Rob Car­rick of­fers tips on how condo buy­ers should as­sess monthly main­te­nance fees

The Globe and Mail (Prairie Edition) - - REPORT ON BUSINESS | SPORTS - ROB CAR­RICK

PER­SONAL FI­NANCE

When lawyer Denise Lash was re­cently look­ing for a condo to buy, she based her fi­nal de­ci­sion more on num­bers than on fea­tures.

“I knew of a build­ing that was about 10 years old and I knew the board,” said the founder of le­gal firm Lash Condo Law. “I liked the unit and I thought, you know what? If I buy in a build­ing, I want it to be one where I know it’s a good one. I judged it by the board, their re­serve fund and how well main­tained it was.”

Con­dos can be a prob­lem-solver in to­day’s real es­tate mar­ket. They’re less ex­pen­sive for young peo­ple to buy than houses and suit an ag­ing pop­u­la­tion by of­fer­ing life with­out stairs, lawns to mow or drive­ways to shovel. But there’s also a sense of dread as­so­ci­ated with con­dos, specif­i­cally with the monthly main­te­nance fees you pay as an owner and the po­ten­tial for big in­creases.

To a large ex­tent, the sta­bil­ity of these fees de­pends on how well a condo board maps out fu­ture main­te­nance costs and bud­gets for them. The Ottawa Cit­i­zen re­ported re­cently on a pair of build­ings where res­i­dents were told main­te­nance issues re­quired a $2.3-mil­lion in ex­tra fund­ing that would be paid by adding roughly $800 to their ex­ist­ing monthly fees of $700 or so. Some res­i­dents were think­ing about sell­ing, and one per­son won­dered how the many se­niors in the build­ing would af­ford the in­crease.

Ms. Lash said lawyers rep­re­sent­ing condo buy­ers should review a sta­tus cer­tifi­cate in­di­cat­ing what a condo board ex­pects for monthly fee in­creases and spe­cial as­sess­ments. She de­scribes the sta­tus cer­tifi­cate as “the cur­rent state of the condo corporation’s fi­nan­cial well-be­ing.”

Condo buy­ers should also check up on the man­age­ment com­pany that looks af­ter the prop­erty, she said. Real es­tate lawyers of­ten know which prop­erty man­agers have good and bad rep­u­ta­tions.

The po­ten­tial for rising condo fees or spe­cial as­sess­ments plays a big part in de­cid­ing whether to buy a new or older condo. Ms. Lash dis­cour­ages any gen­er­al­iza­tions about older con­dos of­fer­ing more fee risk be­cause of main­te­nance or up­keep issues re­sult­ing from sim­ple wear and tear.

“The feed­back that I’m get­ting from clients about the older con­dos is that they feel they get bet­ter con­struc­tion,” she said. “They feel the older con­dos are more ro­bust, and they get larger units.” On the flip side, older con­dos can be less en­ergy ef­fi­cient and may need costly retro-fit­ting to com­ply with new trends like adding charg­ing sta­tions for elec­tric ve­hi­cles.

There’s no doubt that older con­dos can have main­te­nance issues. For ex­am­ple, some older build­ings have what’s known as Kitec plumb­ing, a re­place­ment for cop­per pipes that turned out to have cor­ro­sion issues. If you buy a unit with Kitec plumb­ing, you’d have to bud­get for re­plac­ing it as re­quired.

Ms. Lash doesn’t buy the ar­gu­ment that new build­ings are the ob­vi­ous so­lu­tion to keep fees in line. “El­e­va­tors are such a big prob­lem,” Ms. Lash said. “I’ve seen a lot of prob­lems in newer build­ings with the el­e­va­tors.” She’s also seen a lot of noise com­plaints in newer build­ings.

Con­dos.ca has re­ported that the av­er­age main­te­nance fee for Toronto was 65 cents per square foot last year, with 22 cents at the low end and $1.35 at the high end. The av­er­age in­crease last year was 2.5 per cent, which is sig­nif­i­cant when com­pared with the 1.6-per-cent rise in the in­fla­tion rate in 2017 over 2016.

Don’t be fooled by condo fees that dra­mat­i­cally un­der­cut other build­ings, Con­dos.ca warns on its web­site. If fees are kept low to at­tract buy­ers, it could mean the re­serve fund will not have enough in it cover fu­ture main­te­nance needs.

The story of about the Ottawa condo sug­gests the need for some fresh think­ing about re­serve funds. Condo cor­po­ra­tions have them, and so should in­di­vid­ual condo own­ers. Take a block of money, say $10,000 to $25,000, and keep it in a high in­ter­est sav­ings ac­count that you’ll only ac­cess if there’s a spe­cial as­sess­ment or an­other of the fi­nan­cial emer­gen­cies that crop up when you own a prop­erty.

“There’s al­ways the risk you move and some­thing goes wrong the day af­ter,” Ms. Lash said.

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