Monday, October 26, 2015

The Truth About Condo Fees

Often we hear people say, “I’m not interested in buying a condo because I don’t want to pay condo fees.” Or sometimes condo owners tell us, “I pay these condo fees every month but don’t know where the money goes.”

Well, today we are going to discuss condos and where those monthly condo fees go!

First a technical definition of a condo:

A condominium, frequently shortened to condo, is the form of housing tenure and other real property where a specified part of a piece of real estate (usually of an apartment house) is individually owned. Use of land access to common facilities in the piece such as hallways, heating system, elevators, and exterior areas are executed under legal rights associated with the individual ownership. These rights are controlled by the association of owners that jointly represent ownership of the whole piece.

Put simply, when you own a condo, you own the square footage inside your unit, and are entitled to use the common areas of the building. This common element is managed by a condo corporation within the building. This condo corporation basically runs the operation and the finances of the building. Every unit owner is obligated to pay their share of the operating costs of these common elements of the building and condo fees are how that is administered.

Source: See Windsor Real Estate

Typical Expenses Incurred By Condo Corporations & Funded By Condo Fees:

  • Utilities of common areas
  • Maintenance of common areas
  • Management of the corporation and building
  • Safety/Security (Cameras/concierge in some buildings)
  • Garbage/Recycling
  • Landscaping/Snow Removal
  • Insurance
  • Allocation to the Reserve Fund (which is a topic we will discuss in depth in an upcoming post)
In other words, you are paying for the convenience of walking into your unit at the end of a long day, and having no worries outside of keeping up the interior of your unit. You also don’t need to budget for upcoming capital items the way you would in a house (like a roof) as that is built into your reserve fund allocation (unless the reserve fund is underfunded and a special assessment comes in, which we will also discuss in another post).

This works well for certain people, namely younger and older people, because it allows them to budget consistent costs for housing and not have to worry about maintenance.

To summarize, you aren’t throwing money out the window when you pay condo fees. You are paying your proportionate share of the operating (and future) costs of the property.

Were you part of the percentage of people who already knew this about condo fees? Leave a comment to let us know.

Next up we will be talking about reserve funds – a topic that confuses lots of buyers.

Russel Lalovich
Office: (519) 966-0444
Cell: (519) 995-5620

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