Maintanence fees determination by developers

[neuhaus]

I have been shopping for a condo for a while now and pretty much have seen almost every sales center in downtown.
I am very curious on the range that is charged for condo maintanence fees. I understand that these fees differ due to size of building, inclusions of utilities, amenities, etc. but I have seen some similar developments where the amount of amenities ranges from nothing to one with a luxurious 20,000 sq.ft. recreation center (with a pool, spa, screening room, high-tech gym, extensive gardens, etc.) and their maintanence fees are almost the same.

Seems like condo fees typically ranges from the low-30 cents to 50 cents (excluding hotel-condos like the Ritz-Carlton and Mandarin which could charge 80 cents to $1.50/sq.ft.). Some even charge extra maintanence fees if you purchase a parking or storage locker. These fees are often noted in the fine print on the price list, so I don't know if potential buyers really look at this when considering their buying decision.

Would it be assumed that a condo with higher fees (and little amenities) will be better kept and managed?
Has anyone experience a significant correction or increase in fees after the first year or two of occupancy?
Has high fees noticably affected resale values in your building?

 

[Naveen]

With my recent experience, my condo fees jumped from 38 cents to high 50's. In my opinion it would not be fair to assume that condos with higher fees and little amenities will be better kept and managed. For example, the condo I recently sold which was from Liberty Development in Markham has very basic amenities compared to other developers and in my opinion Liberty Development falls well below what the industry standard is but yet the maintenance fees are comparable to the nicer developers. The condo I speak about was built in late 2007 and within the first year the pool was shut down for about 7 months because of construction defects. I think things like this swallow up a lot of maintained fee dollars. In turn I do believe reputation and construction quality does affect resale values and maintenance fees. I would definitely stay away from Liberty Development and I would suggest to anyone looking at purchasing property, knock on some doors and ask people who live there their honest opinions. Does anybody agree or would like to add something?

 

[BlueCat]

In my experience, condo developers love to keep the fees artificially low to entice buyers. Anyone who thinks that the fees are going to remain the same or only increase a little in the first few years is kidding themselves. I live in a 4/5 year old condo and our fees have increased substantially in the last few years. I live in a large condo building with a sister tower and a shared facilities that includes an indoor pool, full recreation centre, hot tub, saunas and 24 hour security.

There are so many reasons why fees increase after the first year but builder budgets are always underfunded so it's up to the condo owners to make up the difference in the following years. Our biggest expense are our reserve fund contributions, security and management fees and of course utilities. Running a condo properly is not cheap so low fees actually make me suspicious. You need to ask yourself if the building is being properly maintained when the fees seems really low. On the other hand, extremely high fees also set off warning bells too. You have to do your research and have a good lawyer.

My condo has relatively high fees and it has not effected our resale value or sales volume negatively in any way.

 

[uptownto]

Developers market unrealistic low fees to attract buyers. It is as simple as that. I agree completely with BlueCat on this.

If you are looking for a correlation between condo fees and other factors, then I think the closest would be location and target market (though the two are pretty related). The most expensive buildings have the most expensive fees per sq ft. Just like maintaining a BMW should be more expensive than maintaining a Hyundai. The target buyers demand more, can usually afford more, and the replacement parts are more expensive.

Like I said in the other post on this topic, the majority of the fees go to utilities, on site staff, and reserve fund. These have little to do with age of the building or amenities, and they tend to scale so bigger buildings with more units don't take advantage of economies of scale. eg) a bigger building needs more cleaning, so cleaning is more expensive. Basically this leads to buildings in the same neighbourhood and price range having similar fees PSF +/- a few cents.

My advice is when looking for that new condo, see what already established condos are nearby, and see what they charge PSF for fees. That's what your new condo will most likely trend to.