If you live in a city like Vancouver or Toronto, chances are condos or townhouses are your only option to become a homeowner.
Although condo/townhouse ownership has a few things in common with house ownership, there are also a few differences you need to be aware of.
One of them being the monthly condo fees, also called maintenance fees, or HOA fees. If you live in British Columbia, they’re called strata fees. That’s it for the semantics.
What are those fees? What do they cover? Let’s find out.
Condo/maintenance fees are a mandatory expense that each owner must pay, whether the property is owner-occupied or rented out.
Condo fees are budgeted annually. The budget must be approved by owners at an Annual General Meeting -AGM-.
They’re usually paid on a monthly basis, although you can prepay them, should you wish to do so.
What Do Condo/Maintenance Fees Cover?
When you buy a condo, you also buy an interest in the common property of the building. Common property includes items like the hallways, the elevator, the parking lots, the grounds, but also the roof, the plumbing, the electrical wiring and amenities like a gym or a swimming pool.
The condo fees cover maintenance and repairs to the common property. Think garbage removal, cleaning services, snow removal, landscaping, gutter cleaning, heating, electricity, lint removal, lightbulb replacement, fire and sprinkler system, and the myriad of jobs common to a condo building.
It also includes property management and caretaking fees.
Condo fees also cover certain repairs pertaining to the limited common property. Limited common property is common property that has been designated for the exclusive use of a condo owner.
Balconies are a good example of limited common property. Should the balcony railings need to be replaced, the costs would be shared by all owners, including the ones living on the ground floor.
Condo fees sometimes cover some utilities, like water or gas, if you have a gas fireplace. However, it’s not systematic.
Reserve or Contingency Fund
A percentage of your condo fees also goes toward the reserve or contingency fund. A reserve or a contingency fund is a savings account for major repairs such as roof replacement.
The money is separate from the operating budget’s.
Having a reserve/contingency fund is a legal requirement in Canada for all condo buildings and townhouse complexes.
Some provinces also mandated having a reserve fund study or a depreciation report. These are documents determining how much money will be needed to replace the major components of a building.
How Are My Fees Calculated?
Your fees are based on your unit entitlement, usually the number of habitable square meters. The bigger your unit, the higher your fees.
Fees are between $0.35 to $0.70 per square meter. It’s a wide range but fees also depends on the number of units, the age and the location of your building/complex.
As a rule of thumb, the condo fees are higher in older buildings, in buildings with lots of amenities and in cities like Vancouver or Toronto.
Maintenance fees are lower in townhouses, as they are fewer elements to maintain. Don’t be fooled by low fees in brand new buildings. They’re inadequate and will drastically increase.
Can My Fees Increase?
Yes, they can and there is no limit as to the amount.
However, any increase must be approved by the owners at an AGM. This is a mandatory requirement. Your HOA or condo board can’t unilaterally increase the fees.
That’s why attending the AGM is important. You do have a say in the affairs of your building.
A good board/HOA will look at keeping costs reasonable as well as saving money when possible.
What If I Don’t Pay the Fees?
Your building will come after you, at some point, if you don’t pay your monthly fees. Condo corporations have the right to place a lien on your unit. When selling, you’ll have to pay arrears with interests. You can also be taken to Court.
When an owner defaults on the maintenance fees, it puts a financial burden on the other owners, who have to shoulder the costs. It can also mean some repairs/services may be delayed or cancelled, if there isn’t enough money to pay for them.
Unfortunately, condo fees are necessary. It doesn’t mean you have to like it, but you have to pay for it.
Condo/townhouse living is communal in nature. As such, it’s expected that you do your part in the maintenance of the community.
As unpopular as they seem, condo/maintenance/strata fees are necessary, and an integral part of home ownership.
They can certainly add-up to the costs of home ownership. You need to determine if they’re reasonable for your finances.
When looking at condo/maintenance fees, you need to think about all of the above. When putting an offer, ensure you have a subject clause to review all the corporation’s minutes and other documents.