What are condo fees, how are they calculated, and what do they cover? Condos have become the home of choice for many Canadian homebuyers, particularly first-timers, but increasingly move-up buyers as well. But many don’t understand this lifestyle option before deciding that it’s right for them.
Homeowners are drawn to condo living for a variety of reasons. It is a good option as residents age and can no longer care for a house or want to downsize. There is less maintenance and repair responsibility and more security features. But the big draw is often on-site amenities such as a swimming pool that you would not otherwise be able to afford.
Affordability is a big factor behind the relatively recent shift to condo living, but it’s certainly not the only appeal. Other benefits include a sense of community (yes, vertical communities are a thing!), easy access to urban conveniences, public transit, employment and entertainment, as well as a lock-and-leave lifestyle for when life takes you further abroad.
Condo fees are the way that all the amenities are paid for, and the cost is a separate payment from your mortgage. Luckily, they tend to be fairly predictable. Let’s take a closer look at condo fees.
What are condo fees, how are they calculated, and what do they cover?
What are condo fees?
Every condo owner pays a regular, non-negotiable condo fee. This fee is calculated based on your share of the condo building – the larger your unit, the greater your fee. This fee is adjusted annually based on the condo’s operating budget.
Condo fees are mandatory for divided co-ownership but not for undivided co-ownership. Divided co-ownership means that you paid a minimum five-per-cent down payment, and there is a group of co-owners managed by a board of directors that regularly holds meetings. Undivided co-ownership means you paid a minimum 20-per-cent down payment and have a more flexible administration. Undivided co-ownership properties may still require a monthly or annual fee to build a reserve fund and pay for building maintenance.
Each condo owner is responsible for paying their condo fee in addition to other payments like mortgage, property taxes, and homeowner’s insurance. Fees can range anywhere from $50 to $1000 per month and will depend on a variety of factors, including:
- The size and age of the property
- Whether the building is a high-rise
- How many buildings are in a particular complex
- The amenities covered
Do be wary of condo fees that are too low since this can be a sign of underestimated maintenance costs, unfinished maintenance, or an underfunded reserve fund.
What do condo fees cover?
Your condo fees are divided into three main categories: utilities, common areas and the reserve fund. Let’s take a closer look.
A chunk of your condo fee goes to utilities such as water, hydro and sometimes heat – but this isn’t always the case. Most brand-new condominiums are now being built with individual heat pumps that are controlled by and paid for by their respectful owners.
Condo fees also pay for snow and garbage removal, cleaning and minor repairs of common areas, exterior window washing and the like. Make sure you’re clear on your condo fees before you buy.
We’ve already mentioned that condo ownership means less maintenance on your to-do list. But somebody’s gotta do it, right? Your condo fees cover that expense as well. This goes not only for the small stuff like lawn care but for major maintenance work like roofing that will come out of the reserve fund.
And remember those awesome amenities that your family and friends come over to use? You have to contribute to their upkeep. The more amenities your condo has, the higher your condo fees will be. Think pool, gym, hobby rooms, sports courts, an in-house theatre, and indoor and outdoor areas. Ask yourself if you’re going to actually use all of the amenities offered by your condo, because you’ll be paying for them.
Lastly, condo fees cover administration costs for managing the condominium, such as holding meetings. Some buildings are managed by private companies that are paid for their services. Insurance is necessary to cover the building and everything in it, and your condo fees cover this.
In short, if there is something that every resident uses as a collective that you are not paying out of your pocket for, it is probably being paid with your condo fees.
What is a reserve fund?
A portion of your condo fee is set aside in a reserve fund, which every condo board must maintain as a savings account for big-ticket items that inevitably arise. A roof replacement can cost upwards of half a million dollars, so this fund is essential.
Then there’s the Special Assessment. In the case that the reserve fund doesn’t quite cover the bill, each condo owner will be required to pitch in their proportionate amount to cover the cost.
If you’re considering condo ownership, make sure you incorporate the condo fee into your budget. Make sure to leave a buffer in case your condo fees increase, which tends to happen as condos age. Any increases are at the discretion of the condo board.
Before you make an offer, get a copy of the condo’s status certificate, which contains important details about the condo’s financial status. Review it and make sure you understand it. The document will include things like the condo’s budget, any pending legal matters, information about the reserve fund, current maintenance fees, and whether any increases are planned in the near future.
The fee for the status certificate? It varies by province, so ask your local RE/MAX agent. In Ontario, you can expect to pay about $100. The information contained in it? Potentially worth a great deal more to your investment.