If you’re thinking about buying a condo, you’ve probably asked what do condo fees cover? Generally speaking, condo fees (or strata fees) cover building maintenance, amenities, and utilities. Some people think condo fees are a rip-off, but if you own a freehold home, you pay maintenance fees too. You just get to decide when to spend that money.
The tricky thing is, what condo fees cover differ for each individual building. For example, a condo that comes with 24-hour security and a pool should have fees that are higher than a building that just has a small exercise room. It’s also worth noting that condo fees are much higher in Toronto compared to Vancouver since snow removal is a major cost.
Regardless of where you live, you need to compare the cost of condo fees and determine if they’re reasonable or not. You also need to look at the reserve fund to ensure that the building has enough money to pay for any upcoming costs. Let’s take a look at what condo fees cover.
What is typically included in condo fees?
Anyone looking for a condo will likely ask what do condo fees cover? Condo fees cover different things in each building, but generally speaking, they fall under three categories.
Security, the building superintendent, and cleaners are the people you’ll see on a daily basis, but there are also elevator repairmen, landscapers, window cleaners, snow removal, and general contractors to consider. Your building will also require general repairs and upkeep which your condo maintenance fees help pay for. As the name implies, common elements are shared by everyone so the cost to upkeep your pool, gym, sauna, whatever are also included in your condo fees.
Part of your condo maintenance fees goes towards the condo reserve fund. This fund is meant for major repairs such as roof repairs or new HVAC units. Older condos require a large reserve fund since they’ll probably require more repairs. When purchasing a condo, you’ll want to look at the reserve fund to see if it’s fully funded. Some building reserve funds are poorly maintained and don’t have enough funds for major repairs. When this happens, the condo corporation needs to charge a costly special assessment to all the unit owners.
This is where things get tricky. In my building, the condo fees cover just water (cold), and central air. So I need to pay for heat, electricity (hydro) and hot water. Some buildings include everything. There are even a few buildings out there that include internet and cable tv in their condo fees while some buildings charge a separate fee for parking maintenance (which applies to parking owners only). If you own an electric vehicle and need a charging station, you’ll be charged separately for the charger and how much energy you use.
How much will my condo fees be?
You’ve probably figured out by now that my answer is “it differs” so let’s take a look at the average cost of condo fees. These days the average condo fee in Toronto is $0.60 to $0.75 per square foot, while you can expect to pay about $0.35 to $0.50 per square foot in Vancouver. Let’s say you own a 1,000 square foot in condo and your maintenance fees are $0.75 per square foot. That means you would pay $750 a month in fees.
There are a few things we can generalize when it comes to condo maintenance fees, but again, things differ per building. Older condos (think 15+ years) tend to have higher condo fees since they require more maintenance. Taller buildings usually have lower fees since there are more units which means there are more people to split the cost with. Buildings with lots of amenities e.g. a swimming pool, hot tub etc. tend to have higher fees too.
If you plan on buying a pre-construction condo, don’t get too excited about the low condo maintenance fees that the builder has estimated. These estimates are famous for never being accurate and usually increase drastically in the first few years. The same applies to buildings that are just a year or two old, there’s a good chance those condo fees will increase. I’ve owned a condo for 6 years and my fees have gone up every year. Fortunately, it’s usually been in line with inflation.
When looking at condo fees, you need to think about all of the above. A building with low maintenance fees doesn’t necessarily mean it’s a well-run building; it might signal that the reserve fund requires more money. Some people hate how you pay condo fees based on how much space you own. It’s not like you’re using more amenities just because you have a bigger unit. That said, there’s really no other fair way to split costs.
In case you didn’t know, condo fees are paid monthly, not yearly. The fees are also withdrawn directly from your bank account. You can’t charge them to your credit card to earn points or cash back.
How much can condo fees increase?
There is no set limit to which condo fees can increase. Some people may be surprised by this, but it comes down to what the condo costs are. Assuming the board is running things correctly, costs will likely still go up every year, so a small increase should be expected.
A good condo board will try to keep costs reasonable or down by examining where they can save money. For example, they might be able to save money by hiring a different security or cleaning company. They may also decide to drop a shuttlebus service as it’s a service residents are no longer getting value out of.
Keep in mind that the condo board makes decisions based on what the residents decide. This is why it’s important that you attend any condo board meetings and vote on any of their recommendations. All of these details must be made available to residents so you have no excuse. If you’re worried about how the board is spending money, then speak up and get other residents involved.
How do condo fees affect my mortgage?
It may not be obvious right away, but your condo fees can have direct affect on your mortgage. When applying for a mortgage, many lenders look at your gross debt service (GDS) ratio. Your GDS is essentially what it’s costing you to own a home and covers things such as your mortgage payments, property taxes, utilities, and 50% of your condo fees.
Generally speaking, you don’t want your GDS to exceed 32%. If yo need CMHC insurance, they have a hard rule of not approving anyone with a GDS that’s above 35%. Some lenders will also use your total debt service (TDS) ratio which includes any outstanding debt along with your GDS. Many lenders don’t want your TDS to exceed 45%. If it’s higher than that amount, you may not qualify for a traditional mortgage.
Do condo fees cover property taxes?
No, condo fees do not cover property taxes. As a condo owner, your property will be assessed by the city and you’ll be sent a tax bill once a year. You’ll need to pay for your property taxes separately. That said, some mortgages add property taxes to your monthly payments so you don’t need to worry about missing any payments.
What do townhouse maintenance fees include?
If you live in a condo townhouse complex with maintenance fees, they’re similar to condo fees. The obvious difference is that you’ll likely have fewer amenities, but you may also have increased outdoor maintenance costs to cover. In some cases, the lifespan of townhouse roofs is shorter than condos, so that ends up being a major expense. Your complex may also still have to pay for property management, security, cleaners, insurance, utilities, and more.
Why are condo fees so high?
In well run buildings, condo fees aren’t high or low. What you pay is based on the expenses of the building and what’s required for the reserve fund. Condo fees sometimes appear to be high since they’re determined by how big your condo is. For example, a single person who has a 500 square foot condo where fees are 60 cents per sq. ft. would be paying $300 a month. However, a couple with a 1,000 sq. ft. condo would be paying $600. The couple may find that high, but it’s technically the same rate as the single person.
That said, buildings that aren’t run well can have higher expenses which can translate to high condo fees. If you buy a condo, you should attend the condo board meetings so you know where your money is going. As an owner, your opinion matters and you can suggest changes to lower costs.
Are condo fees worth it?
Well, I don’t think anyone thinks condo fees are worth it, but they are necessary. Some homebuyers will insist on buying a house instead of a condo so you don’t need to worry about those condo maintenance fees, but that argument only goes so far.
If you own a house, you still have maintenance and upkeep to pay for. Your driveway won’t shovel itself and if your furnace breaks, you’ll need to replace it. The good thing is, you get to choose when you make those repairs, but nonetheless, you’re still on the hook for those costs.
The other argument is that if you didn’t have to pay monthly condo maintenance fees, that would allow you to take on a larger mortgage. That may sound appealing in theory, but again, you still have to pay for maintenance with freehold homes. The amount you spend on maintenance for a freehold home could actually cost you more compared to condo fees. There’s no way to tell who will come out ahead, you just need to understand what do condo fees cover.
What happens if you don’t pay condo fees?
As an owner, you’re responsible for paying your condo fees every month. This amount is withdrawn automatically from your bank account. If you don’t pay your fees. the following could happen:
- Your bank will charge you an NSF fee
- Your condo corporation could charge you interest
- Your condo corporation could register a lien on your unit
Condo fees are part of owning a owning a condo. While looking at buildings with low fees is not a bad idea, it shouldn’t be your only consideration. When making an offer, be sure that you put in a condition that allows you to review all the relevant condo documents before the purchase agreement becomes final. Your real estate lawyer will be able to review everything on your behalf and advise you of any concerns.