With a properly managed reserve fund, regular fees have the potential to prevent sudden, unexpected costs. But they do tend to get a bad rap - there are a lot of misconceptions around them. Here are a few we tend to hear a lot:
MYTH #1: It’s illegal to increase maintenance fees above a certain level
There’s no law around the bumping up of maintenance fees: it’s up to the Board and the condo corporation. As a general rule, they increase to adjust with inflation and/or the needs of the building; the cost of operation adjusts for the true cost of maintaining the building. And the condo board members who might vote to raise fees will have to pay them too.
MYTH #2: Lower maintenance fees mean lower monthly costs
Not necessarily. All buildings calculate their maintenance fees differently, so make sure you’re comparing apples to apples. Some building fees may include heat, hydro and even the cable, while others have very basic inclusions; you may need to do a little math to get an accurate monthly estimate.
The maintenance fee that includes things like heat, hydro and A/C will obviously be more expensive, but if you’re paying for these elements separately, the total monthly costs could end up being even higher.
MYTH #3: Small buildings have lower fees than high-rises
Condo building maintenance fees depend on a lot of factors, including the building’s footprint and the number of units it has. If two buildings have a similar footprint, it doesn’t matter if they have five storeys or forty – it’ll cost the same amount to fix the roof. Remember that cost is dispersed across the units. The more units, the lower the fee per unit. Building amenities are another factor, but it still has to do with the number of units. A concierge service shared between ten boutique units will be more expensive per unit compared to a concierge shared between 400 units.
Between two buildings with a similar footprint and amenities, the one with more units will probably have lower fees. But remember, with more units comes greater wear and tear, which might cost more to maintain in the long run.
MYTH #4: Maintenance fees for new buildings spike within 3-5 years
Yes and no – it completely depends on how the building is managed. Builders can market new buildings with low maintenance fees to make them more appealing to buyers. Once the condo board takes over, it’s not uncommon for fees to go up as the board fills out the reserve fund. After an initial increase, however, they should stabilize. In the case of well-managed properties, maintenance fees may even come down.
MYTH #5: Low maintenance fees are a sign of value
Maintenance fees should reflect the true cost of operating and maintaining the building. If that true cost is low, and the maintenance fee is low, then great. But if maintenance fees are artificially low to attract buyers, you could run the risk of a mismanaged reserve fund.
A better sign of value is smart building management. The maintenance fees fill the reserve fund and are used for big repairs, upgrades, etc. If a building is poorly managed, the reserve fund may deplete, at which point the condo board will have to issue a special assessment – which isn’t going to make anybody happy.
MYTH #6: Parking and locker are included in maintenance fee
Nope. These are often separately titled properties, which means they actually have their own maintenance fees attached to them! Make sure you check into that before signing on the dotted line!
MYTH #7: The older the building, the higher the fees
Again, that completely depends on how the building is managed. And yes, fees may go up if the building requires more money to keep it running, but the same can be said of owning a house – as it gets older and needs roof repairs or a kitchen update, those costs go into your yearly maintenance budget. A poorly-managed older building might be another story, however. A good agent always asks for a status certificate, and will steer you towards well-maintained buildings with good reps.
Maintenance fees are a fact of life when it comes to condo living. But they aren’t evil. You’d probably end up paying a lot of the same costs if you owned a detached house – it’s just those costs would vary from month to month. In a condo, you pay to maintain the gym – in a house, you pay for a membership or for your own equipment. In a condo, the security system comes with the package, in a house, you pay for it separately. Maintenance fees just take all those expenses and package them conveniently in one lump sum so you know what to expect every month.