Nothing gets a bee in the bonnet of a
condo owner more than the topic of condo fees.
In fact, a good portion of the buyers and owners alike can be a little
obsessed about how maintenance fees work (or don't work) in a given building.
Condos fees are also a big concern for
the buyer as well, and who can blame them? Maintenance fees make a difference
to the purchase price. Simply put, condos with high maintenance fees generally
cost less than ones with lower fees in a comparable condo building with a unit
of a similar size. That's a huge generalization, I know. So, let me add one
caveat: Some condos do warrant the higher fees they charge and some of condos
with smaller fees are not necessarily great investments.
Regardless, I can see why there is such
a disdain for condo fees, though they are often misunderstood. Condos, like
houses need repairs, need to be fixed and updated, and these things cost money.
If you want your condo to run well, you need fees coming in. Also, you want to
make sure you bring up these fees to have a healthy reserve fund. If money is
required for a repair or an update, like replacing the smelly and stained
carpet in the hallway, you'll need the funds to pay for it.
Still, I understand people's
frustration. So, here are some tips when it comes to spotting the condos where
fees may be unreasonably high or on the verge of going higher:
1. Brand New Condos. Don't be fooled by
a developer telling you the estimated maintenance fees of a condo that is not
even running yet. It's not the fee you will be paying a few years from now, once
a condo is built and registered. When you are living in your unit or renting
out to someone, the condo needs to build up a strong reserve fund. So, it raises the
fees to do so. And fast. In many Toronto condos, fees can rise 20 -30%, even up
to 50% in the first year of running and functioning like a condo.
2. Older Condos Have Higher Fees. I can
be a big fan of larger condos, but they do have higher fees. In the olden days
of condos, condos were built as a kind of Club Med where you can play tennis, eat caviar
by the pool and have your concierge do your dry cleaning. It was like being in an
all inclusive vacation deal at a five star hotel all the time. Well, pools are
pricey to maintain and a top notch concierge needs to be paid. Plus, things
break down in older condos. So, windows need to be replaced. Garages need to be
repaired. Elevators break down. And in turn, maintenance fees go up. Newer
condos, though tinier, have managed to bring down fees by offering less
amenities. Keep in mind, though, that the older condos often include more in their maintenance fees like
electricity and heating, and even cable. Newer condos, you pay for your own. And don't forget that that newer condo
will become an older condo some day and require repairs.
3. Poor Management. Sometimes a condo is
just run badly. Subsequently, money is not spent wisely or the management
company doesn't do a good job. I have been seeing a few condo boards lately
that fire one management company for on that does a better job.
4. Lousy Builders. There are some places
that were just not built well. So,
things start to break down a little sooner. The quality of workmanship has been
rushed. Check the builder. Some have better reps than others.
5. Lawsuits. Generally if a condo is
getting sued, that can mean pricey trouble. Because if the condo is getting
sued, the condo owner are getting sued and will need to pay the legal bills.
Any buyers should make sure they have their lawyer review the status
certificate to see if anything serious is going on before they buy. Any
lawsuits should be mentioned in the status certificate.
With all that said, I want to be very
clear that a condo with high maintenance fees is not a bad idea all of the
time. There are some condos that justify a higher condo fees. As I often
mention, older condos are bigger in size and need more maintenance, but you do
acquire more space. Some smaller sized condo buildings have higher fees since
they are not spreading the cost of maintenance fees through as many condo
owners as larger condos. Fees may be less per unit for larger condos, but I
still feel the investment in a boutique, smaller condo is a better route to
take, even though the fees are a little higher. Unique spaces
often have more cachet than your typical condo space. So, beware of the
pitfalls of condo fees, but understand that it's not the only parameter to
determine the worth of a building.
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