Condo fees: investing for the future
We’re all looking for a good deal, and condo fees are no different. In fact, low condo fees, in addition to saving us money, seem to indicate careful management on the part of the administrators. Is this really the case?
It is true that for the regular expenses that must be covered by the co-ownership syndicate (also known as condo corporation) for the smooth operation of the condominium, you can expect that the costs be kept as low as possible. These expenses include the insurance payment, the cost for snow removal and landscaping, cleaning and building maintenance, the cost of security inspections, any salaries paid out and other shared expenses. Here we are considering the short-term responsibility of the co-ownership administration, which is to ensure, on a daily basis, the quality of life of all residents.
On the other hand, there are long term factors to be considered as well. This is where money invested in a reserve fund and the management of future financial risk play an important role.
A condominium building must be maintained in the same way as a single-family dwelling. Some of the issues that will need to be dealt with during the building’s lifetime include :
- Repairing the roof
- Replacing windows and patio doors
- Repairing and refreshing common areas : paint, flooring etc.
- Indoor and outdoor parking repairs
- Repairing or replacing siding
- Replacing balconies and guard rails
- Re-doing ground level terraces
- Important landscaping improvements
- Buying, repairing or replacing equipment : elevators, pool, central air conditioning and heating
These improvements are covered by the money that has accumulated in the reserve fund.
Most co-ownership syndicates do not set aside enough money to cover these inevitable expenses. Residents are asked to take out their cheque books and add a few thousand dollars to the pot in order to cover the costs. In order to have peace of mind, it is preferable to invest enough money, every year, into the reserve fund.
The annual amount needed to build the reserve fund will be determined based essentially on an evaluation of future needs, a service that can be found at GestiondeCondos.com, for example. If your condo administration is not looking for a formal evaluation, the next best option would be to determine a rate based on the insurable value of the building.
In summary, condo fees are made up of two parts: the regular maintenance expenses and the annual investment in a reserve fund for future renovations and repairs.
Having a healthy reserve fund is a sign of good management and planning. It is also an important element for residents who wish to sell their condo, contributing to the factors that future buyers will want to consider.
When all is said and done, paying today for a healthy reserve fund tomorrow is a very good deal.
Stock images: Shutterstock
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