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The Critical Role of Contract (CPI) Adjustments for Effective Property Management: Balancing Budgets and Sustainability for Consistency in your Condo

Updated: 7 days ago




Condo operations and finances are no easy task to tackle, and Directors are ultimately the ones whose decisions have the greatest impact on the lives (and bank accounts) of residents. But did you know that these decisions also deeply affect property management professionals, and even the sustainability of our condo industry? Among these decisions, the often-contested annual adjustments or increases (usually referred to as the CPI, or Consumer Price Index) in property management contracts stand as a crucial yet misunderstood element. 





However, before we can dive into CPI increases, we must gain a deeper understanding of the condominium industry, particularly in relation to the supply and staffing of property managers.  Our industry faces a profound crisis: a dire insufficiency of property managers. Statistics paint a stark reality— Ontario has 1 licensed manager per 3 condos, with a quarter nearing retirement, and a mere fraction (approximately 3%) of young minds entering the field. This shortage jeopardizes the very fabric of our condo landscape. Boards must acknowledge the urgency of this situation and proactively strategize to ensure a sustainable workforce to manage our condominiums effectively.


Together, as a collective condo community, we must recognize the urgency of effective succession planning for ensuring sustainable condo management services in the future, which means Boards also must realize and prioritize competitive pay for property managers. Boards understanding this bleak reality and embracing proactive measures fortify both their community and the industry's future resilience - which is why the CPI increase is such a valuable tool whose rejection should be considered very carefully and thoughtfully.


Of course, it’s tempting to try to cut costs at every corner of the budget, and we all know how much every little bit adds up - especially in light of the skyrocketing costs that we’ve seen post-pandemic (that are, of course, not in line with increases in pay). Everyone is paying more attention to their personal finances, so it only makes sense that Directors are paying even greater attention to their corporation’s budget and avoiding adding to the financial stress of condo owners with increases in maintenance fees.


But is saving the CPI really a savings? And, at what cost? Let’s explore this nuanced topic together, and see how we can help Directors balance their budgets in a way that is respectful to owners and realistic to a condo’s current and future operational requirements and interests.


We’ll better understand the condo connection to the CPI cost, as well as consider alternatives and dialogue for when condos: 

  1. Are considering rejecting the CPI to prioritize the condo’s budget,

  2. Wish to increase the manager’s salary but are dissatisfied with the property management company,

  3. Are happy with the property management company but dissatisfied with the manager, and

  4. Are dissatisfied with both the property management company and the manager.


Are you ready to dive in further and find out what the most important considerations are for keeping effective property management and economical budgets for your condo community? Let’s go!


 

Considering The Critical Role of Contract (CPI) Adjustments for

Effective Property Management in your Condo Community:

Balancing Budgets and Sustainability for Consistency in your Corporation + Unveiling the Cruciality of CPI Increases



The Condo Connection to the CPI Cost: Understanding the scope of CPI increases is vital for sustainable property management; these increases serve as a long-term lifeline, aligning with industry standards and ensuring fair compensation for the diligence and expertise of service providers. By anchoring these adjustments to the Consumer Price Index, it reflects the actual rise in costs faced by management companies to maintain service quality and meet the evolving needs of our communities. Appreciating this correlation empowers boards to make informed decisions that prioritize long-term stability over short-term savings, safeguarding the sustainability of their condominium.


Accepting CPI adjustments isn't merely about figures; it's about acknowledging the cost of keeping qualified and consistent management staff on site. It maintains equilibrium, allowing for operational advancements and retaining talent vital for effective management - and no one likes turnover, especially Directors and condo communities. Ensuring that compensation stays competitive and in line with the market can create consistency in the community by preventing a constant churn of property managers who may consider alternate roles for financial reasons.


For the above reasons, and more, a CPI increase isn't just a numerical uptick; it's a testament to acknowledging the invaluable expertise and commitment of property managers. These adjustments contribute to fostering an environment where talent is retained, innovations thrive, and the quality of services continually evolves to meet the growing needs of diverse condo communities.


Val Khomenko (Regional Condominium Manager at TSE Management Services Inc.) would “be happy with Construction Price Index increases in salaries commensurate with the legislative customer demands”, but wittingly reminds us that “we are stuck with the other CPI. [Property Management was deemed essential during the C era [Covid] and it was forgotten as soon as mandates [were] dropped”. 


Condo Managers “are essential and a friendly reminder perhaps during these negotiations for increases may be prudent”, Khomenko reminds us before advising that, while he realizes the budget constraints of clients, “frank and open discussion about service is a reasonable approach. Nobody wins if we are at odds”.

Wise words indeed - so how can we keep together, pay appropriate wages, and maintain an economical condo budget? Read on to find out!



Embracing Alternatives and Dialogue


Contract Adjustments: Exploring Options


While rejecting CPI increases may seem financially prudent, it’s important to explore the reasoning behind the rejection. In cases where the CPI increase may be rejected in order to prioritize a cost savings, it’s important to remember that there are alternative paths to navigate financial savings that may not cost the corporation as dearly down the road.


When considering rejecting a CPI increase, we suggest that Directors first explore why they’re not agreeable to it:

  1. Is the Board simply looking to cut costs?

  2. Is the Board satisfied with the property manager, but dissatisfied with the property management company?

  3. Is the Board dissatisfied with the property manager, but satisfied with the property management company?

  4. Is the Board dissatisfied with both the property manager and the property management company?



If the Board is prioritizing the budget: For many corporations, the property management contract is one of the biggest service expenses to the operating budget, so it often seems to be one of the most tempting places to cut corners from - and rejecting the CPI just seems an easy line item to chop right out. Unfortunately, because property management companies often rely on the CPI to increase the wages of their employees, this often ends up costing staff the most - including the property manager dedicated to the condo’s site. 


Due to the current labour crisis in property management, managers are in high demand - and they know it. If a property manager doesn’t feel like their salary is in line with the demands of their job, they may consider leaving for a better opportunity. Turnover affects condo corporations due to the loss of historical knowledge, which inevitably leads to challenges and frustrations within the Board and community. 

Luckily, most property management companies have done their best to ensure that “the increases have been pretty steady and possible”, Angel-Marie Reiner (President at Onyx Condominium Management) states.


Onyx, for example, has even tried to get creative by “extending [their] contracts to hold prices for a  year and see where the economic climate is” while making adjustments “such as moving meetings from monthly to every other month”, Reiner suggests. Working together with your property management is key - and constructively compromising alongside clear and open communication is the perfect vessel to negotiating a fair contract (and CPI negotiation) for all.


For Boards looking at rejecting a CPI increase to simply cut some costs, please take a step back and ask yourself: is this short-term gain worth the potential long-term pain? Could we be doing this better, with less risk to losing staff and causing disruption to our residents? We believe you can, and we’re ready to help by showing you how!



Are you happy with your manager but perhaps not as satisfied with the property management company? Are you looking to withhold the CPI because of that dissatisfaction, but don’t want to risk unfairly affecting the property manager? Or do you really want to ensure that the money spent is going to the manager rather than the management company?


Direct salary adjustments offer a viable alternative for boards opposing an overall increase, fostering fair compensation without compromising fiscal prudence. In this case, you’d pay out an increase (or bonus) to the property manager via the property management company, with agreed-upon terms ahead of time. 

For taxation and employment law purposes, we don’t  suggest that you make this payment directly to the property manager from the condo corporation’s operating fund as it can cause some issues down the line, so be sure to speak to the property management company about how you can increase the manager’s pay in lieu of a CPI.


John Recker (Property Manager at Meritus Group Condominium Management) stresses the importance of being “sure that [CPI increases] actually translated into an actual increase in salary for the manager, on the ground . . . it’s likely that such increases often mean more income for the property management company in many cases. How to raise salaries.


“How to raise salaries for managers is a very important topic. We are essentially executive directors of multi-million dollar not-for-profit organizations, but with many more legislated responsibilities and often very challenging customers. Yet, managers' salaries remain very low for what is expected of them. If we look at how other industries have fought for higher pay, we have minimum wage laws and the dreaded ‘U-word’ [unions], but it’s not clear to me how these means of gaining equity could be effectively employed”, Recker states.


Reiner agrees with Recker that “most Managers deserve more . . . though the Corporations need to recognize this and pay management fees accordingly”. She uses the example of a Toronto management firm that recently quoted at extremely low costs for a condominium, and questions how such companies are able to pay appropriate salaries to their staff (including managers) at that rate - a fair point, which Stratastic also echoes.



What should you consider if you’re satisfied with the company but not the manager? And if you’re considering holding back the CPI because you don’t want the property manager to get a raise due to poor performance? Keep in mind that the CPI increase isn’t exclusively for the property manager’s salary. It helps the property management company meet their increasing costs, which includes competitive pay for all members of their staff, not necessarily just on-site ones. This may include: any supervisors (such as regional or district managers that oversee several property managers), administrative workers, directors (who oversee overall operations, client satisfaction, etc.), and any other head office staff members. It also allows property management companies to cover the increased costs of doing business, such as rent, utilities, insurance, supplies, and more.


Budget season is also often the point where Boards may choose to discuss their dissatisfaction with the management’s company’s overall services to justify rejecting a CPI increase. While this may be inevitable in a current circumstance, we advise that Boards should always maintain open communication with property management companies, who serve as their partners and are the most important team members in managing the condo community. If a Board is unhappy with services, these issues should be addressed as they occur throughout the year - don’t let them pile up to be revealed annually when discussing a CPI increase!


If the Board is still unsure of approving a CPI increase, there are alternatives for consideration, such as considering performance-based incentives, or even re-evaluating service scopes are avenues that encourage a more nuanced approach to remuneration while aligning with budgetary constraints.



Timely and Transparent Communication: Transparent communication forms the bedrock of healthy relationships between boards and management companies. Engaging in open dialogue, expressing concerns, and jointly seeking solutions ensures mutual satisfaction, operational synergy, and that both parties are working together in the best interests of the condo community. Establishing channels for ongoing communication fosters a collaborative environment where concerns can be addressed proactively, allowing for creative problem-solving and mutually beneficial outcomes that serve the interests of the board, the management company, and ultimately, the residents that both are committed to serving.



Balancing the Budgetary Scales


Efficiency in Reallocation: Beyond rejecting CPI increases, prudent fiscal management involves identifying budgetary reallocations. Shifting resources within the budget to optimize operational efficiency mitigates financial strains without hampering competitive remuneration. Boards can explore areas such as energy-saving initiatives, vendor contract optimizations, or technology integrations to streamline operations and allocate savings toward compensating staff competitively. If a corporation has committees, one creative way to cut costs is to challenge committees to be financially self-sustaining (or at least partially so) rather than corporation-funded - a method that we’ve often seen work quite well!


The Cornerstone of Competitive Compensation: Ensuring competitive compensation transcends mere numbers; it's an investment in excellence. Boards' commitment to paying competitively nurtures a respectful and mutually-beneficial relationship, minimizing turnover and preserving invaluable site knowledge. Recognizing the pivotal role of property managers and staff by offering competitive compensation not only retains talent but also attracts skilled professionals, elevating the standards of service and fortifying the Board’s commitment to a flourishing community both in the short- and long-term.



Now that we’ve explored the nuances to consider when faced with an increase in a contract’s cost, it’s important to also remember that retaining talent doesn’t stop by starting to approve CPI increases.


You should also consider the value of creating better workplaces for your staff within your corporation’s workplace.


You now know that our industry is facing a shortage of property managers, and how approving a CPI increase can help keep consistency in  your condo corporation, as well as ensure competitive pay for service providers. But, that’s not the only thing that Boards can do to keep property managers from leaving to other sites or companies. It should come as no surprise that how people are treated matters, and incivility in condos has been a huge topic that concerns our industry and collective condo community as a whole.  In fact, the CAT recently took a stand against harassment, and more emphasis has been placed on conflict resolution, de-escalation, and enforcement for appropriate behaviour.


Boards set the tone for the type of comportment that will (and won’t) be accepted in a condo. By protecting workers and creating a safe and respectful workplace environment, staff is more likely to feel valued, appreciated, and most importantly - safe. Committing to protecting workers and their workplace costs corporations nothing, but ultimately it means everything to the staff - especially in light of the current climate of increasing harassment and violence in condos.


👀 Sneak peek: We encourage you to read our upcoming series on harassment and violence in condos to gain a better understanding of just how many challenges property managers are dealing with, and the changes proposed to better protect Directors, too. Stay tuned in March - and register now (free)!



The Conclusion to the CPI Conundrum


When considering rejecting a CPI increase, we urge Boards to keep in mind that contracts establish what the tasks and responsibilities of property management are, and how they are to be carried out. In exchange, the Board agrees to fair compensation for these services via current pricing and future CPI increases. Negotiating mutually beneficial terms with management companies from the beginning, and ensuring that both sides stick to their commitments (property management companies are to perform accordingly, and corporations are to compensate appropriately) is key to a long-lasting relationship that maintains consistency in the community.


The decision to thoroughly consider CPI increases (rather than easily reject them for budgetary reasons) transcends mere financial prudence; it's a testament to nurturing sustainability and efficiency in both the individual corporation and its community, all the way through to the very fabric of an industry that’s already hanging on by a thin thread. By fostering dialogue, exploring alternatives, and ensuring competitive compensation, boards are in a better position to protect and build upon the foundation of thriving condominium communities.


Next week, we’ll hear a personal take on CPI increases, and their effect on service providers, from Nicholas Chirametli (President at City Sites Property Management Inc.). Stay tuned as we dive deeper into this topic, together!


Let's embark on this journey of stable property management partnerships; through collaboration and discourse,  we can secure a sustainable future for our communities and collective condo industry.

-Stratastic Inc.


P.S. Join our collective condo community by registering with Stratastic now, and be the first to receive informational articles such as these!


P.S.S. Don't forget that you can find condo contractors on our Vendor Directory - check it out now!

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