WHY CONDO "FEES" CAN VARY GREATLY?
Gerald Rotering, Condominium Realtor
Condo "fees" are like city taxes - there is no profit margin in them, and they are set in direct proportion to the cost of maintenance and the level of service we demand from our elected officials. In fact, they are not fees to a third party, but contributions that condominium owners make to the upkeep of the common elements of their own homes. The owners elect a mini city council, their Board, and the Board sets the budget to cover direct expenses each year, plus contributions to a rainy day reserve fund.
There are numerous reasons why condo fees can be higher or lower between neighbouring condominium developments; and lower is not necessarily better! One condo Board, for example, may be unwisely ignoring looming capital costs, such as replacing water lines, hot-water boilers and the roof. At first glance they look like geniuses for keeping condo fees so low. Yet when the roof and pipes leak, that Board will have an inadequate cash reserve, so all owners could be facing a large special assessment to quickly raise the funds needed for repairs.
Right next door, homeowners may be paying $50 per month more, which at first glance makes us frown. Yet a look at the books could show they have thus saved up $1500 for each of 100 living units—sufficient to cover pending capital expenses and to have a cushion left over afterwards. As well, that development may be providing a higher level of services to its owners in the form of better snow removal, landscaping, gardening and maintenance touch-ups that reflect pride of ownership. Such obvious pride and reserve funds, by the way, often outweigh lower condo fees when it comes to obtaining high value on the resale market.
Typically, townhouses make a smaller monthly contribution than apartment condos, simply because townhouses can have their own water meters, and usually have their own furnaces and hot water heaters, while apartment condo owners pay their corporation to do these things centrally. Either way, you pay to stay warm in the winter and for the hot water that flows from your taps.
Monthly "fees" can also be higher when a condo corporation has recreation facilities to operate. If you don't use a pool, sauna, whirlpool, weight room or tennis court, why buy into a development in which you'll pay to maintain them? Calgary has some highrise condominium buildings with great indoor swimming pools—filled with crushed gravel and a few potted plants plopped on top! Those owners simply could not justify the costs of continued operation or overhaul of the aging facilities. Whether to raise fees and run these facilities, or to shut them down, are in-house political decisions for the mini democracy of the condo owners to sort out.
The type of construction can also be a factor in the monthly contributions needed to run a condo development properly. Some concrete buildings and parking structures were built using post-tensioned cable-reinforced concrete construction. While most such buildings are just fine to buy into, some may need to budget for future cable replacement, and virtually all of them require an engineering inspection every few years, perhaps followed by more minor remedial work. These can be great buildings offering open floor plans and fine views, but there will be some on-going cost to all the owners, and therefor slightly higher condo "fees".
New developments, of course, have all new components, and so may face few capital costs for several years. Even so, some builders are be a bit optimistic about what it will really cost to run a development after the purchasers become owners of the condominium corporation. Often, operating reality soon shows that proper maintenance and reserve-fund contributions for future major expenses require an increase in fees from what was represented in the show suite. Don't blame the sales staff for the optimistic presentation, but increase the numbers 25 to 50% within two years for your own comparison and budget purposes, just in case.
In short, you usually get what you pay for. Don't shop for a condo based only on the level of condo "fees", as that may mean you'll receive little in the way of services or reserve-fund protection. Don't be afraid of higher, yet reasonable, condo fees. That might mean you're looking at a well-run development, with a Board that's not afraid to charge what it costs to do the job right, and to save for a rainy day.