People often say that they don’t like the idea of paying condo fees. It’s not surprising given that the cost of condo fees combined with taxes and utility costs can add up to a pretty hefty operating budget for your home each month. But is it really that different from owning a home?
Condo fees are an owners pro-rated share (usually based on the size of their unit) of the cost to run the condo corporation. There is no “us and them” as some perceive but rather, condo corporations are registered not-for-profit entities that cannot use the fees for anything other than the maintenance and operations of the condominium. Decisions are made by a board of directors who are usually volunteers and owners themselves.
Condo fees are made up of costs that you would also have if you owned a home such as having to set aside money to replace a roof, walkways or fences. They also include the costs for property maintenance such as snow removal, grass cutting, landscaping, pest control, garbage removal and then, the cost of managing the collection of fees, paying of bills and general management on behalf of the owners. In most cases, when people look at the actual annual operating costs of a condo corporation and see where the funds are being spent, it’s reassuring.
Beyond basic maintenance and management, some corporations have amenities such as pools, elevators, underground parking, tennis courts, special security, gates, guest suites or concierges which will of course also increase fees with the added costs of these amenities and it is a lifestyle choice that dictates buying into such a development.
It’s important to also understand that while condo fees cover the costs for maintenance and management, they don’t cover unexpected costs that could result in additional levies, known as special assessments. For example, discovering the presence of mold in attics could be a costly fix shared among owners. It is also easily possible that projected costs for the replacement of common elements are under-projected resulting in special levies.
One thing I have learned over the years is that the units with the lowest condo fees are not always the best investment. It’s possible that a board of a corporation has underspent on maintenance for years by deferring upkeep which could result in much higher monthly fee increases in the future or in special assessments.
Buying a condominium unit versus a single family home is both a financial and a lifestyle choice. Yes, there is merit to the argument that you have limited control over the myriad of daily operating decisions that are made but on the other hand, you have other owners doing the heavy lifting for you.
To make the right decisions when you chose to buy a condo, your offer should ALWAYS be conditional upon receiving a status certificate for the corporation which includes the budgets, reserve fund information and any existing or planned special assessments. Owners should also be active participants in staying informed about the decisions of the board and ideally, joining the board to share in the management decisions.