Surplus, Deficits, and Loans

Surplus (and Contingency Fund)

A condo has a surplus when general revenues exceed general expenditures at the end of a fiscal year. (This does not include the reserve fund which, by definition, acts like a savings account for the future.)

Some condos with huge surpluses and/or contingency funds keep raising owners’ fees. It’s neither a fair nor a good decision. After all, the surplus has been paid by owners. Very large surpluses could be taxed as profits (condo corporations are not generally taxed because they are non-profit corporations).

What is considered a large surplus and/or contingency fund?

A condo with a budget of $10 million and a $150,000 surplus is in a prudent situation. But a condo with a $1 million budget and a $150,000 surplus and/or contingency fund has to use it. A small part of this surplus can be retained to cover unexpected expenditures in the budget. The remainder should be used to either reduce owners’ fees or stabilize them. Finally, it can be used to top up the reserve fund if it is deemed insufficient. However, once monies go into that fund, they can’t be retrieved for anything else.


Condos cannot function in a deficit situation. When expenditures are larger than revenues, boards have to use the surplus or contingency fund or increase fees in order to cover this deficit.

Deficits should be erased within one year after they occur. If the usual methods are not sufficient, then special assessments or loans may be necessary. Owners should be very concerned when their condo operates in a deficit mode and certain expenditures that could be postponed continue.

Loans (and Loan By-laws)

It is not a good thing when a condo corporation has to take a loan.

A by-law has to be passed for this purpose, which means that owners can vote against it. (Click here for Owners’ Meetings and Voting) A loan by-law cannot be open-ended: It should not allow the board to borrow at any other time. Rather, a loan by-law specifies what the loan is for, the amount, and the time period. If, in the future, more borrowing is necessary, another by-law has to be passed.

Both the budget and the status certificate should reflect a loan by-law and the loan itself. There may be exceptions but, generally, loans devalue a property because prospective buyers will not want to invest in a condo that has debts.

But a loan may be necessary when, say, the roof leaks and needs to be replaced and the reserve fund is empty. This loan can be repaid via higher fees or a series of special assessments. (For information on special assessments, click here for Owners' Money Facts)