Why condo fees

Unsurprisingly, a 1, sq. In some parts of Ontario, condo fees can be overwhelmingly high. The Greater Toronto Area, for example, averages 65 cents per square foot monthly.

Be sure to exercise caution, as some developers of new condos reduce fees in order to sway buyers. At some point, the condo corporation will have to increase them substantially to keep the building in good condition. For existing buildings, condo fees that are too low could indicate that preventative maintenance is not being done and major renovations are being put off.

When a building is neglected, it loses value and puts it owners at a disadvantage. Each month, a portion of your condo fees are deposited into the reserve fund to ensure the corporation has enough money to pay for future repairs.

How much money should be in your reserve fund? This way, owners know, for instance, that the roof will need to be redone in three years, the railings and stairs in ten years, etc. The condo corporation can then adjust the amount deposited into the reserve fund accordingly, and determine a catch-up strategy if necessary.

Since , reserve fund studies are mandated in Ontario under the Condominium Act and must be carried out every three years.

When extensive renovations are necessary and there is not enough money in the reserve fund, the condo corporation could charge a special assessment. This often comes as an unpleasant surprise because it means having to contribute a large sum all at once.

A s a result, many condo corporations failed to build up their reserve funds. Offering extra services as non-compulsory is a great way to reduce condo fees because condo owners can pay more or less based on the number of amenities they have access to. The maintenance fees you pay each month have an indirect effect on the value of your condo. For instance, a condo building with higher monthly fees will attract high-end buyers and investors. However, it might take a while to sell off the units in such a building because of high fees that chase away buyers.

They also point to poor or mediocre maintenance and planning. Here are a few viable solutions that you can suggest to your condo association:.

Property management software like Condo Control is a perfect example of a money-saving digital solution for condo associations. Condo associations can use this software to:.

Using this software will help to cut back on things like general admin costs, maintenance supervision, papers, and on-site staff payroll. The condo association can then pass on these savings to unit owners in the form of reduced monthly maintenance fees. The efficient management of energy resources is the easiest and fastest way to reduce monthly fees. Condos have become the home of choice for many Canadian homebuyers, particularly first-timers, but increasingly move-up buyers as well.

Other benefits include a sense of community yes, vertical communities are a thing! Every condo owner pays a regular, non-negotiable condo fee. This fee is calculated based on your share of the condo building — the larger your unit, the greater your fee. Your condo fees are divided into three main categories: utilities, common areas and the reserve fund.

Most brand-new condominiums are now being built with individual heat pumps that are controlled by, and paid for by individual owners. Your condo fees cover that expense as well. In other words, no one is profiting from these fees—they are decided by owners who have to pay them just like you do. Special Assessments Are Bad Even a well-managed condominium can fall prey to what is called a "special assessment.

Many condo owners assume that their fees will take care of everything, but as an owner in the condominium, you are ultimately responsible for its upkeep, no matter what happens.

This is not unlike living in your own single-family home. Even if you routinely save money for repairs, a major unforeseen expense such as a foundation or roof repair can still leave you out of pocket. In fact, special assessments are often much better for condo owners than the alternative of raising condo fees over the long term. This is because a one-time fee will cover whatever repairs need to be done without putting a often much bigger dent in the overall value of each unit in the property.

Fees Shouldn't Keep Going Up Unfortunately, condo fees, like most expenses, tend to rise on a regular basis. This is based on inflation and the costs of running the building. Condo fees are calculated based on projected costs for the coming year, and should include additional amounts to put toward larger repairs. Remember that no one is making any money on these fees, and if they are not appropriate for the building requirements whether they are too high or too low , owners will eat this cost when they try to sell their units.

In other words, most condo owners will have a hard time escaping from a necessary cost, whether this occurs because the board tries to avoid repairs to keep costs down, or owners try to sell to get out of paying their share. Savvy buyers will want a discount for a poorly maintained building or one with soaring condo fees.

As is often the case in real estate , this discount is likely to cost more than just paying for the problem in the first place. The Bottom Line Many of the misconceptions that prevent homebuyers from considering a condominium —or leave them frustrated and angry when they do own one—often stem from a misunderstanding about how condominium ownership works and what owners are ultimately responsible for. Many condominiums are poorly managed, which can lead to money problems. However, no condominium board is really looking to extract a "pound of flesh" from owners, as this punishment will also apply to board members themselves.

In a single-family dwelling, owners will have more control, which can make expenditures easier to swallow and perhaps less noticeable. Perhaps that's why homebuyers are left mistakenly believing this type of ownership is so much cheaper.

Real Estate Investing.