As Calgary continues to rapidly urbanize and grow in population, so does the demand for condo-style residences.
Despite impending interest rate hikes and subsequent fears of a housing market crash, condo complexes are still being built and equipment financing is making more and more sense.
Lately we’ve been financing more equipment for condominium corporations, and here’s why. Whether they need a new boiler, fitness equipment or a security system, a condo complex will often need critical equipment immediately.
More and more condominium corporations are leasing, especially when dealing with major emergency purchases
OK. Maybe a treadmill or elliptical doesn’t qualify as “critical” but there is some urgency when the boiler goes in December, or the tenants cars are constantly being vandalized due to poor security.
So here’s the thing. When the time comes to replace features that are common elements, the reserve fund can be used. But boards cannot refuse to fix the damage because “there is no money.” Rather, the board has to raise fees, do a special assessment, or take a loan to top up the reserve fund. They can save for years to be able to afford to pay cash for the new boiler or security system. OR, they can get it right now and start making lease payments.
Leasing lets condos avoid big upfront costs
With leasing, you don’t have the big upfront costs you’d face if you purchased the equipment outright or the deposit for a loan.
You generally just have a flat monthly payment over the lease term, with the first payment needed to start the lease. And here’s another thought to consider …. With a lease, everyone shares in the payment, and everyone enjoys the benefits. And once the equipment is paid off the condo association may elect to continue collecting the same condo fee. That additional income now goes into the associations’ coffers for the next emergency or opportunity. No special assessments needed!
Sounds like a savvy win for condo boards and condo owners alike!