Condo Maintenance Fees: How Much is Too Much?

Condo fees generally cover much of what homeowners would spend out of pocket, reminiscent of property insurance and general maintenance, said Karolina Armstrong, an actual estate agent with Right At Home Realty in Toronto. “It’s what keeps the building running for all the owners,” she said.

Other common services which are normally included in condo fees include trash removal, elevator repairs, and security and cleansing staff. The fees also go toward the constructing’s reserve fund, which is money put aside for future repairs and major maintenance projects reminiscent of replacing windows and roofs.

How much a condo owner pays is determined by the age of the constructing, how well it has been maintained, whether utilities are included, and what number of units are within the constructing or complex.

What’s behind condo fees?

Armstrong said older buildings could be costlier to take care of, while certain perks, reminiscent of a swimming pool, may be reflected in fees. “It’s basically a lifestyle where you don’t want to do anything, but you have to pay for it,” she said.

As a rule of thumb, condo fees should range from 75 cents to 85 cents per square foot of unit, said Brendon Cowans, vice chairman of business development at Property.ca Inc. That means, for instance, about $595 in monthly maintenance fees for a 700-square-foot condo is inside range. If the value is greater than a dollar per square foot, it suggests that the fees may very well be expensive depending on the amenities one receives.

On the opposite hand, low condo fees may very well be a sign that the reserve fund is underfunded, Armstrong said. “If you’re paying 50 cents per square foot in a 20-year-old building, I think that’s too low,” she said, which could indicate an underfunded reserve fund.

Budget for rising condo fees

Alim Dhanji, a licensed financial planner at Assante Financial Management, said he typically instructs his clients to take a look at their budget and monthly money flow before purchasing a condo. If you are on a good budget, it’s probably time to search for something cheaper since condo fees typically go up, he said. “If you’re able to afford those condo fees and still meet your own (savings) goals, then that’s a green sign,” he said.

Provinces, including Ontario and British Columbia, don’t have any legal cap on annual increases in condo fees, and the condo board decides what the common fund needs. Each province and territory maintains and regulates its own condominium laws, which give condominiums with a structure for forming boards of directors, establishing bylaws and managing property.

The article continues below promoting

But not all maintenance or condo fees are created equal, and the monthly payment alone doesn’t necessarily provide an entire picture of a property’s financial health. Cowans said it is determined by how well the reserve is funded and whether the property has been maintained over time. For example, if management doesn’t handle the property over time, homeowners could face larger, unexpected repair bills down the road. And if the reserve fund is lacking, the condominium board could push for special assessments that impose a one-time fee on all homeowners for major repairs.

Beware of special reports

Special assessments are typically a warning sign, Armstrong said. She often said that special assessments could put a dent in property values ​​within the short term and the owners could have a difficult time selling the property during that point. “You’re going to have a situation where buyers have to be careful,” she said.

Cowans recommends that each one of his clients review the condominium status certificate — a financial and legal report on the constructing — with their attorneys before purchasing to grasp the property’s history. “It’s about the condition of the building, including the reserve fund studies,” he said.

Armstrong said condo fees needs to be viewed as a hard and fast cost, so people should thoroughly review construction documents and understand their financial situation before purchasing. “There’s no way around not paying it or negotiating it.”

Read more about real estate:

Via Canadian Press

The Canadian Press is Canada’s trusted news source and a pacesetter in delivering real-time reporting. We provide Canadians with an authentic, unbiased source based on truth, accuracy and timeliness.