Monday, 3 December 2012

Condo Fees: More Than Just a Number!

Condo fees. The mightiest of obsessions among the condo owner across the city, the world, and possibly the universe, if there are condos on other planets. And for good reason! You can spend a lot of money on maintenance fees for any given condo. So, you want to make sure your money is well-spent, and you are not being taken to the cleaners. Nothing wrong with that.

Still, there are some misconceptions out there on how condo fees function. Understandably, condo owners want to spend as little on condo fees as possible. I know first hand that a condo with exceptionally high fees will act as a repellant for condo shoppers buzzing around looking to find a new home or income property. Prices will stay low, and the condo seller will likely make less money on the sale of his or  her unit. So, often it is assumed that the lower the condo fee, the better the building will be as an investment.

Most of the time, I find buyers are focused exclusively on that number. What are the condo fees? That's almost always the first question I get. Some buyers have a limit with how much they will pay. The thing is, the number can be a little misleading. A higher number in an older condo can often include a lot more of the cost of ownership, like the heat and the hydro. If there is a healthy reserve fund and good management, this number may not be increasing all that much for a couple of years.

When it comes to brand new condos, on the surface they are selling for  49 cents/per square foot.   Resale market averages about 59 cents/ square foot. It seems like the resale condos are more expensive but the truth is, the newer condos will likely have fees going up very soon. On average, common expenses can rise almost 30% in the fist three years. The law requires 10% for a reserve fund, but this often is not enough. So once the new condo is up and kicking, the reserve fund will likely need more funds. So, if you're not suppose to judge a book by its cover, then don't judge a condo by it's condo fees.

Of course, it's not just about the cost of the maintenance fees.  Many condo buyers don't like the idea of maintenance at all. They don't like a big yard, fixing roofs or replacing old wiring like those who own a  house. Many do not want to be caught up in the servitude of taking care of a property. They don't like the surprise when some thing breaks down and suddenly requires their savings. Simply put: The "maintenance" in maintenance fees does not sit well with them. Many condo owner don't really accept that they own a portion of the condo building, and they are responsible for maintaining it with their fees. They like to think they only own their unit.  And because there are so many new condos in Toronto, it some times feels that condos will never need to be fixed. They will always be new. The reality is, all buildings, as they start to age, will need new roofs, new window and new other stuff whether it's a house or a condo. So really, you never really fully escape maintaining your place. But if you own a condo, you can at least share the cost of repair. 

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