When are condo fees high?
Buying a condo means paying condo fees. Some condo fees are high and some seem fair. When you buy a condo, you buy into a corporation. You own your unit or living space, but you also own a share of ownership in this condo corporation. Think of common areas such as the parking garage, the hallways and common areas like a fitness center and roof top gardens.
If you live in a condo building and none of the owners in the building pay condo fees, you would all come home to a dark and cold place. Literally. Condo fees are used to pay for heat and electricity in the common areas. Besides heat and electricity the condo building needs to be managed, the snow needs to be shoveled, the landscaping needs to be kept up, the hallways need cleaning, the elevator needs maintenance, the building needs insurance and so on. All those costs are called operational costs.
Besides all those daily operational costs, a condo building also needs to save some money for future repairs and maintenance. So from your monthly condo fees, a part also goes into the reserve fund. As the word reserve fund already says, this money is reserved for the big expenses. Here you can think of a new roof, a new elevator or some exterior maintenance. And unexpected cost that can show up.
Healthy reserve fund
As explained before, the reserve fund is used for the big expenses such as a roof, a new elevator or exterior maintenance. It is important to understand that the reserve fund be healthy. If this reserve fund does not have a sufficient amount to pay for example a new roof, you may end up having to pay money out of your own pocket. We call these special assessments. There are some buildings in Calgary where unit owners got into a shortfall, and they ended up paying tens of thousands of dollars. Sometimes condos are for sale when special assessments are already known. We have seen assessments from a few hundred dollars to several thousand. If the special assessment is already known, it is important who will pay for it, the buyer or the seller. The AREA, Alberta Real Estate Association, writes the contracts that are used in Calgary, and there is a separate section about special assessments. Make sure you understand this.
Condo document review specialist
The financial health of a condo complex is obviously very important. But how can you understand all this? Calgary has about 4 companies with people who are specialized in reading, understanding and interpreting the financial situation of a condo complex. When you put in an offer on a condo, make sure you add the condition to review those condominium documents to your satisfaction. When you negotiate the price, you have a number of days, your condition days, to bring all the documents to a review specialist. Not only will this specialist read into the financials, s/he will also read the bylaws and about the state of the building from all documents available, including the minutes from the board. The price of the condo document review specialists varies from $300-$500. Email us for a list of current companies that reviews those condo documents in Calgary.
When are condo fees high?
Condo fees can range from a few hundred to several hundred dollars per month. While writing this article, I took a moment to check on condo fees, and found the current highest condo fees found at $3070 per month.
Several things determine the condo fees. One is the amenities that are offered. For example, a fitness area can be small with a few pieces of equipment or can be a high tech fitness area with many machines. Some condo buildings in Calgary offer a concierge who can be full time or part-time. Some have swimming pools and saunas, perhaps assigned parking or elevators.
But the level of condo fees can also be caused by a big expense that wasn’t saved up for properly. A reserve fund can be drained financially when the condo building faces some unexpected cost. Looking forward, maintenance has to be done to any building. And so the condo board may have decided to raise the fees to get up to a healthy level again. So to answer the question if condo fees are high or not, you will have to look into the financials of the condo corporation.
If you have more questions in regards to buying a condo or condominium documents, Tanja is a Certified Condominium Specialist. It is part of the extended, accredited education from the Calgary Real Estate Board.