, help organize a social event so you can meet other people. Get to know the people on your floor. Do something positive and valuable to your building, but don't just be the guy, you know, I'd like those old, you're probably too young for this, but the the two old men and the muppets who just sat on the sidelines criticizing, you know, like don't be them, right? you know, be helpful, be useful, take care of your own part of the world, give good feedback, be positive and respectful and helpful to the board. Like, do that. And then, quite frankly, if you want to have a say
• 67:30 - 68:00 in things, then get on the darn board, but it's a lot of effort. So, don't don't sign up to be on the board if you just want to fix your pet problem because you don't get and choose, right? You get everything if you get on the board. And then what I always say is the coolest thing and it's I think I put my acknowledgement or something in the book to that was to say you know I am blown away by the volunteers that I meet on the boards. It's a thankless job. It's unbelievable effort. Like some people are doing 10 or more hours a week easy, easy on condo
• 68:00 - 68:30 business. And if they're in a big problem and they take everything so personally, you know, like this your example with the windows and the special assessment, I can guarantee you that that board agonized over the decisions around that thing. You know, it was not like they didn't care and just did it, but people as if they did, right? So, it's it's a tough job. But anyway, so yeah, that's it. Get involved. Do you just This is a one of those questions that doesn't land well, but do you think
• 68:30 - 69:00 these board positions should be paid? I feel it may like from my perspective, assuming there's scale and stuff. I I think it it may actually benefit especially in the if the building is crap, if you can attract I don't even know what to call it, but again, because the commitment is big and I have had a you know, I've seen what it takes. I would never do I I don't have not that I don't have the time. I just wouldn't be willing to put my time into it. But if it came down to
• 69:00 - 69:30 I'm living in a building that I really want to be in and I see it going downhill, I would have no choice but to get involved. Now, I don't know if payment is the right thing, but it just I feel I don't know if that would make a difference. Just always wondered about that. Yeah, I there's a lot of discussion in the industry about whether or not some building should have a professional director. In other words, you have your volunteers on the board, but maybe there should be one person who's an experienced condo lawyer, condo engineer, condo manager, maybe who has who can help make sure that you're staying on the narrow. Now, the manager
• 69:30 - 70:00 gives some the board some of that feedback sometimes, but a lot of times the the condo managers can be quite junior as well or they're or they're not necessarily in a position of authority to sort of um set a stray board back on track. Yeah. Yeah. So there is a lot of discussion about professional directors and I don't know what I think about that like it ends up I it's a kind of that is how many great boards
• 70:00 - 70:30 there are without payment. Yeah. Right. And I don't know what motiv I do know what motivates those people. They have time and they're willing to do it and they want to protect their own investment and they want and they and they get caught up in it and then they take care of it. Now, the odd time, I mean, I can sit in a board and I know the one guy in the room who is only here to protect his own pocketbook, you know, within the first 10 minutes or something of a meeting, right? And that guy's a bit dangerous because his motivations are not right. Like, he's not taking care of the fiduciary duty of the corporation. He's only worried about himself. So, cuz he's selling next year
• 70:30 - 71:00 usually. Well, that's kind of like all the investor buildings that they're coming online right now. That's basically the board right there. Defer, defer, defer. Everything's great and then as long as they get out. You know, the big challenge we're actually seeing right now is I've got I'm doing a couple So, we do the performance audit in the first year after registration, right? So, the warranty starts at registration and then within a year you can make a warranty claim. And for the last 35 years, you know, they'll have turnover um within a few months of registration. So, they've sold 50% of the units or
• 71:00 - 71:30 closed 50% of the units. And um and so then the board that we're dealing with for the performance audit is the owner board, the post turnover board. Um, now we're starting to see some of the buildings where they haven't sold 50% of the units yet. And so it's actually a declarant board who's making the decisions in that first year, which is a whole interesting twist. And I think the builders should be careful because they shouldn't if they put enough of themselves, there's a if they put too many builder reps on the board or friends of builder, you know, it's the
• 71:30 - 72:00 two from the builder and his first cousins or something. Um then when it comes to make a decision that is um make a decision that has an impact on the builder they should all recuse themselves from the meeting. So let's say if there's a board of five of four of them are working for the builder they have to recuse themselves from a decision there's not quum they can't do anything. So they've basically hand tied the you know they've tied up the board but they're not doing that. What they're doing is they're staying involved in the decisions. So when we're coming to them and saying for the performance audit we need more information they're saying
• 72:00 - 72:30 it's not available. the the builder reps on the boards are making decisions that have an impact on the builder. So, they shouldn't be making those decisions, right? They should have the corporation's interest at heart. So, it's an interesting time and that hasn't happened for 25 years because we've always had turnover, you know, the units selling everybody on. But when you don't have all the units sold, then you get into these strange positions. Yeah, it's be interesting to see. Yeah. Well, thank you so much. I really appreciate it. I learned a ton and now I realize I know even less than I thought I knew. Well, it sounds like But you know what? you're
• 72:30 - 73:00 doing the right stuff, right? Like saving those status certificates is pretty nifty, you know? It's like um because it does give you some comparatives. I think it's a good idea. Context. Yeah, I'm just looking for context because it's like it's so much easier when you when you come when you have a baseline because a status certificate as a as a standalone document in absolute terms means very little to somebody reading it. Like you just don't know.