The demand for condos, short for condominiums, have hiked due to their affordability, availability of amenities that an average consumer may not be able to afford independently, and manageable mortgages. In addition to the most notable factor of affordability, condos encourage community building, socializing, offer security and often easier access to public transport facilities. Condo units in Canada are managed by the unanimously appointed home owner associations (HOAs) that look over the matters of maintenance and other aspects to facilitate condo occupants.
Though the Condo units appear to have gained popularity, one must understand the fee structure of condos to avoid falling prey to bogus offers that look appealing by nature of their cheaper rates but have hidden supplementary costs. It is important to note that condo fees are commonly paid separately from the mortgage amount. To let you understand in a simple manner, condo fees are generally classified into two types:
Types of Condo Fees
Undivided Condo Fees
With an undivided condo fee, condo owners have to share the cost of the shared elements of the condo like lobby, hallways, elevators and the expenses for insurance, reserve funds for major building repairs and utilities. The undivided condo fees are fixed according to the percentage of the condo ownership by different condo owners. It is obligatory for every condo owner to pay the undivided condo fees as failure to do so may become a prerequisite to legal action by the HOAs.
Divided Condo Fees
Divided condo fees are paid by condo owners depending upon the share, size and value of unit ownership held by individual owners. For example, a condo owner of 10 units that are twice or thrice the size of other smaller units, pays the larger amount of the condo fees.
What to expect with a Condo Fees?
In Canada, condo fees are structured to include the shared cost of maintenance, amenities and other facilities and may cost a few hundred to a several thousand dollars per month or annually depending upon the location and average price. When buying a condo, one must expect to pay the following costs:
Building Repairs and Maintenance
As condos are multiple unit buildings, costs for maintenance and building repairs managed by the homeowners association should not come as a shock to those seeking to shift into a condo unit. These costs include the regular servicing of lifts, hallways, or major building replacements like HVAC (Heating, Ventilation, Air Conditioning), electrical and plumbing defects.
Amenities and Utilities
Condo owners if they avail shared amenities in condo units such as a pool, fitness center, golf court and others, have to pay a predetermined sum to continue availing them. Costs for utilities like water, hydro and gas are also shared among multiple condo owners. Some new condos are now being built with separate water and heating connections to condo units so that the costs are distributed accordingly.
Insurance Fees
Condo buildings are covered by insurance, therefore a building insurance fee is also included in the condo fee.
What is a Reserve Fund and Why is it important?
Reserve funds are a mandatory sum of money jointly paid by condo owners as part of the monthly condo fees and put aside by the homeowner association for any major building repairs that include the shared components of the condo. Like insurance, reserve funds are emergency savings that help bear the costs of situations that call for maintenance within the condominium. Condo owners, when making a contribution together every month for the reserve fund, are levied from the possibility of being liable to pay a huge sum of money in case of a major repair problem. In face of maintenance issues, funds are liquidated from the reserve fund to cover repair costs.
The cost of reserve funds varies based on the age and condition of the building structure together with the expected durability of its components. Financial advice is usually sought out by condo professionals for the approximate costs needed to cover the maintenance of the condo.
Thus, condo owners should not have any reservations with respect to paying the monthly dues for the reserve fund, whilst they should also authenticate if the fee is being used for the purpose intended.
How much do condo fees cost in Canada?
It is tricky to determine the exact condo fees as they vary based on location, building age and per square foot charges. However, you can get an idea of the approximate fee by multiplying the average fee per square foot in your city with the assumed square footage fee of the condo you are interested in. Before committing to the transaction, you must double check with a trusted real estate agent or lawyer so that you avoid getting blindsided to any hidden costs.
