When purchasing a condo, knowing what your condo fees are and what they include is extremely important. While low monthly payments are appealing, you should probably be wary of buying into a condo corporation with very low condo fees.
Why do I have to pay condo fees?
Your condo corporation is responsible for setting an annual operating and maintenance budget and your condo fees fund these expenses. The fees collected from you are to cover costs for your own unit, as well as a portion of your complex’s shared space. This means your condo fees will likely be higher if your unit is larger (you might pay more than your neighbor depending on unit factors), and if your complex has amenities like an elevator, underground parking, pool, fitness centre, party room, etc., your fees will be higher to maintain these as well.
If your building is older, more money may be needed for regular maintenance and repairs – just like a homeowner would need to spend more to maintain an older home.
Sometimes condo fees also include utilities like heat, hot water, or electricity, or even cable and internet services too.
What is a reserve fund?
Your condo corporation is required to have a reserve fund in place to cover the costs of major, foreseeable repairs – like replacing the roof. The amount of the reserve fund will depend on the size of the complex, the corporation’s budgeting history, and history of past repairs/expenditures. New buildings will have less money saved in the beginning but they shouldn’t need major repairs for several years.
A reserve fund study will be done by a qualified professional every 3-5 years to help the corporation identify what upcoming repairs will be needed so they can plan for topping up and maintaining the reserve fund accordingly.
What happens if there is not enough money in the reserve fund?
If unexpected repairs are needed and there is a shortfall of cash in the reserve fund, a special assessment may be required. In this case, the owners will be responsible for covering the shortfall.
Will my condo fees go up?
The answer is yes. Your condo fees will go up over time to account for inflation, rises in energy prices, etc. Condo fees can increase any time with little notice and are likely to increase at least a little bit every year. Attending your annual general meetings and reading the minutes from your corporation’s board of directors’ meetings are good ways to stay on top of what’s happening within your complex and know if fee increases or major repairs are expected.
Am I paying too much?
A thorough condo document review and comparison of condo fees for similar buildings in the area will give you a good idea of whether your fees are reasonable or not. Take into consideration what is included in your fees (are the utilities included, or can you cancel your gym membership because there is one in your complex?) and the health of the reserve fund. Only you can decide if the fees are reasonable and fit within your budget.
Written by CIR REALTY
