Posted by: Daryl & Wendy Ashby | May 14, 2010

Why The Fees?

Having worked with a number of condo owners, they quickly become adept at budgeting their monthly bills.

Cell phone to keep them connected? Check.

Cable to keep them entertained? Check.

Mortgage to keep a roof over their head? Check.

Maintenance fees to keep the building running smoothly? Check.

Maintenance fees (sometimes referred to as condo fees) are a monthly expense, paid by condo owners, that do exactly what the name sounds like — they help maintain the building.

More specifically, they help maintain the common areas of the building, like the lobby, the parking garage, the exterior facade and any amenity areas that exist.

Some people believe that, because of maintenance fees, condo owners have greater monthly expenses than homeowners, but this is a snare and illusion, for the fees cover many similar costs that homeowners experience, but in a more regular billing cycle.

For example, as a homeowner, I have a garden that needs to be landscaped in the summer and a driveway to shovel in the winter. As a condo owner, you are billed for these services in two lump sums, one paid to the landscapers at the first sign of summer, and one paid to the snow-removal service at the start of winter.

In a condo, you will also have a garden to landscape and a driveway to shovel, albeit on a larger scale, that you will share with the 100 or so other owners in the building. The costs of these services are built into our monthly maintenance fees, amortizing them across the year and making budgeting a slightly easier task.

Maintenance fees don’t only cover landscaping and snow removal, they typically also include exterior window cleaning and building facade maintenance, common area utilities and upkeep, common area insurance, garbage removal services and a reserve fund that gets built up to cover large expenses or repairs.

A good rule of thumb is that anything outside the walls of your condo unit are part of common expenses (monthly fees) and anything inside the walls of the condo are billed to you, the individual unit owner.

There are exceptions to every rule however, since some maintenance fees will include monthly utilities for the suite, but some will not. One of our clients have individually metered electricity for their suite (They pay the utility company directly for their usage), but water and gas are included in their monthly fees, so they don’t get billed for them via the utility companies direct.

What’s included will vary according to each developer and condominium, so make sure you have a clear understanding of what you’re paying for. Also, remember that the nature of amenities will have a big impact on monthly maintenance fees.

The 24-hour concierge service? Those salaries have to be paid from somewhere. The state-of-the-art fitness centre? Those machines aren’t cheap to buy. The seasonal outdoor pool? Huge upkeep necessary for smooth paddling. If you don’t use these amenities, there’s no sense in living in a building where you’ll be paying for them, since condo fees aren’t calculated based on usage, they’re based on percentage of interest.

In simple terms, percentage of interest (or percentage ownership) is calculated based on the square footage of each unit and its relative size compared to all the units in the building.

This percentage is then multiplied by the annual operating budget of the condominium (as determined by the condo board in the annual budget) and divided into 12 monthly payments, to give the condo fees for a unit. To illustrate, the wee 650-square-foot space that one of our clients calls home has a 0.703% interest in the building.

With their building’s particular annual operating budget, that works out to $320.07 a month in condo fees, or approximately $0.49 per square foot.

When they purchased their unit, the estimated maintenance fees were approximately $0.38 per square foot (which gave them a monthly bill of $247 for about the first year before the building was registered), but an increase in the first year is quite common, as the fees are suddenly based on real budget numbers, rather than an annual budget estimated by the developer. After that initial jump, condo fees usually stay relatively stable, with only minor adjustments for inflation.

On the first of every month, when their fees are due, they let out a small sigh, knowing that their bank account is a little lighter than it was the day before.

But whenever they see a cleaner in the lobby, the garbage men loading up the garbage or the landscapers pruning the trees, they tend to smile, as they recognize they are free from the everyday logistics of running a house

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: