If you’re looking to buy a condo you have probably noticed talk of condo fees in the listings you have viewed. However, if you’ve never owned a condo before, you might have no idea what condo fees are. Fear not, because we’re going to explain everything you need to know about condo fees: what they are, what they include and what you need to look out for as a condo buyer.
What are condo fees?
Let’s start with the basics. A condominium is the concept of shared ownership, where individuals own their houses/apartments and own “in common” the shared amenities, spaces and common areas. The shared elements and services in a condo are overseen, run and paid for by the condominium corporation, which gets its money from condo fees paid by all owners in the condo.
The condo fees are set by the condo corporation board and are usually proportional to the size of the owner’s home, which is why they are generally quoted as the price per square foot. Depending on the budget and the financial health of the condo corporation, the board has the ability to adjust the condo fees annually.
What is covered by condo fees?
Condo fees are often referred to as maintenance fees and this gives a clue as to their main purpose. General upkeep such as cleaning of common areas, gardening and snow clearance are generally covered by condo fees. The salaries of any staff, such as the concierge, property management and security, will also be covered; as well as repairs and maintenance that are commonly needed (for example, regular maintenance of elevators). Depending on the condo, some or all utilities consumed by individual units may also be included, although this is more often in condo apartment buildings and not in other types of condominiums (like condo townhomes). Similarly, some condo towers also include cable and internet services within their condo fees.
By law, a portion of the condo fees goes to a fund called the “Reserve Fund” which is used to cover large maintenance and repair costs. This may include sudden, unexpected costs due to malfunction or breakdown, or may be used periodically for major renovation of common areas to keep the condominium new, fresh and attractive to the owners (and future buyers).
The list can go on, perhaps including special services particular to that condominium corporation – for example, there are some condos that have shuttle services to nearby mass transit hubs, which can be of great benefit to the residents, even if that makes the condo fee slightly higher. When buying a condo, it is important to ask your Realtor to find out exactly what is covered, so there are no surprises in your monthly bills.
Is there anything not covered by condo fees?
As mentioned above, condo towers often have some utilities included in the condo fees, however, one big exception is hydro. In the past it was common for all utilities to be included, but most modern buildings now have separate meters for individual apartments, meaning hydro is billed separately. It is not always the case so it is important to check. Similarly, many LEED certified condominiums, which are more environmentally friendly and sustainable, will have all utilities separately metered, including water consumption. This has become increasingly popular as many owners like the idea of only paying for what they consume.
If the condo’s reserve fund isn’t substantial enough to cover the cost of a necessary replacement or repair, the cost will have to be covered by owners with an additional payment on top of their regular condo fees. This is called a “special assessment”, and all individual unit owners are expected to pay their proportionate share of the cost of the assessment. This can be a major risk as it can cost thousands of dollars. As such, it is important to check the status certificate of a condo before buying because this will show the current state of the reserve fund; if it is healthy, an unexpected special assessment is far less likely.
How much are condo fees?
Across the GTA, condo fees can vary greatly and are often connected to the health of the reserve fund. New condo developments tend to have fees in the range $0.40/sq. ft to $0.70/sq. ft but they can be notably higher. For some condos in Toronto, the fees can be over $1/sq. ft. and that can be a sign of either more services being offered or could be because of the financial health of the corporation (for example, perhaps the board has elected to increase the fees temporarily to back-fill the reserve fund after a major expenditure).
With the fees being related to the size of the home, you can also control your condo fees somewhat by opting in for a smaller home. It’s another factor that needs to be kept in mind when budgeting for your new condo and working out what you can afford to pay.
When do you pay condo fees?
In almost all cases, condo fees are paid on a month-to-month basis. Your Realtor should be able to tell you the cost per month or the cost per square foot per month.
Are lower condo fees better?
Not necessarily. Although it might be tempting to go for a condo with lower fees, it is not necessarily a good sign. Although it could mean that the condo board is running the condo efficiently, it could also mean that they are cutting corners and holding off on needed maintenance work. With this in mind, it’s worth checking how and why the condo fees are so low before you buy.