Many condo buyers are worried about how condo fees might affect their investment - and their future. Condo fees are rising steadily - the average rate in the GTA is almost 60 cents per square foot. They can be as high as double the average - twice what they were over a decade ago.

 

High fees have many developers and buyers questioning the need for pools, party rooms, gyms, movie theatres, and other expensive facilities - or even personnel like 24-hour concierge service. What’s contributing to your condo fees - and how much should you really be paying?

 

What are they?

Condo fees are similar to home ownership, except the costs of owning a property are divided among the owners. Although what the fees cover vary from building to building, they generally pay for the residents’ collective utility bills, as well as maintenance costs like window cleaning, snow shoveling, gardening, and more. They pay the salaries of concierge services or security employees, as well as for common-area repairs and maintenance. They also cover building insurance and can even cover property taxes (although this is rare). Fees are calculated based on square footage - the larger your unit, the larger your fees.

 

 

What can contribute to higher fees?

Individual features that come with your unit can contribute to higher condo fees. Parking can add an average of fifty dollars each month, and as much as one hundred and fifty dollars a month. Storage lockers can add fifteen to fifty dollars, as well.

 

But premium amenities can also add to higher fees. Buildings with a pool, a gym, even valet parking can cause fees to reach over a dollar per square foot. With the average condo size being just under eight hundred square feet, it means that condo fees can be anywhere from three hundred to a thousand dollars a month in the GTA.

 

 

Condos are also required to have a “reserve fee”, which contributes to an insurance pool that would cover any sudden and large expenses the condo may need to cover. An aging Etobicoke condo made waves in September over fees as high as two thousand dollars a month for repair costs.

 

Who sets my fees?

Although most owners view condo fees like income taxes, something they must, but would rather not pay, not all condo fees are bad. They’re the same as any other maintenance costs homeowners would pay out-of-pocket, like to fix roof leakages, broken windows, or plumbing issues. In that sense, condo fees are the same as any costs you might incur owning a property.

 

But ultimately, your condo’s board of directors sets your monthly fees. As a unit owner, you’re entitled to vote for your condo board’s directors, or even to become one yourself. Condo governance can get pretty complicated, but by participating in your condo’s governance you might be able to lobby for lower fees.

 

Recently, Toy Factory Lofts in Toronto’s Liberty Village did just that. The board of directors capped their resident’s monthly fees at thirty-one cents a square foot, and it’s held steady since 2012. Their model may have had more financial repercussions than you might think - the average resale price of Toy Factory units rose by ninety-nine dollars per square foot between 2013 and 2015, making lower condo fees a possible source of increased equity.

 

Does lower necessarily = better?

Just as high fees can be financially strenuous, extremely low condo fees should also be considered carefully. Low fees may mean that the condo doesn’t cover individual utility bills, which may have to be paid out-of-pocket each month by each unit. All buildings constructed after 2010 in Ontario should have utility meters in their units, however, putting energy expenditure under each resident’s control.

 

Some developers “estimate” condo fees during pre-construction sales, with no contractual obligation to maintain these rates once the building is complete. Within a few years, low fee estimates may climb to average or above-average rates.

 

Interestingly, older buildings don’t necessarily have higher fees than new buildings. Data suggests that new construction fees start lower, but they level about nine years later. Often, newer buildings have extra amenities and features that can add to maintenance costs - but the majority of costs are unrelated to the age of the building. In February, the Toronto Star found that “heat, hydro and water account for 40 to 50 percent of costs, and are climbing 8 to 10 percent per year. Concierge, cleaning and other services can be another 25 per cent”.

 

The property’s MLS listing will say what’s included in your maintenance fees. It’ll show utilities, like heat, hydro, water, and central air and whether they’re included. It may also add the fun things like cable and common elements, as well as taxes, building insurance, and parking.

 

While shoddy construction of window-walled towers made waves in 2010 for increasing fees, the Tarion Warranty and building insurance take precedence. If you’re concerned about your building’s upkeep, be sure to have your lawyer carefully review the status certificate when purchasing a resale condo unit for any unusual maintenance costs. Also, try to do a search on your developer’s construction history or ask your realtor.

 

How the Protecting Condominium Owners Act affects condo fees

The Protecting Condominium Owners Act (Bill 106) passed in early December 2015. The bill proposed some vast changes to Ontario’s Condominium Act that will likely hike fees for condo owners. For a full outline of the effects of the bill, check out our post “Understanding Condo Governance” at TeamAmador.ca

 

 

 

Ultimately, condo fees are important sources of income in order to maintain buildings, and they need to be factored into any homebuyer’s potential costs when looking to buy a condo. Still, if you’re concerned about high fees, there are a number of ways to get involved in your condo's governance. Make sure you attend your condo’s annual meeting and board of director’s vote so you have a say in who manages your fees. All unit owners are also entitled by law to look at the documents stating where their condo fees are going (although this might not be free), so you can check the building’s financial records at any time. Getting involved may be the best way to understand how your condo is governed and make positive changes in your home.

 

Want More 5 Things?

Understanding Condominium Governance

The Plain Language Guide to Mortgage Insurance

Investing in Residential Real Estate: A Step-by-Step Guide

 

 

Phone number: 416-992-7972

Email: info@teamamador.ca

Website: www.teamamador.ca