CONDO MAINTENANCE FEES
January 1st, 2015
"I’m considering buying a condo, but the maintenance fees scare me.” This is a common concern for people thinking about a condo purchase, but should it be? The best answer to this question is, "sometimes."
Maintenance fees are typically a monthly payment each unit owner makes to the condo corporation. This money goes into a trust account and is used for the expenses of the building. Usually there is a relationship between the size of your unit and the maintenance fees that you pay. A larger unit means you write a larger monthly check.
In the GTA, maintenance fees have quite a range. Anywhere between .35 cents per square foot (psf), to $1.00 psf is an approximate range. Let’s say you own a 1000 sf unit. If your maintenance fees are $1.00 psf, you will be paying $1000 a month. If they are .35 cents psf, you will be paying $350 a month. A big difference.
Because .35 cents psf is not too common in Toronto, nor is $1.00 psf (yet), let’s average it out at .68 cents psf. Our 1000 sf unit would cost us $680.00 a month. Sound like a lot? The important question is: what is included in the maintenance fee? In some buildings, almost everything is included. Cable, building insurance, water, hydro, and gas. On top of that, maybe the building has a pool, gym, security, and party room. You don’t have to cut the grass or shovel the snow either.
Let’s compare these numbers to owning a detached home. A recent property that I owned (a 2400 sf detached 2 story) cost the following each month (approximate figures averaged over 12 months): Hydro & Water $200.00. Gas $130.00. Cable $80. Insurance $100. This comes to $510 a month. On top of this of course would be repairs and maintenance (furnace filters, hot water tank expenses, a broken garage door here, extra insulation there, etc.). Snow shoveling and lawn maintenance are more expenses to factor in, unless of course you will DIY.
By looking at these numbers we can see that there is not always a huge difference in monthly expenses between owning a home vs. a condo. However, keep in mind the comparison was a 2400 sf home with a 1000 sf condo, not a fair comparison some might argue.
A house comes with many hidden expenses, where a condo generally will have fewer (that the unit owner is responsible for). With a condo, the unit owner is typically responsible for what is inside the unit (drywall to drywall). What is outside the unit, such as elevators, heating systems, other mechanical systems, flooring, pool, landscaping, gym, lobby, etc., is usually the responsibility of the condo corporation. The condo corporation will use money from the maintenance fees to cover such on-going expenses.
For people who travel frequently, or for long durations, a condo gives you the freedom to close your unit door and go away for as long as is required, a few days to a few years (a house certainly requires more consideration). For some people, that flexibility is handy. There are other advantages also:
- Being able to live in the city and walk to many attractions such as restaurants, shopping, and patios.
- Some people who opt for city living do not need a car and this of course is a huge savings that should be considered when comparing cost of ownership.
- For many, a smaller space just works. Less furniture is required and there is less to clean on chore day. Condos today are often very well designed and although they are a smaller space, they are usually quite functional.
- People generally feel safer living in a condo over a house (this is one reason so many single women are opting for condo living).
As I mentioned earlier, the question of what is covered in the maintenance fees is a very important consideration. While the previous example of what is covered in the maintenance fees is accurate of some buildings, in other buildings very little will be covered.
In some condos, the unit owner is responsible to pay for their own hydro, water, gas, and cable expenses. Each unit can be metered individually. Typically, the more amenities a building has, the higher the condo fees will be. Pools are great to have, but they are expensive, in fact some builders are no longer installing pools in an effort to keep the buildings expenses lower.
Not all buildings are created equally and in some cases condo fees can be reasonable, while in other cases they can be exorbitant. As a buyer, it’s important that you understand both how much the maintenance fees will be, and what is included.
There are many ‘boutique condos’ in today’s condo market. These are typically smaller buildings (maybe up to 6 or 7 floors) with fewer occupants than a traditional condo. These buildings tend to not have a lot of amenities (maybe a fitness area and rooftop terrace). On the positive side, these buildings can have a greater sense of community because there are fewer owners. You will get to know most of the people who live in the building. However on the negative side, if you want amenities, this style of building may not be for you.
Because there are fewer units in the building, there are fewer owners paying towards the maintenance fees.
This either makes for expensive maintenance fees, or, few amenities (and it’s usually the latter). Another concern here is if a special assessment is ever required, it could get very expensive (a special assessment means that for whatever reason, say for example the exterior glass of the building needs to be replaced and there is not enough money in the reserve fund to cover it, the condo board can approve a separate fee to all unit owners, and this fee can be as much as is needed to correct the deficiency, $5000 to $20,000 per unit owner would not be unheard of).
All prospective condo owners need to be aware that the unit owners are responsible for all costs of the building. This may include special assessments.
The more unit owners there are, the more people there are to contribute to the expenses. This is at least part of the reason why sometimes we see two or three buildings sharing amenities such as a pool and gym. One building will house the amenities, but the occupants of a few buildings will use them. This means there are far more unit owners paying into the maintenance and upkeep of these amenities. Buildings who use this strategy can offer excellent amenities, while having reasonable maintenance fees. Of course the downside is that the facilities will see more users.
While I think condos are a great option for many people, I fully appreciate the fact that they are not for everyone.
If you are thinking about condo living, there is more to consider than just maintenance fees. For example:
• How would you feel about building fire alarms waking you up in the night?
• How would you feel if you could hear your neighbors?
• Are you OK with not being able to blast your music?
• Waiting for elevators may not be your thing.
• Following all the rules set by the condo board is just too much for some people.
• Getting some new furniture? Oops, did you remember to book the elevator?
If you have input or a general comment about this, or any future BLOG, feel free to post on my Facebook page (there is a link to my FB from the homepage of my website).
My BLOG & PHOTO CONTEST will always be posted on the 1st of each month. On February 1st, CONDO-BUYING TIPS will be covered. If buying a condo may be in your future, make sure you check out the February BLOG.
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The first person to tell me where this photo was taken from, wins the January prize, lunch at Sprout.
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