While it’s easy to forget that your monthly fees are going anywhere other than some mysterious black hole or the pockets of board members and building owners, it is important for the building to have a well-padded reserve fund.
We’ve all come to terms with the fact that a loaf of bread no longer costs a penny. Or at least we hope everyone has. In fact, “penny candy” from the convenience store now costs five cents apiece. For some reason, though, an annual rise in maintenance fees for condo homeowners still seems unwarranted.
When a building’s fees increase annually by about the same rate as that of inflation, things have a way of evening themselves out.
Currently, as of this writing (August, 2018), condo fees are on average about 60 to 67 cents per square foot in most Toronto condos.
Of course rising fees seem like a bad idea upon first glance — people are generally attracted to sales and lower price tags — but sometimes this type of investment pays off. While it’s easy to forget that your monthly fees are going anywhere other than some mysterious black hole or the pockets of board members and building owners, it is important for the building to have a well-padded reserve fund (or safety net).
Plus, monthly maintenance fees are actually used for practical matters, such as heating and electricity for common areas, paying maintenance staff, equipment and supplies for both indoor and outdoor maintenance and cleaning endeavours, and so on. Due to inflation and increases in utility fees, it’s no surprise that maintenance fees continue to follow suit.
For fees to increase by the same amount as the rate of inflation is quite typical. Inflation increases the cost of utilities, labour, and supplies — are all items covered by maintenance fees.
If the board tries to gratify residents by freezing fees, this puts the building at risk of issuing a ‘special assessment’ down the road, to make up for the shortfall. A special assessment is when the building needs an infusion of cash to usually address a problem, and bills each unit owner a fixed amount to address it.
Special assessments usually only occur when the reserve fund is underfunded. If the board doesn’t want to do a special assessment, the only other options are to either take out a loan, or increase the maintenance fees (usually above the standard rate, which can hurt property values). Both of these are bad options.
Whatever is going on in a building, if you're dealing with a competent real estate professional, they should be able to determine the state of the building before you purchase a unit. They would do this by assessing (and having your lawyer assess) the condo status certificate, and of course if experienced, would likely know which buildings are reputable and which are not before booking a showing.
When a building’s fees increase annually by about the same rate as that of inflation, things have a way of evening themselves out. If these fees are going up because the salary for cleaning staff is increasing, your own pay is likely to be rising too. Although it may seem counterintuitive, the worst thing a building can do is not increase maintenance fees enough, and then play catch-up later on.
After all, by choosing to purchase a home in a building — whether a condo or a loft — you usually understand that you wind up paying more for certain conveniences. While this type of monthly fee is nonexistent in a detached house, you also will never wake up to find your front walk has miraculously been shoveled for you, your trees trimmed, or your windows washed.