Understanding Condo Fees 101
March 9th, 2015 by Admin on
Buying a condo is a lot like purchasing a house. You are paying for property that you own and can potentially live in. However, they often have a hidden cost that can drive up monthly expenses considerably.
Condo fees are used to pay for the maintenance, care, and safety of the complex you live in. Unfortunately, many people do not take these into consideration during the purchase process – don’t get caught unaware! This guide will help you understand your condo fees so you have more time (and money) to spend enjoying your new home.
Depending on where you live and how your property rates are structured, the exact condo fees that are charged and what you will get for your money will vary. Generally they work on a sliding scale, with larger spaces paying more and smaller ones shouldering less of the burden. The exact cost of these fees, and the services that they pay for, will vary greatly between different locations, and often you end up getting what you pay for.
Fees will tend to vary year by year, depending on the value of the property itself. In most cases they will go up slightly on an annual basis, though it is possible that they could go down if there is a surplus or a reduction in utilities and services offered.
Janice Pynn is president of Simerra Property Management, a FirstService residential management firm and the third largest such firm in Toronto, with interests in over 32,000 units. “Condo maintenance fees are your percentage share of the costs to run the building as a whole,” she explains. “Unlike rent, they are not a profit source for the management; in fact, each building is registered as a non-profit corporation.”
Condo Fees Cover Many Different Services
There are a number of different services that can be provided in return for condo fees. The most basic include general maintenance of the complex, including the repair of plumbing, heat, and electrical issues. They also help with cosmetic maintenance such as fresh coats of paint on a regular basis, janitorial services, and maintaining the amenities of the building. These are simple things that will need to be done often just to retain the integrity of the building that you call home.
In some cases, these fees will also include exterior care and upkeep including landscaping, snow removal and maintenance of the lawns, trees, and other vegetation in the area. That helps to keep the entire community looking pleasant, without forcing the residents to actually take on these tasks themselves. It also maintains the value of the condo that you purchased, so that it does not depreciate due to lack of care.
Another common use for condo fees is to pay for monthly utilities, such as heat and electricity for the lobby and hallways. It will usually include garbage pickup as well. In some locations, internet, cable, and other luxury services may also be included in the fees.
Some other amenities that can be included maybe the maintenance of a pool, a garden, a small park, or even access to a rooftop patio. Some properties even offer concierge service, making your home feel like an upscale hotel, with all costs covered by your monthly condo fees.
Not All Condo Fees Go To Pay For Large-Scale Disasters
A percentage of your condo fees go towards the maintenance and day-to-day upkeep of the building and its property. Another percentage goes to the Reserve Fund which is used to pay for capital expenses, such as a new roof, paving of the parking lot, replacement of decks, etc. If there isn’t an adequate Reserve Fund and a capital replacement or emergency comes up, then a Special Assessment/Levy will be charged to all of the Owners in the complex. Essentially, the cost will be shared by all owners based on either the “unit factor” or square footage that they own. It is extremely important that your Realtor request all of the condo documents, including the Reserve Fund Study, Plan, Budget and copies of the Reserve Fund bank account statements for review by yourself and/or a condo document review company. Never put an offer in on a condominium property without it being subject to review and approval of all condominium documents. Give yourself adequate time for review before the condition date deadline.
Decide If You Need All Amenities Offered
One of the greatest drawbacks to condo fees is that they can significantly drive up the cost of living in a condo, even if you have purchased it outright. In general, the extra monthly bill can actually increase the price of living there to the point where it equals a single-family home of the same size. You may also end up paying fees for services and/or amenities that you do not use. If you don’t drive, then maintenance on a parking place will be wasted on you. If you can’t swim, then paying extra for pool cleaning is a waste as well. That is why you should evaluate the entire fee structure before deciding on the condo community that you would like to reside in.
On the other hand, not all condo fees are bad. These payments go towards the maintenance of your home and neighborhood. In some cases, it may even be desirable to have higher condo fees assessed monthly, as that should reflect in the amenities and level of service that you receive. However this is a personal choice that you have to make before purchasing a condo. Make sure that you read the agreement carefully in order to ascertain exactly what you will be getting for your money.
When you are deciding whether you want to purchase a condo it is important that you factor these fees into the monthly price that you will be paying. Many people fail to notice these costs, and end up in a situation where they are paying far more than they expected. The best way to evaluate whether a real estate purchase is a good idea is to look at it from a long term perspective, understanding what your goals are for the future, while remaining bound to a strict budget that you can afford right now.
Realtors at Greentree Real Estate Group have received specialized training in Condominium Corporation management and sales and will be happy to work with you on the purchase or sale of your condo.
Greentree Real Estate Group also has connections to condominium document review companies which will assist you in the review of bylaws, reserve funds, budgets and more.
*This article is syndicated and licensed from Realtor.GetWrittn.com.