If you’re planning to buy a new condo, then there is an additional fee to consider compared to a freehold property. Every month, you have to pay condo fees, and they can eat up a significant amount of your budget, so it’s important to pay attention before falling in love with your dream condo unit.
The fees go towards some utilities (like water), the maintenance of common areas, and the building’s reserve fund.
Some condos simply have a lobby and maybe a lounge of sorts, while other condos are decked out with luxury amenities like theatres, indoor and outdoor pools, billiards rooms, and even bowling alleys or golf simulators. The more common space there is to maintain, the higher the condo fees will be. All the hallways and elevators are considered common areas, too, and they need to get cleaned!
The reserve fund is money intended for emergency maintenance. For example, if a common area is significantly damaged, like broken windows or malfunctioning workout equipment, the reserve fund is there. It’s important to keep in mind that there are special cases where the amount of money required exceeds the reserve fund, so all the owners are required to cough up their share. This can happen at any time.
This is one of the reasons older condos have higher fees. Older building require more maintenance and there’s a higher chance of something major going wrong. A 25 year old building with just a lobby may have higher condo fees than a brand new condo with a pool, party room, and gym.
It’s somewhat common for larger condo buildings to have lower condo fees per square foot because the monthly cost is covered by more owners. In Toronto, you can expect condo fees to be somewhere around $0.50 per square foot, but can be as high as $1.00 per square foot. In our experience, any psf condo fees under $0.50 is considered low.
So, if the listing says the condo fees are $0.56 per square foot and the unit is 600 square feet, your condo fees would be $336 a month. If only the total monthly fee is listed, then divide the fee by the total square footage to determine the per square foot cost ($336 divided by 600 = $0.56).
When you’re hunting for a new construction condo, developers typically have estimated condo fees displayed somewhere, usually on paperwork somewhere around the deposit structure and purchase requirements.
But, remember that the developer’s displayed condo fees is just an estimate. The fees could increase by the time of occupancy. When you get your lawyer to review the Agreement, they may even mention to you that you should plan for the condo fees to be slightly higher.
And those condo fees will keep rising. Rarely do condo fees actually go down, but it’s not unheard of. Some new condos have higher fees for the first few years to build up a healthy reserve fund, then they optimize the building’s operations and find more cost efficient ways to maintain the building. To be safe, always plan for an increase.
When it comes to planning your household financials and applying for a mortgage, your lender will include the condo fees in your application calculations. Your income may be high enough, but if the condo fees are expensive, it could push you into risky territory in the eyes of a lender.
Some people see condo fees as an extra cost or a luxury, but it’s really just a consolidated payment for a handful of household items. If you own a freehold home, you have to maintain your own property, repair the roof, pay for emergencies, etc. And if you want a theatre room, you need to build it and pay for it yourself. If you want to use a gym, you need a membership or pay to build one in your home.
Condo fees support a more carefree lifestyle. When buying your new condo and planning your budget, make sure to include this essential detail!