When you buy a new or resale condo, you also commit to paying the condo fees that go towards maintaining and upgrading the common elements.
Condo developments are co-ownership arrangements. Every owner contributes towards ensuring the development stays in good working order by paying into a fund that covers those expenses.
If you’ve been shopping for condos, you may have noticed that condo fees aren’t always cheap. When you’re already making mortgage payments, asking where and why that money is being debited is a reasonable questions.
Unfortunately, there’s a lot of misconceptions surrounding condo fees, what they pay for and their real use.
In this article, we’ll attempt to clarify questions on condo fees. Our goal is to give you a better idea of what this recurring expense really does for you.
Why Do Condo Fees Exist?
Condo fees (sometimes called homeowner association fees or strata fees) exist to pay for the maintenance, upgrade or management of the common elements of a condo building.
Common elements are amenities like the pool, tennis court, gym as well as mechanical, electrical, plumbing and exterior elements (roof, windows, walls) of the building.
When fees get debited from every owner’s account every month, they go into a fund.
The condo corporation has this fund for:
- Recurring costs: gardening, snow removal, cleaning, maintenance, upgrade, management.
- Reserve fund: by law, condos must hold a certain amount of money in a reserve fund that covers major expenses and ensures the condo doesn’t go bankrupt. This is often referred to as a contingency fund (more on that later).
What Do Condo Fees Include?
Condo fees cover a range of costs associated to maintaining, upgrading and managing a condo building or development. These are:
-
- Upkeep and maintenance of common elements – most condos hire cleaning services to clean the hallways;
- Exterior shell maintenance – repairing the roof, fixing up the brick siding, in some cases cleaning the windows;
- Engineering services and building maintenance consultants – inspection of the concrete foundation, electrical systems inspection, assessing the health of the exterior shell;
- Building management company fees – the company condos hire to manage the day-to-day operations of maintaining the common elements;
- Heating and cooling costs – covers the common elements, however, depending on the condo development, these can include the interior of your unit;
- Lighting of the common elements
- Security – hiring a security guard or concierge;
- Insurance for common elements – Important note: this doesn’t cover inside of your unit. Condo owners must secure their own condo insurance;
- Landscaping and/or snow removal.
Are Condo Fees Worth It?
Straight to the big question.
But we should rephrase the question to:
“Are paying condo fees worth it compared to single family dwelling living?”
Our answer is always YES.
You have to consider that in a single family home, the owner is 100% responsible for any maintenance to the property. That includes costs, but also the time it takes to complete that maintenance if the owner is a DIYer.
Condos? Completely hands off.
Figure out what your time is worth. Remember that you’re not mowing the lawn, clearing snow during the winter or worrying about the pH of your pool.
Oh and in 20 years, you won’t get the salty bill of a major repair. Your condo fees will cover that.
How Are Condo Fees Calculated?
In most condo arrangements, condo fees follow a “per square foot” scheme.
The calculation is simple: multiply the square footage of the condo by the condo fee rate.
Here’s an example:
If the condo fee is set at $0.47/sq.ft per month, then the owner of a 520 sq.ft condo would pay:
520 sq.ft x $0.47 per sq.ft per month = $244.40 per month.
How Often Are Condo Fees Paid?
Condo owners pay condo fees every month during the first week of the month.
They are paid two ways: direct withdrawal from your bank account, or via post-dated cheques.
We encourage condo buyers to setup direct withdrawal from day one. Cheques are a hassle to keep track of and can get lost.
Also consider this:
In some condos buildings, and depending on the rules and bylaws, if a cheque bounces, the property owner may be liable to pay fines.
Depending on the mood of your condo board, they may fine you without a warning.
Do I Get Back Unused Condo Fees?
The simple answer is no, you won’t receive a cheque at the end of the year for any unused condo fees.
Unlike a business, your condo corporation doesn’t collect condo fees for profit. There are strict laws in place that dictate what they can do with that money, which are:
- Maintenance;
- Repairs;
- Upgrades to the property;
- Building a reserve fund.
What Happens With Unused Condo Fees?
In the US and Canada, a condo corporation must have a reserve fund in place (the size depends on local laws).
At the end of the year, your unused condo fees go into that fund.
When a condo development gets handed over to the owners by the developer, the fund is usually small.
It’s new and owners haven’t contributed to it yet. It’s also unlikely that major expenses will be on the horizon for at least 10, 15 or even 20 years.
This is why condo fees start low in new condo buildings.
Over time, the fund grows until major expenses are due.
The fund needs to be large since some expenses (especially for large developments) can have a high price tag. Imagine replacing all the windows on a 20 storey building.
Not cheap!
How Much Are Average Condo Fees?
There’s a wide range of variables that affect condo fees. This makes it impossible to give a proper estimate of how much you can expect to pay. Each condo building is different.
CMHC compiled a list of condo fees per province. Although the data is from 2011, it shows that most Canadians pay approximately $300 or more a month on condo fees.
That number includes brand new builds as well as pre-2001 constructions.
If you want a better estimate of condo fees in your area, check MLS listings on Realtor.ca for your area.
The listing will show the monthly condo fees of what you’re interested in:
Can I Opt out of Certain Condo Fees?
No, you cannot opt out of paying certain condo fees even if you don’t use specific amenities. If you don’t use the pool, the gym and the entertainment room, you still have to pay the same “per square foot” fee as every other owner.
Why Are Condo Fees High? (Or Perceived to Be)
Condo fees are often perceived as being high, especially by previous generations of single family home owners.
But condo associations use condo fees to cover the maintenance and upgrade of common elements as well as build the reserve fund.
Your money isn’t disappearing into thin air.
It’s paying for expenses single family house owners cover unknowingly, or DIYing. It also builds a reserve fund most house owners don’t think of creating until the major expense is due.
It’s the loss of control of where the money goes that gives the impression fees are high. What would you rather have, a monthly expense over a few years or a giant price tag when all of a sudden the roof needs replacing?
Do Condo Fees Increase With Time?
Yes, condo fees increase with time.
As a building ages, it needs more maintenance and expensive repairs. For this reason, condo owners generally vote to raise condo fees to pay for these expenses.
Unlike rent, condo fees can’t increase without a vote by the other condo owners.
The issue of condo fees gets addressed every year at the general assembly.
Is There a Cap on Condo Fees?
There is no capping of condo fees. Remember that they are based on anticipated expenses by your condo board.
Your condo board anticipates common element expenses by hiring experts. These can be building maintenance professionals and engineers. They forecast upcoming repairs and provide maintenance recommendations.
When you buy a condo, it’s important to take into consideration the age of the building and the amenities.
For example, if you buy a brand new condo in a bare bones building, your fees will likely be low.
On the other hand, if you buy in a 20 year old property that has rooftop pools, floor-to-ceiling windows and a large gym, expect to pay more.
Simple as that.
Like an aging house, older condo development costs more to maintain. For this reason, condo fees tend to increase every few years.
Do Condo Fees Include Insurance?
Your condo fees always cover insurance for the common elements. These are often called “building insurance policy” or “shared insurance”.
The important thing to remember is that this insurance does not cover what’s inside your unit.
Each condo owner needs their own condo insurance on top of what the condo building insurance covers.
Here are a few examples to help clarify the difference between the two:
- A fire breaks out in the electrical control room: covered by the condo building insurance;
- Your toilet floods your unit and damages two floors under: covered by your insurance;
- A fire breaks out due to a faulty appliance: covered by your insurance;
- A sewage pipe leaks between the walls and damages the drywall in your condo: covered by the condo building insurance.
What Are Special Assessments for Condos?
Special assessments occur when the reserve fund can’t cover an urgent or critical repair to the common elements of the condo building.
They take place when there’s a major deficiency such as replacing windows, unsafe balconies or a critical piece of equipment (ie boiler, water pumps) needs replacing due to potential safety concerns.
To raise funds, the board needs to charge every owner a lump sum fee.
The condo association implements special assessments. Depending on how the condo rules or bylaws are set up, they don’t always need the majority vote approval of other condo owners.
The amount charged during special assessments can be high.
It’s not unheard of for special assessment to range from $3,000, up to $10,000 or more.
When buying a resale condominium, make sure that your realtor puts in a conditional offer that includes reviewing the condo building’s financial statements.
This is where you’ll find out if the condo building has a healthy reserve fund.
Wrapping This Up
By now you have a good understanding of what condo fees are used for, how you are responsible for them and why they can be high. Remember that when you purchase a resale condo, part of your due diligence is to review the condo association’s financial statements.
