Are My Condo Fees Too High? Hamzeh Roumani, Board of Directors President October 29, 2013

What is a Condo Fee?

Your condo corporation collects condo fees (also known as common element assessments) from unit owners to pay for such expenses as landscaping, utilities, and site maintenance. The fee is collected monthly and is based on the percentage of ownership--square footage of the unit, locker and parking spot. It is therefore useful when comparing fees to express them per square foot per month, or /SF/MO.

How Much Should It Be?

According to a recent Globe And Mail article, the average condo fee in the Toronto area was between 50 and 65 cents /SF/MO in 2010 but has lately risen to 75 cents /SF/MO and can reach one full dollar for older buildings. These fees vary from one building to another due to a number of factors:

• Building Type
  Flat roof vs. shingles, presence of a swimming pool, number of elevators, and other amenities determine the overall order of magnitude of the fee.
  
  
• Construction Quality
  Sub-par material and/or poor workmanship will lead to more repairs and a shorter service life than assumed in the reserve fund study, and these ultimately lead to higher fees.
  
  
• Management
  This is the only controllable factor and it plays a critical role. Management includes Board oversight (to ensure money is spent properly and enough of it is saved for a rainy day) and day-to-day supervision (to ensure owners' concerns are addressed and needed repairs are undertaken).

Spend or Save?

...the average condo fee in the Toronto area has lately risen to 75 cents /SF/MO and can reach one full dollar for older buildings....

I have seen Boards at both extremes of the spectrum. Some keep the fees too low and save very little. This leads to higher fees as the building ages and possibly to special assessments. For example, the Board of a loft conversion had to impose a $10,000 special assessment on each unit in order to fix an old roof that was not sufficiently funded in the reserve! Other Boards "act stingy" by spending only the bare minimum. This leads to an overall deterioration of the site (due to lack of maintenance), lower property value (due to the shabby look), and a sense of injustice by those who sell (because they do not see the impact of most of the fees they paid).

The Casita Fees

...Our current fee is below 30 cents /SF/MO! ...

Our current fee is below 30 cents /SF/MO! This is truly amazing when compared to the Toronto average of more than 75 cents for older buildings. Our site is almost 20 years old yet it looks exactly the same today as it did back in 1995 when I moved in upon site completion. There were more trees around the gazebo back then but we have since learned that big trees and their big roots have a negative impact on our concrete slab. Moreover, we now have a new roof, refurbished corridors, more safety and convenience features, and more efficient systems throughout.

The Magic Formula

I shared our "secret"" for low fees during the last AGM and promised to post the details online, so here it goes. The AGM package included our financial statements as well as those for the Shared Facilities, the entity that oversees elements shared with the two high-rise buildings on the site. If we combine both statements and analyze the figures into site-work, utilities, and saving, we reach the totals shown in the figure below:

As you can see, we spend about half a million on site-work, a quarter of a million on utilities, and save the rest:

Your Board has followed this magic formula since its inception and it is working! Indeed, your fees are significantly lower than average and their rate of increase has always been modest. But even though the formula seem simple, it is far from simple to implement and sustain. This is because it requires constant monitoring of expenses and calls for innovative solutions to address unexpected changes.

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Note: Views expressed in this blog do not necessarily reflect the official position of MTCC 1113. They were written by Hamzeh Roumani, the President of the Board, and reflect his personal take on things.