Common expenses (commonly referred to as “condo fees”) are a recurring grievance for those living in condos. They seem to always go up; they seem to never cover enough and owners often feel they have no control over them. In this post we discuss what goes into the calculation of common expenses.
But, before we start, have you ever wondered how your fees compare to others? We have put together a survey, which (we hope) will provide an accurate province-wide picture on condo fees. What makes them trend up? How do they vary across the province. How does the age of your building affect common fees? Please give us a few minutes of your time to complete the survey and feel free to share this post with anyone who could also complete the survey. The more answers we get, the more accurate will be the picture. The survey will take only a few minutes. It is best (but not essential) to have in hand your most recent budget to be able to provide a full picture.
What are common expenses for?
Condo fees cover the corporation’s common expenses. Naturally, one easily thinks of cost associated with regular maintenance and repairs: window washing, grass cutting, landscaping, snow removal, carpet washing, hallway painting…. Then there is the fun stuff: the state-of-the-art gym; the pool; the party room, the movie theatre…
But there are many more less obvious expenses, which quickly add up: insurance premiums; multiple phone lines (ever wondered how many your corporation has?); elevator maintenance and certification; utilities (electricity, gas, water, sawage cost); garbage removal; garage pressure washing…. And don’t forget labour and professional costs: the superintendent, the property manager, the auditor and the lawyer…
But wait, there’s more…
Reserve Fund Appropriation
Another important category of expenses which is often overlooked by those complaining of condo fees is the condo’s required contribution to the Reserve Fund. By law, every corporation is required to maintain and contribute to a reserve fund. This fund is to be used solely for the purpose of major repair and replacement of common elements and assets of the corporation.
Indeed, nothing lasts forever. Eventually, you’ll need to recaulk the complex; repoint or fix the cladding; replace the windows; repair the balconies and their railings; replace the membrane above your underground garage; repave the laneways; replace the roofs; replace the elevators….
Without an adequate reserve fund, you risk facing recurring special assessments.
How are fees calculated?
Common expenses are divided amongst owners pursuant to a specific percentage. This percentage is specified in the declaration. It is often (but not always) roughly based on the percentage of common interests appurtenant to each unit.
While the percentage set in the declaration does not have to be fair, it often (at least loosely) relates to the size of the unit and its placement in the building. The 2,000 square feet condo at the penthouse level is expected to contribute more towards common expenses than the bachelor unit on the ground floor.
Obligation to pay common expenses
Owners have a statutory obligations to pay common expenses to ensure the corporation functions properly. It is the lifeblood of the condo corporation. Owners are not exempt from the obligation to contribute their financial share, even if they waive/abandon their right to use common elements (“Why would I pay for the elevator if I live on the first floor?!”) or even if they have a claim against the corporation (“I’ll pay my fees when you fix my roof!!”).
These contributions are so important to the corporation’s survival that the Condo Act provides condo corporations with a super priority to protect their fees: the infamous condo liens.
Indeed, whenever owners default on their obligation to pay their share of the common expenses, the corporation has an automatic lien against the defaulting unit. This lien will cover the arrears but also all interests and all reasonable legal costs or reasonable expenses incurred by the corporation in connection with the collection or attempted collection of the unpaid amount.
The condo lien trumps and has priority over every registered or unregistered encumbrance, including the mortgage! To preserve this lien, a corporation must register it within 3 months of when the default first arose. Stated otherwise, until registered on title, the lien will only cover the last three months worth of arrears. We’ve already blogged on condo liens.
- Register your condo lien early or risk losing it
- How much time does a condo have to register a lien
- Strict deadlines to register condo liens when collecting on judgments
Beware of low condo fees…
While many owners gripe and complain about condo fees, there is no secret algorithm to them. Add up all of the corporation’s expenses and divide them between the owners based on the set percentage. There are simply no free picnics. The more services and amenities, the more you have to pay. The more utilities you use (assuming they are common), the more expensive it gets.
You find the fees too high? Me too. Tell me where you want to cut. We could turn the elevator off every second day. We could also not repair and not maintain the complex. Surely we’ll save tons of money that way.
We often hear of directors who run their electoral campaign on (or brag about) not increasing fees. Beware of these dream peddlers: Frugality comes at a cost. And that costs usually takes the form of a dilapidated building, decaying infrastructure or reduced services. You can only postpone the inevitable for so long. Eventually, you have to pay the piper. Either through sudden and unpredictably high increases from one year to the next or, even worse, through Special Assessments or loans.
How do you compare?
So, how do your fees compare to others? It’s difficult to know and is often difficult to compare from one building to the next. Too many variables go into the mix: the age of the building; its size; the amenities it offers; etc. etc.
We’ve put together a survey which we hope will help us draw an accurate province-wide picture on condo fees.
The survey only takes a couple of minutes to complete but, if you want to be able to answer every questions, we strongly encourage you to have in hand your corporation’s latest budget or most recent audit. You can do without these but may have to skip a couple of questions.
We will share results once we have gathered sufficient data. For this survey to be meaningful though, we need a high number of participants.
Please share this post with friends and neighbours. Even better, share it with your favourite condo manager and encourage them to send it to their boards.
Share it once, share it often, by email, on facebook, linkedin or twitter. It’s easy to do by using one of the social media button at the bottom of this post.