Are condo fees really a downside to condo living?
We felt we should dedicate an article to this question because it comes up quite often.
One of the biggest perceived drawbacks of condo ownership is the monthly condo (or maintenance) fee. If buyers were to look at a checklist of pros and cons for home ownership (in a ‘freehold’) versus condo ownership, condo fees would likely be at the top of the condo “cons” list.
This assumption seems to imply that a condo costs extra money for upkeep whereas a traditional home does not. In reality, homeowners are still responsible for paying out-of-pocket expenses for their home repairs and maintenance.
When you own a house, you do not have to pay a set monthly fee for maintenance, but you still have to sustain the house. The typical Toronto home is anywhere from several decades to 100 years old – and as a result, this upkeep is in no way optional if you want to live there comfortably – not to mention seasonal costs like snow clearing and landscaping. The work required on an older house, as well as seasonal maintenance, can cost above and beyond your typical monthly condo fee.
In addition, home repair costs can be sudden and unexpected, while condo fees are consistent and can easily be incorporated into your budget.
What you get for your condo fees:
Condo fees are typically between 50 and 65 cents per square foot in Toronto. There are some exceptions – for example, in smaller more boutique style buildings (or lofts) you may have fewer than 30 units. In a case like this, the fees are usually higher as they are spread among such a small amount of units. However, there are some buildings that have serious problems (be they structural or legal) and the high condo fees will serve as a red flag. These building should be avoided altogether (to any of our clients reading this – we will definitely point out these buildings, so don’t worry!).
In most cases, condo fees cover utilities such as water and heat (hydro is usually paid separately), building insurance, security/concierge, building maintenance such as renovations and snow removal, as well as the upkeep of common elements like the exercise and party rooms.
Part of these condo fees are also placed in a reserve fund, which is a fund that the condo corporation keeps handy to deal with large issues that may arise such as emergency repairs or any lawsuits. A healthy reserve fund is like a safety net and ensures condo owners aren’t sharing or responsible for these costs later. As a side note, it’s worth pointing out that you should always make an offer on a condo conditional upon your lawyer reviewing and approving the Status Certificate, which is a document that speaks to the overall health (fiscal & structural) of the building. This document will also tell you how much money is in the reserve fund.
When building issues arise…
Just as a homeowner can be sued when the mail carrier twists their ankle on a slippery walkway, a condo building can also be sued or require immediate and expensive repairs.
If the reserve fund isn’t large enough to adequately address the problem, these costs can be passed along to condo owners through either increased condo fees or a “special assessment” – a one-time extra fee paid by the owners. Most condo boards opt for a special assessment as they keep the condo fees at a reasonable level. If you buy from a building that is undergoing a special assessment, make sure the seller pays for it! Your agent should be on top of that.
We hope you found this article to be helpful. If you have any questions or would like assistance in finding the right condo, please don’t hesitate to call or email. We’d be happy to help out!
– SelectCondos Team