Recently, I sold a Detached Condo Home in Mississauga, and the common question I got was “why am I suppose to pay condo fees”, “what do the common element fees cover,” “where does the money go” “will the fee increase every year” etc. Buyers usually are reluctant to pay the “extra”condo fee. Most of the buyers have misconceptions and misunderstand the concept of paying condo common element fees.
What are Condo Common Element Fees?
Condo fees are each owner’s share of the common expenses of a condominium corporation, it is the costs of maintaining your condominium.
The condominium board prepares a budget for each fiscal year of the corporation. The budget sets out the amount of the estimated common expenses. Each owner’s monthly contribution is determined by multiplying that amount by the owner’s common expense percentage as set out in a schedule to the declaration and dividing by twelve.
Why pay condo common element fees?
The condo common element fees cover a variety of things and without being conclusive, they may include staff (security and concierge), guest suites, recreational facilities such as pools, tennis court, party rooms and saunas, water, hydro, gas, building insurance, snow removal, landscaping,cleaning, maintenance, taxes, property management fees, reserve fund contributions, reserve fund studies, accounting and legal.
Every building is slightly different and the fees will vary depending on age, size and complexity. In order to determine what the fees include the buyer’s agent should the agreement of purchase and sale conditional on status certificate and review the budget and the most recent statements of the condo.
What is Reserve Fund?
A portion of the common element fees you pay is put into a reserve fund for special assessments of the property as is needed, and these monies cover major repairs and upgrades to the building, including items such as roof replacements, re-painting an re-carpeting the hallways, new windows and doors, and re-paving the parking garage. When there is not enough money in the reserve fund to cover these special assessments, the costs are distributed proportionately among the unit owners and are levied for a period of time deemed appropriate by the board or pursuant to a reserve fund study.
As an example, let’s take a $150,000 condo with a $140 monthly condo fee for a first time buyer.
While owning a house you might average a water/sewer bill of $25 per month. With a condo you save $20 per month on homeowners insurance costs compared to a house. That’s $45 saved per month. When you think about the actual costs of maintaining the exterior of a home, landscaping, paving, fertilizer, purchasing a lawnmower, hedge trimmer,etc… Most homeowners would spend more than $95 a month on average. This isn’t even taking into account eventual big ticket items like roof ($5000) and siding($5000) replacement. There is also quite a value to living a low maintenance, care-free lifestyle.
Will the Condo fee increase every year?
It’s best to review the status certificate before purchasing the unit. The status certificate will let you know how much is in the reserve fund and give you an idea of whether there is enough money to cover these costs as they arise. The age of the condo may also aid in assessing whether major repairs will be necessary in the future. In addition, this is an opportunity to discover if a “reserve fund study” was , is or shortly will be conducted, and if known, what increases (if any) to be expected.
Common element fees generally increase yearly at the rate of inflation, however, this is not a set amount and fees could increase by more or less than the rate of inflation depending on what the board deems necessary to operate the building. Fees are set to pay for the proper maintenance of the building and to put money into the reserve fund.
In conclusion, condos are for living pleasure and condo fees protect your investment. The common element fees are an integral part of the condo world and in the same way you need to pay to maintain a freehold home, you pay someone else to take care of your condominium home. Remember, every condominium is different and rates may be set to rise so be careful, take your time and investigate so there are no surprises.
I hope most of your doubts are cleared, if you do have any other questions please feel free to contact me at 905-828-3434 and I will be happy to answer. My goal is to help you achieve in buying and selling residential homes and investments and provide you guidance throughout.
Regards,
Zeenia Kola
Sales Representative with Re/Max Realty Specialists Inc., Brokerage
Email: zeenia@zeeniakola.com
Ph: 905-828-3434
Add: 2691 Credit Valley Rd, #101, Mississauga, L5M 7A1
Website: http://www.zeeniakola.com/
Facebook Link
