Dear David,

We are first-time homebuyers who have received mortgage preapproval from our bank. Most of the properties in our price range are older condominium townhouses. Monthly condo fees factor into the amount we qualify for, so we’re trying to understand what these fees cover and where the money goes. How do we know if condo fees represent good value? – ON THE HOOK

DEAR HOOK: For those who have never owned a condo, monthly fees can feel like a waste of money if you’re not necessarily seeing an immediate benefit. But every dollar collected should be accounted for in the condominium corporation’s operating budget and its reserve fund (a.k.a. the savings account).

The people who understand this best are often the condo board members. They see the books and know what it costs to insure, maintain and operate the property, as well as how much should be set aside for future updates and repairs. When a condo corporation installs a new roof, it immediately starts saving for the next one, even if that expense is likely 25 years down the road. The same principle often applies to windows, paving, balconies, plumbing, elevators and other common elements.

Freehold homeowners pay maintenance expenses too, but in a less regimented way. Instead of saving a set amount each month, they may suddenly face a $15,000 bill for roof replacement, new windows, or major driveway repairs. Condo fees are not wasted money, but a way of sharing expenses among unit owners by saving for them in advance.

This does not mean that every condominium is well managed or that all fees represent good value. A lower fee isn’t necessarily better if it means the corporation is postponing maintenance, or is failing to save the funds it needs. In Ontario, condominium corporations are required to have their reserve fund studies updated by a qualified independent professional at least every three years. These studies assess whether sufficient funds are being set aside for future updates.  

In some cases, higher fees may include specialized services, utility costs, exterior maintenance and a properly-funded reserve. That’s why it’s important to look at the price of the monthly fee, what it covers, and whether the corporation itself is financially prepared for the future. Before you decide to buy a condo, have your lawyer and Realtor review the status certificate, financial statements, reserve fund study, meeting minutes and any history of special assessments. You’ll want to understand what the monthly fee covers, whether the reserve fund is adequately funded, and if major repairs or fee increases may be in the works.

PRO TIP: An older condo townhouse is not automatically concerning. What matters more is how the property has been maintained, how the corporation has been managed, and whether it is financially prepared for the future. In some cases, an older, well-managed condominium can be a safer purchase than a newer development with no proven track record. #Advice #AskDavid #TheNegotiator 

David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Moving? Get it right. Ask David today! Call or text 519-577-1212.