6 Myths About Condo Maintenance Fee's
Thursday May 21st, 2020
All condos owners are entailed to maintain common areas and assets of their condo buildings through provision of a regular monthly fees, more commonly known as the condo maintenance fees. While these regular fees have the potential to prevent sudden, unexpected costs, and may also cover things like security, utilities, contingencies, and amenities, there is also a lot of misconceptions around them, which makes many condo owners wary of paying their dues. However, the fact of the matter is that these built-in costs serve to offset the headaches of dealing with upkeep, overheads, and maintenance costs, and in some scenarios, save the homeowner money down the lane. Here, we are going to try dispelling 7 common myths about condo maintenance fee that are not true at all.
It’s Illegal To Increase Maintenance Fees
Even though a lot of people seem to hold the notion that it’s illegal to bum up the condo maintenance fee above a certain level, the truth is that this decision rests with the Condo corporation and board. As a rule of thumb, the condo association may increase the maintenance fee to account for inflation or in accordance with the needs of the building. Just keep in mind that the same condo board members who are in favor of a fee raise, will need to pay them as well.
Lower Maintenance Fees Equals Lower Monthly Costs
This is not always true because the maintenance of each condo building is calculated separately, so you can’t compare apples to bananas. Some building fees only cover the basic, while in other buildings, building fees may take care of high-end amenities, cable and even heat. You may need to do a little math to get an accurate monthly estimate. Obviously, the maintenance fees that includes utilities, amenities and hydro will definitely fall on the higher end of the spectrum, but if you were to pay for all those elements separately, you would incur a much higher monthly spending.
Condo Fees Include Luxuries You Don’t Need
Granted that many condos offer state-of-the-art amenities such as fitness or community centers, pet parks, and indoor Jacuzzis, but that’s only part of what you’re paying for. Given the turbulent weather in some places, homeowners may also need flood and windstorm insurance worth several thousand dollars, as part of their overall insurance portfolio plan, especially if the house is close to water. When you think about how Condo fees cover this, as well as gas, water, and other utilities, this only means more savings down the road.
Larger Condo Buildings Have Higher Condo Fees
Again, this is not always necessary. Buildings housing a large number of units often benefit from the economies of scale principle, which translates into the fact that the cost of amenities are spread over many suites. This is why larger buildings with many amenities sometimes have a lower maintenance fee as compared to smaller buildings with fewer amenities. After all, a concierge service shared between five units will weight much heavier on the pocket than when shared between 400 units.
Remember that plenty of factors go into determining a building’s condo maintenance fees, such as the number of units and a building’s footprint. For two buildings of a similar footprint, it will cost the same to fix the roof regardless of whether the building has ten storeys or fifty. However, the only downside to this is that the higher the number of units, the more there is a chance of wear and tear, resulting in a higher maintenance fee in the long run.
For New Buildings, The Maintenance Costs Will Spike Within a Few Years
Like all myths associated with the condo maintenance fee, this is purely situational. Everything depends on how well-managed a building is. More often than not, builders tout low maintenance fees to market new constructions and make them appear appealing to new buyers. But once the condo board takes over and the picture becomes clearer, the board may raise the condo maintenance fee to fill out the reserve fund. However, after an initial increase, the fee usually remains stable for a few years. In some effectively managed buildings, we have even seen the maintenance fee go down.
The Lower The Maintenance Fee, The Higher The Building Value
Maintenance fees reflects the true cost of maintaining and operating a building. If the maintenance fee is lower because the operating cost is low, it all works out in your favor. On the other hand, if the maintenance fees has been deliberately reduced to lure in buyers, all signs point towards a mismanaged reserve fund. If you want to gauge the value of a building, smart building management is a better indicator. The maintenance fees waters the reserve fund, which goes towards big repairs, upgrades, renovations, catastrophe management, etc. However, these funds are depleted fast in a poorly managed building, resulting in a need for special assessment by the condo board, which makes owners very unhappy.