Maintenance fees, or condo fees as they’re often referred, can be an annoyance for first time condo buyers and long-time condo owners: paying out additional fees each month on top of a mortgage can understandably create some frustration.
Making matters worse, some condo residents aren’t aware of what their fees cover. At Strata, we’ve witnessed the condo boom in Toronto firsthand and have served more than our share of first time condo buyers, many of whom have question about condo fees.
While one might imagine their fees are being tucked under the mattress of a member of their condo board — these fees are absolutely essential and actually protect condo residents from unexpected expenses as well as covering a plethora of services.
Still, in many cases, even buildings that haven’t needed significant repairs will have condo fees that increase year over year. There are reasons for this as well and as much as some might seem suspicious, they are often quite innocuous.
More Than Maintenance
Condo fees cover much more than just maintenance; these fees cover everything from utilities like water and electricity, to insurance, groundskeeping, staff wages, and all amenities and shared common areas. What could be the most important function of these fees is ensuring that there’s a substantial reserve fund — a fund that’s kept in the event of major repairs or projects to improve the building.
How Much Should You Pay?
In Toronto, the average condo fee is roughly $.68 per square foot; because these fees are based on square footage, residents with larger units will have higher fees. What’s an acceptable condo fee is largely based on the city and the type of unit you’re interested in. When it comes to luxury condos and lofts, the rules are completely different than condos or townhomes.
For the top luxury condos in Toronto, fees can easily exceed $1.00 per square foot, meaning your 2000 square foot penthouse will cost you an extra $2,000 every month. That might sound outrageous, but luxury condos commonly have high fees due to extensive amenities such as spas, valet parking, and in some cases, concierge with room service.
Of course, luxury condos aren’t the only buildings with high fees and though it’s rare, poor construction can inflate fees as well.
Bad Management and Insufficient Reserve Funds
A building that was constructed with low quality materials or on rushed schedule will require more repairs than a well constructed building; that’s a given. However, spotting poor construction during a showing or even with a home inspection isn’t always as easy as it sounds.
One way to know if there’s a problem is to look at the history of condo fees at building you’re interested in; your real estate agent should be able to provide you with this data.
Sudden spikes in fees can be an indication that a building was poorly constructed and frequently requires repairs. Sudden spikes in condo fees can also be an indication of a light reserve fund; if a building suffers structural damage and the reserve fund is drained, fees are often raised to recoup the expenses.
Should I look for the Lowest Condo Fees?
If a building is well kept, has a great reputation and a healthy reserve fund, low condo fees can lead to significant savings on your monthly expenses; many loft conversions with fewer amenities have condo fees that are well below average. Of course, with lower fees one should expect fewer extras.
On the other hand, buyers who crave on-site gyms, spas, and all the bells and whistles are often willing to pay higher condo fees for the sake of convenience and luxury. In either case, buyers should expect that fees will continue to rise in the future; accounting for rising fees is an essential consideration when purchasing a condo, and a costly regret when overlooked.
Photo by Wes Hicks on Unsplash
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