Condo question

[iJDH]

I think that a few of the members here live in Condo's, and i have a few questions if you don't mind. My soon to be wife and I are house hunting, and we're thinking of a Condo. The only thing that we aren't that familiar with is the monthly condo fee. I know what it's for, and that sort of stuff, but i want to know if there are any condo fee horror stories where the fee was raised and raised, and raised again to ridiculous amounts?

We're just afraid that it will start out at $250/month (for example) then out of the clear blue it jumps to $500/month. Does/has that sort of thing ever happened?

Thanks for the help.

 

[cassiusa]

My condo fees nearly doubled in two years. It's not so much a real horror story for me as it's currently only at $250/month right now for a 1500sq ft house after the increase.

I think developers often set their condo fees as low as possible while they're trying to sell units for two reasons:

1) Many ameneties aren't ready by the time your unit is
2) It's easier to sell a unit with $200/month condo fees than with $400/month.

Another reason that condo fees go up quickly in the beginning is that I believe there is a minimum amount the condo corporation must have on-hand/in the bank (act as insurance?), but I could be wrong. Anyone know if this is true?

 

[indense]

My condo fees were around $200 the first year and $400 the next. This year, they've dropped to $340.

The builder left us with a large debt so we were charged the extra money last year to pay that off. The builder also left a lot of things off of their budget when setting the condo fees.

If you are worried about suprise costs, it might be worth it to only look at buildings that are established.

 

[elook]

Sounds like you live here, indense. Same story.

 

[Team Critter]

Indense, that's the first time I've ever heard of condo fees dropping.

 

[indense]

i'm in the Boot. if the fees didn't go down, i was seriously considering selling and renting in Jazz across the street.

140k for a starter condo, 10 minute walk to work, 5 minute walk to the Eaton Centre, 5 minutes to Metropolis which was supposed to be finished when i moved in 3 years ago.

 

[thx1038]

Hi there

Condo fees are generally purposfully under estimated by the developer, to make the buying look more appealing.

By law they must pitch in the difference for the first two years, so its after that the fees go up. mine was at 327 and 3 years later they are 427. After things settle down, the fees move up very slowly. Smaller building tend to have higher fees, since there are less of units to pool in for costs.

So in total I pay $5121 a year and I don't have to worry about a thing and I get to live in the center of it all with great amenities.

My girlfriend bought a Victorian house, on top monthly expenses ($300 for hydro water etc) She has had to repair her sewage line $7000 in 2005, roof $5000 in 2004, and her house just got broken into.

Condo life may look expensive, but sure is worth it.

 

[Observer Walt]

^ I agree with thx that fees for new projects are sometimes deliberately underestimated by developers. This has been a bit of a racket and could be avoided of course by buying in an established building.

Look at fees on the basis of "per square foot" and compare to other buildings. Expect to pay $0.38 to $0.42 per square foot typically. This will obviously vary based on amenities offered. The most expensive amenities are indoor swimming pools, and 24-hr. concierge service (few people really need the latter).

If buying in an established building (ie. building is built and the condo corporation has been in existence for a while) be sure to look at the Status Certificate which must be issued to you by the condo corporation. This used to be known as an Estoppel Certificate until about 3 yrs. ago. It sets out the financial status of the corporation and is supposed to tell you of any planned increases in fees.

Buildings older than 20 yrs. can be expected to have heavier repair expense, especially if they include underground garages and balconies (two items which will need repair sooner or later and are big-ticket expenses). This may or may not be a problem. The Status Certificate will tell you if the corporation has a good balance on deposit in the reserve fund to cover these anticipated repairs. If not, you might get hit with a "special assessment" of several thousand dollars.

Do homework before signing on the dotted line!

Hope this helps.

 

[elook]

Fees...ours went down after the initial spike. We had a similar problem with the builder fudging the first year budget then refusing to cough up the dough as required. We ended up suing and winning, but by that time the condo was in debt up to here and we needed big bucks to cover the deficit. We went from a way-too-low 16 cents/sq to 48 cents, and now down to a reasonable 39 cents.

If you buy a resale, look very deeply into the board of directors, and property management to ensure stuff isn't being ignored in the short term, at the expense of the long-term to keep fees low.

Also, if you buy new, do a ton of research into the builder. Don't rely on Tarion or GTHBA ratings which are bullshit, IMHO.

Go to a couple of projects that are done (or just) and see what buyers are saying. Oh, and have a good lawyer look at the sale agreement during your 10 day cooling off period.

edit: AFAIK? What the hell am I smoking?

 

[rbtaylor]

Also, if you buy new, do a ton of research into the builder. Don't rely on Tarion or GTHBA ratings which are bullshit, IFAIK.

It is also handy if you are buying into a multi-building complex. You can generally get a tour of some of comparable units in the earlier buildings to see what they turn out.

 

[shmoopie nhi]

Something else to keep in mind:

Property management budgets are set at the very beginning of pre-construction sales and are legally required to be included with your condominium documents. There is often a contingency built in that allows the builder to increase the budget by a specified percentage between the time the original budget is determined and the time of occupancy. Depending on the project, this can be several years. The year to year increases may be at the rate of inflation, but usually it's inflation + contingency.

Condo fees that include hydro are also subject to changes in the price of electricity, so if you buy a pre-construction unit and the electricity market changes, you can expect the builder to pass the increases along once you've taken possession.

Generally, budgets are set for a period of 12 months, so barring very poor management, you're assured of your fees for at least a year.

 

[iJDH]

Thanks for the help everyone. This has helped me alot.

 

[doitonabike]

Although I have moved out of my condo, I was president of the board of directors for several years concurrent with the drafting of the revised and current Ontario Condominium Act.

Historically, condo developers low-balled monthly fees to make their projects more attractive and it was not unusual to see 100% increases when the building was eventually registered and a realistic budget adopted.

The monthly fee must cover ongoing operating costs (utilities, cleaning, taxes on common areas, staffing) PLUS a reserve for future maintenance and repair costs. Many condo boards, wishing to keep fees low, have underestimated maintenance costs with the result that there were insufficent funds available when high cost repairs became necessary and owners were hit with "special assessments".

The new condo act attemtps to address this problem with strengthened rules about maintenance reserve funds. Now, then the condo building is registered, i.e. ownership transferred from the developer to the new owners, a reserve fund study and financial plan must be completed. The condo board will hire appropriately qualified engineering consultants who will estimate the life expectancy and repair/replacement cost of everything in the building (electrical, plumbing, roof, common area furnishings,... everything). With this information, a financial plan must be developed that ensures sufficient funds will be available years in the future when repairs and maintenance are required. The financial plan is an actuarial plan, taking into account not such things as estimated return on funds invested in the reserve account over the life of the building systems.

The Condo Act requires that the reserve fund and financial plan be updated at regular intervals and revised as necessary.

A new condo should accumulate a substantial reserve fund in the first decade so that funds are available when big ticket expenses come up; e.g heating and a/c equipment may last for 15-20 years but cost hundreds of thousands to replace. My building had over $1 million in the reserve fund when it was about 10 years old but this money could not be used (by law) for routine maintenance or ongoing operating costs. It's purpose was to stay on deposit earning interest for the day when the elevators would need to be replaced, the roof repaired, etc.

Condo owners frequently complicate the issue by wanting renovations or similar changes ahead of the reserve fund estimate; e.g. the corridor carpets and wall-paper may have a life expectancy of 15 but owners want to redecorate after 10 years. The funds that have been put aside for these replacements will likely be insufficient so the board can decide to charge part of the cost to the operating budget or draw down the reserve fund and increase the monthly fee going to the reserve fund in the next annual budget.

Anyone buying in an established condo should see the reserve fund study and financial plan and confirm from the condo's financial statements that sufficient funds are on-hand before finalising a purchase.

Persons buying in a new project can only compare the developers budget to the budget of similar established buildings (3-5 years old would be my guess) to determine if the developer's budget is realistic. Buyer beware.