Toronto sales rep Andrew la Fleur of Re/Max Condos Plus says when he meets first-time buyers and asks them, "What are you looking for in a condominium?" a common answer is, "Low maintenance fees."
"When I hear this, a little orange flag goes off in my mind as it's time to bust up another condo myth," he says. The myth is that if you buy a condo with few or no amenities, you will pay significantly less in maintenance fees than you would with a building that has a pool, sauna or rooftop terrace.
"This is simply not true," he says. "Maintenance fees at most condo buildings in Toronto, whether they are loaded with amenities or not, tend to settle around 50 to 60 cents per square foot."
The reason for this, says la Fleur, varies from building to building, "but the best answer is economies of scale - that is, the buildings that have a lot of amenities tend to be the largest buildings and therefore have a huge number of suites to spread the cost over, whereas the buildings with no amenities tend to be smaller buildings with very few units."
He says the older the building is, the higher the fees. How well the building is being managed is also a consideration, he says.
A recent survey by TD Canada Trust says that 23 per cent of people who recently bought or intend to buy a condo say that paying condo fees still feels like paying rent, so they are "saving up to buy another place where they won't have to pay the monthly fees".
Where they will find a house with no maintenance fees at all is a bit of a mystery. Most condo fees include the cost of maintaining the common elements of the buildings, including landscaping, snow removal, exterior maintenance and repair and window cleaning. Some have amenities such as gyms, saunas, swimming pools or tennis courts, which are also included in the maintenance fees. Some may include security.
Depending on the building, maintenance fees sometimes cover heat, hydro, cable television and water and sewage charges. All of these items also have to be paid for separately if you buy a freehold house.
While it's tempting to shop for a condo with the cheapest maintenance fees, that could also be a warning that it's not the best investment. In 2010, the board of a condominium building in Toronto took the unusual step of going to court to ask the judge to impose new maintenance charges on its residents. For years the condo residents turned a blind eye to maintenance issues in the aging structure, for the sake of keeping condo fees low. The court ruled that successive boards of directors of the condo kept the common expenses unreasonably low, "neglecting repairs and maintenance and postponing the inevitable day when the chickens came home to roost. That day has come and gone."
The residents were hit with a whopping charge of $900 a month in condo fees. Many tried to sell their units but were unsuccessful.
A well-maintained condo unit has a much better chance of appreciating in value and is more attractive to buyers than one that is run-down and tired.
Anyone buying a condominium unit should make sure they see the building documents that outline the finances of the condo corporation, the size of its reserve fund for maintenance, and special assessments for anticipated repairs. You should work with a real estate professional and a good lawyer to help navigate these shark-invested waters.
The TD Canada Trust survey says that four out of 10 Torontonians are willing to pay more than $400 a month in maintenance fees, and 17 per cent are willing to pay more than $600 in fees.
"It's clear that the convenience of condo living is important to many Torontonians, and they are willing to pay the monthly fees," says Farhaneh Haque, director of mortgage advice for TD Canada Trust. But the survey says only three of 10 condo dwellers have built a buffer into their budget to prepare for a possible condo fee increase. Another 36 per cent said they would have to cut back on their spending, but they could afford a maintenance fees increase if it happened.
"The possibility of a fee increase can be a little unnerving," says Haque. "While there's no way to 'lock-in' to a monthly fee like you can with a mortgage, you can prepare for a fee increase by building a buffer into your monthly housing budget…that way if fees go up, it won't be a major shock to your cash flow. If they don't increase, you have extra money to put aside in savings or toward your mortgage."
Fees generally increase every year at the rate of inflation, but each condo board sets their own rates.
Sales rep Winham Wong of Sutton Group - Associates Realty runs a website called Condofees.com , where you can compare the maintenance fees for Toronto-area condos.