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.