Understanding Condo Fees 101
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 price that can drive up monthly costs 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. However this is not supposed to be a profit based item, and is instead compensation for services rendered to the residents of the complex.
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, and the repair of minor damage to fixtures and major appliances in each unit. These are simple things that will need to be done often just to maintain the integrity of the building that you are living in.
In some cases these fees will also include exterior care and upkeep including landscaping, 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 untended care.
Another common use for condo fees is to pay for monthly utilities such as heat and electricity. It will usually include trash pick up as well. In some upscale locations, free high speed Internet, cable, and other luxury services may also be included in this package.
Some fancier amenities that can be included may be the maintenance of a pool, a garden, a small park, or even access to a rooftop patio. Many condos also offer washer and dryers in each unit and a full service gym in a common area. In some cases you can even get 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
The fees that you pay are supposed to go directly towards the maintenance of the buildings and amenities in the unit, but sometimes large-scale disasters can occur such as fires, floods, and weather events. Some condo associations set aside a portion of all income in a contingency fund to help pay for such situations. However others do not, and in those cases an assessment fee may be charged to residents to help repair the damage. This can be a significant cost, and should also be part of your budget and saving plan for your financial future when moving into your condo.
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.