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Maintenance Fees Questions?

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aquariaguy

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Just have a quick question. I've been looking at 1+1 condos in the Baview/Sheppard area recently, and the units at St. Gabriel Terrace (650 Sheppard Ave.) caught my eye. However, as I looked into it more closely, I noticed that two condos that were sold in February 2010 had a maintenance fee of $411. One even had $370 (approx) from Nov. 2009. Now, the ones put on the market in November 2010 have had a maintenance fee of $532! These are all 1+1. I contacted an agent to see if he could contact the building management for me regarding these crazy jumps in prices.

I'm new to this real estate stuff, so I was wondering if anyone could give me a clue or any suggestions as to why the huge jump in maintenance fees. The maint. fees don't even include hydro or heat! All that's included is water and 24hr concierge. What's up with that jump in fees than??

Thanks.
 
Electricity and water prices are always going up. It goes up every year. Although the building may not include hydro for your unit. The common areas require electricity and water to run which is shared by everyone in the building. Also, since the addition of the HST, costs have been pushed up 8%. Reserves also have to increase as well to take into account the increased costs associated with HST. The amount of amenities and concierge available and number of units will also affect the fees. If you have a lot of amenities or a especially lot of concierge, it will cost the building money. If the building has less units, costs will be higher than building with more units with same amount of amenities. If you want to find low maintenance fees. Look for building without any amenities and concierge and a tall building.
 
The monthly fees in condos have two main components; annual 'running costs" - hydro, gas, staff, minor repairs - as AKS says if a building has lots of amenities the cost of operating it will be higher. Then there is the contribution to the Reserve Fund; by law a condo corporation must have a reserve fund study carried out every 3 years and if this happened and if the study found the fund was under-funded it could explain the big jump in costs too. If you are interested in monthly fees - as you should be - you need to enquire not only what they are but what they are comprised of and when the last reserve fund study was completed and what it recommended.
 
Were all these 1+1 the same size? Also, an mls.ca online listing may show underground parking as a building amenity but that does not mean the unit has a spot. Whether the unit has parking/locker could explain some discrepancies in fees.

I bought a condo in 1997 and moved in in 1999. At the time, the builder was required to guarantee maintenance/building operating costs for 2 years. If there was a shortage, the builder would have to cover it. This was done to prevent the builder from predicting unreasonably low fees.

It was generally understood that fees would jump after the initial 2 year period. In my case, the builder had to forecast 1999-2001 operating costs in 1996 so it is reasonable that they did not get it exactly right.

Today, I believe the guarantee is for one year. The jump in maintenance fees at St. Gabriel Terrace likely happened after the owners voted in their own condo board and they implemented maintenance fees based on their budget for 2010/2011 (I believe St. Gabriel is fairly new).
 
Condo fees and calculated based on the size of the respective suite. In addition, if the suite has parking, and a locker, or two lockers, the fees will be different based on that.
 
I know this thread is quite old, but my question is related and I am hoping someone can provide some light on my situation.

I am in the midst of finalizing a purchase of a condo in Mississauga. Upon examining the status certificate we discovered that a review of the corporation's reserve fund was conducted in March of 2013. In this report it was suggested that the reserve fund be increased (currently at approximately $270,000). The status certificate indicates that a significantly greater proportion of the monthly collected maintenance fees will go towards increasing the reserve fund over the next five years. $32 increment in 2014, $36 in 2015, $42 in 2016, and so on, accumulating to $278 in additional funds being allocated towards the fund by 2019. Now, my agent and lawyer have assured me that this does not mean the maintenance fees will be increasing. They explain that only a greater proportion of the maintenance will be allocated towards the reserve fund up to 2019, after which point contributions to the reserve fund will be greatly decreased (as per the status certificate). I find it very hard to believe that additional money will be forwarded to meet the expectations of the reserve fund without increasing the maintenance fees beyond expected inflation rates. My agent has assured me that there is nothing to worry about and that I should reasonably expect maintenance fees to only rise at the rate of inflation.

It's true, the building seems to be well maintained, and it has a history of gradual and incremental rises in maintenance over the years (it is 50+ years old), but I am very skeptical and obviously have doubts about my agent's assurances. The lawyer has expressed to me that he does not deal with numbers and that an accountant should review that part of the status certificate, which begs the question: what is he doing then? Anyway, does this seem like normal practice and can I reasonably assume that I'm moving into a safe place?

Much obliged for any advice.
 
arashional said:
The status certificate indicates that a significantly greater proportion of the monthly collected maintenance fees will go towards increasing the reserve fund over the next five years. $32 increment in 2014, $36 in 2015, $42 in 2016, and so on, accumulating to $278 in additional funds being allocated towards the fund by 2019.
Click to expand...

$278 per year is $23/month phased in over a 5 year period. You don't say what maintenance fees are today but I would guess they're in the $400/month range; making this a 2% annual increase. Not something to fret over.

My agent has assured me that there is nothing to worry about and that I should reasonably expect maintenance fees to only rise at the rate of inflation.
Click to expand...

Get them to put that in writing.


what is he doing then
Click to expand...

Looking for issues that could impact your ownership of the place or value at closing. He's looking to ensure the previous owner paid their condo fees and taxes as those are tied to the property and not the owner.
 
Thank you for your input rbt.

rbt said:
$278 per year is $23/month phased in over a 5 year period. You don't say what maintenance fees are today but I would guess they're in the $400/month range; making this a 2% annual increase. Not something to fret over.
Click to expand...

Let me be a little more clear.

As far as I understand it, from looking at the certificate and from speaking with my agent, it will be an increase of $278/month by 2019. The current fee is $540. What my agent is saying is that the maintenance fees will NOT increase due to this proposed plan of increasing reserve fund balance. What he is telling me is that the $540 will not go up $278/month. What will happen is a greater proportion of the $540(+inflation), up to $278 MORE than the current contribution to the fund (which is roughly $230 of the $540) will be allocated to the reserve fund, for five years, after which significantly less will be allocated to the fund. This would essentially leave very little money remaining each month towards actual maintenance costs, so I find this whole story very hard to swallow.


rbt said:
Get them to put that in writing.
Click to expand...

Unfortunately, I asked my agent WHO can guarantee me that no substantial increase in maintenance fees will arise in the next five years, and he said no one will grant me such a guarantee because maintenance fees are unpredictable and subject to (drastic) changes with relatively short notice. Which begs the question - then what the heck is the purpose of such a lengthy document (status certificate)?
 
arashional said:
I know this thread is quite old, but my question is related and I am hoping someone can provide some light on my situation.

I am in the midst of finalizing a purchase of a condo in Mississauga. Upon examining the status certificate we discovered that a review of the corporation's reserve fund was conducted in March of 2013. In this report it was suggested that the reserve fund be increased (currently at approximately $270,000). The status certificate indicates that a significantly greater proportion of the monthly collected maintenance fees will go towards increasing the reserve fund over the next five years. $32 increment in 2014, $36 in 2015, $42 in 2016, and so on, accumulating to $278 in additional funds being allocated towards the fund by 2019. Now, my agent and lawyer have assured me that this does not mean the maintenance fees will be increasing. They explain that only a greater proportion of the maintenance will be allocated towards the reserve fund up to 2019, after which point contributions to the reserve fund will be greatly decreased (as per the status certificate). I find it very hard to believe that additional money will be forwarded to meet the expectations of the reserve fund without increasing the maintenance fees beyond expected inflation rates. My agent has assured me that there is nothing to worry about and that I should reasonably expect maintenance fees to only rise at the rate of inflation.

It's true, the building seems to be well maintained, and it has a history of gradual and incremental rises in maintenance over the years (it is 50+ years old), but I am very skeptical and obviously have doubts about my agent's assurances. The lawyer has expressed to me that he does not deal with numbers and that an accountant should review that part of the status certificate, which begs the question: what is he doing then? Anyway, does this seem like normal practice and can I reasonably assume that I'm moving into a safe place?

Much obliged for any advice.
Click to expand...

Maintenance fees are, as noted above, made up of $$ for the Reserve Fund and $ for "operations". From the 2013 Reserve Fund Study you know what the total that will be put into the Reserve Fund each year for the next three years (though a special assessment is always a possibility) but you really know nothing about how much the cost of 'operations' will go up. The building staff will undoubtedly expect salary increases, Hydro rates are increasing by well over the rate of inflation and in Toronto the City is increasing the cost of water by 9% each year. The Board sets the operations budget each year and nobody can say what it will be in 2 or 3 years. Your lawyer and real estate agent cannot know. If you agent really told you "that there is nothing to worry about and that I should reasonably expect maintenance fees to only rise at the rate of inflation." he or she is not being honest with you.
 
Thank you DSC.

I can understand hikes in fees due to rising operational costs. These cannot be avoided. However, my agent has told me that the increase in funds being allocated to the reserve is not considered a rise in operational costs and therefore should not have a direct impact on maintenance fees. That I find hard to believe. I am fine with paying more for services that cost more. Not with paying significantly more to resupply a fund that has been depleting.
 
arashional said:
Thank you DSC.

I can understand hikes in fees due to rising operational costs. These cannot be avoided. However, my agent has told me that the increase in funds being allocated to the reserve is not considered a rise in operational costs and therefore should not have a direct impact on maintenance fees. That I find hard to believe. I am fine with paying more for services that cost more. Not with paying significantly more to resupply a fund that has been depleting.
Click to expand...

You are very welcome. You really cannot know what your total fees will be in future years with certainty but you know that the reserve fund part of your maintenance fees is going up and by how much. You can certainly also expect the 'operations" part to increase by something, probably more than the 'cost of living'. As a VERY rough calculation I suggest you look at THIS year's maintenance fee. See what the $ amount is for Reserve Fund, the rest is 'operations. For next year (2014) you can simply add the $32 increment to the 2013 reserve fund amount and I would assume that the operations part will increase by 3 or 4 %. You do the maths! Good luck, buying your first place is a big decision and you are wise to be sure you understand all the implications. (By the way, don't forget City taxes!)
 
arashional said:
Which begs the question - then what the heck is the purpose of such a lengthy document (status certificate)?
Click to expand...

It is mostly proof that the current owner has paid all of their fees owing and you will not owe back-fees to the condo corporation for the property. It also shows that there isn't a special assessment coming up (these are sometimes tens of thousands of dollars).

If they don't pay and you take ownership, you now owe what the previous owner didn't pay.

Bottom line: if you're not comfortable with the purchase and your agent is unable to make you comfortable (ask them to do the math with you or refer you to someone who can assist with that), then don't waive the status certificate clause and don't buy the property.
 
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You have correctly figured out what is happening.
You state the building is 50 years old. Probably that is the reason the reserve fund needs to get a fair amount of additional funding as things undoubtedly are at the end of their life and need to be repaired/replaced etc.
This is one of the problems with older buildings. However, with new buildings, developers don't allow for the reserve and the condo fees often go up significantly within 1-2 years for a few years to build up the reserve fund. (Some developers do this to make the building more attractive..subsidize the first year condo fees or under represent the true costs.) Probably the safest bet from the condo fee view alone is to buy something about 5-8 years old...most will have the reserve fund funded and it will likely then go up only by the cost of living.
The agent who said to you that the condo fee will not go up and you pointing out that it is going up by $278 by 2019 means that count on $500 condo fee +6 years of say 4% increases or say around $632 +$278 or$910 / month condo fees. For 2020 it will go up by 4% on $632 + whatever additional new funds will be needed. Hopefully most of the major repairs will have been done by 2019.
I think rbt was a 100% right when he said if you are not comfortable with numbers like this, then don't buy the condo.
 
"interested" is giving some good advice. However, the most important figure was your very first one. $270,000 in the Reserves is a joke.

A condo has two funds, operation and reserves.

Your operating fund should have an end year balance of zero or a small surplus. Never a deficit. So whatever the condo is spending now on the operating fund will NOT go down but should increase at the rate of inflation.

Depending on what the Reserve Fund Study says, a figure of $600,000 to $1,000,000 or more would be far more reasonable. The engineers have recognized this so they want it raised by the figures you saw. So that condo's fees are going up to pay for fees in the past years being too low.

I would change real estate agents.

I have three full pages on how to buy a condo on my website. Follow that and you should be okay.
 
I have seen around $400 for 1+1 for condos and sometimes I have seen like up to $650. Pretty outrages if you ask me.
 
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