As a Realtor who has specialized in Ottawa’s established neighbourhoods for more than three decades, I work often with buyers who are purchasing a condominium unit for the first time and are new to condo living.
Some are young people buying their first property. Others are older and often have lived in a traditional detached house and have decided to downsize. Many choose to live in central neighbourhoods, where they enjoy walking to shops, restaurants and arts venues.
Condo buyers also like the ease of condo living, knowing they will never have to rake leaves or shovel snow again. The maintenance of the building and property, including things like snow removal, landscaping and other upkeep, are handled by the condo corporation.
But as we start to compare properties, first-time condo buyers sometimes balk when they hear about the monthly condo fee they will be required to pay.
Having helped hundreds of clients buy and sell condo units and having owned condos myself, I explain that condo fees are simply a different way of paying for the maintenance that you pay for when you own a traditional house. And with a condo, you sometimes get extras, such as a 24-hour concierge or hotel-like amenities.
These amenities can include impressive gyms, pool, larger terraces to lounge or entertain guests, party rooms, car wash bays and even a place to wash your dog. Owners in those buildings can cancel their gym memberships because they now have a gym included in their monthly fees.
If you’re shopping for a condominium unit or have been considering one, here are some common questions I hear from clients:
Question: What exactly are these condo fees for?
Answer: With most condominiums, whether in a high-rise or townhouse complex, you own your specific unit and are responsible for the interior upkeep, and you share ownership of common elements _ such as the building lobby, elevators, windows, roof, terraces, parking garages and amenities, such as pools, gyms or party rooms.
Your fees go into a fund that pays for maintenance, upkeep and insurance of common areas, including heat and hydro for those areas, fees to onsite staff, and fees to the property management company that works with the condo board on upkeep and financial planning.
Ontario legislation requires that part of the fees also go toward your condo’s reserve fund. This separate fund is intended to pay for replacements and major repairs that will come up in future years, such as replacing the roof, windows or parking pavement.
Boards are required to have engineers and/or other professionals inspect the building every few years and draw up a report of upcoming expenses and estimated costs associated with them. Your condo fees may have to be increased based on those reports.
By contributing to a reserve fund, you are doing what financial planners recommend you do when you purchase a traditional house: setting aside money regularly so that when costly repairs come up, you have the funds for them.
To help show what I mean, I often ask clients who have owned a house how much they spent on large repairs over the years. It usually amounts to thousands of dollars, but those repairs helped your home’s resale value. The same applies to repairs paid for by your condo fees.
A condo building may occasionally face an unexpected repair or work that was more expensive than engineers estimated. In these cases, owners may be required to pay a “special assessment” on top of regular condo fees. But just as when you face an unexpected repair on a traditional house, these repairs also help the resale value of your condo.
Question: How are the fees calculated, and why are some units in the same building more expensive than others?
Answer: Many first-time buyers are surprised that fees in a building or complex are not the same for all owners. This is because condo fees are almost always calculated based on the square footage of the units. The larger the condo, the higher your monthly.
Question: Do condo fees all include the same things from building to building?
Answer: No, and this is where it pays to compare fees carefully.
Some condo fees include things like heat, hydro and water, and sometimes even cable, while with other condos you pay all those bills separately from your condo fees. A fee in one building could be higher than a similar unit in another building, but if it includes heat and hydro and the other unit does not, then the higher fees could be worth it. If you need a parking space or a locker, you will also often pay a higher monthly fee than someone who does not.
Question: How do I find out about the financial health of a condo I’m considering?
Answer: When you make a conditional offer on a unit, your lawyer will examine the condo corporation’s finances, including the state of the reserve fund and any plans for special assessments or coming increases in the condo fees. I strongly recommend that when you purchase a condo unit, you work with a lawyer who has extensive experience in condo sales, rather than someone who works mostly with traditional detached house sales.
A real estate lawyer with extensive condo experience can see if the reserve fund is healthy, what the plans are to increase the fund, and any potential red flags. He or she may be able to steer you away from condos that based on their experience could become potential problems.
Of course, as with a traditional house sale, a lawyer can only work with the current documentation, and cannot guarantee that a condo corporation will have no financial concerns in coming years if unexpected repairs arise. But an experienced lawyer is able to recognize when a condo’s current finances are cause for concern.
Question: Are there limits on condo fee increases that I might face?
Answer: No. A board can find that it needs to raise the condo fees if the corporation does not have sufficient funds on hand to meet projected repairs or if unexpected repairs arise. Your fees will then increase according to the amount required to keep on track with the Reserve Fund Study (engineer’s report). This is not something boards like to do, since boards consist of your fellow owners. A well-run board does its best to keep costs under control, but at the same time, the board is responsible for the proper upkeep of the building for the benefit of all owners. That can mean increasing the fees.
If you love a condo unit but find that the fees at their current level already stretch your finances, it’s probably better to look for a unit with lower fees. Some townhouse condos, for example, have no common amenities and only modest fees that cover only things like snow and garbage removal.
Question: Where can I get more information on condos and how they work?
Answer: The website of the Canada Mortgage and Housing Corporation (CMHC) has an excellent, clearly written overview for those thinking of buying a condo. It explains what condos are, how they are managed and governed and how the fees work.
There’s also a list of questions to help you decide if condo ownership is right for you or if you would be more comfortable in a traditional house. Condo living is not for everyone, and what some owners consider reasonable fees, others will find too high.
You can read the CMHC guide [CLICK HERE] The site has a similar guide with tips for those buying a traditional house.
If you’re interested in buying or selling in the Ottawa area, whether you decide to go for a condo or a traditional detached house, I’d love to chat with you about the current market. With my extensive experience with condominium living, I can also explain how they work and help you to decide if it’s the right fit for you.
You can contact me through my website, at nancybenson.com, or give me a call at 613-747-4747.