Everything you need to know about condo fees

Whether you've ever considered buying a condo or not, you've probably heard about the condo fees that all unit owners must pay. Also known as condo fees, they are charged to owners every month.

Because they can easily seem daunting, many people shy away from buying a condo. However, when properly measured, these fees can become a condo owner's ally, allowing them to cover the cost of regular building maintenance as well as certain major projects.

To demystify condo fees, we've put together some important information you need to know about them.

Are condo fees mandatory or optional?

In Quebec, condominium fees are mandatory. The law requires that all condominium owners contribute to the common expenses related to the maintenance of the building. If an owner fails to fulfill his obligations, the syndicate of co-ownership may impose penalties ranging from a simple notice to legal action, depending on the severity of the case.

Ultimately, the board may even obtain the right to sell the delinquent owner's unit to recover what's owed.

How are condo fees calculated?

Ideally, condo fees are calculated based on the relative value of the unit owner's share of the building. The value of each unit is stated in the declaration of co-ownership. It is expressed as a percentage or fraction.

The relative value of the unit is calculated according to its dimensions, area, location in the building, etc. If the value of the condo is 10% of the value of the building, the fees should be 10% of the common expenses. Thus, a large condo on the top floor with a great view will have higher condo fees than a smaller condo on the first floor.

It's therefore perfectly normal for unit owners in the same building not to pay the same amount in condo fees.

But there are other factors to consider when determining the amount of condo fees the owner will pay. For example, the services available in the condominium will also affect the fees to be paid. The more services the condo offers, the higher the fees will be.

Note that condo fees are often miscalculated by developers. So be careful and check the breakdown of condo fees before finalizing your real estate transaction.

Low co-ownership fees: should you be wary?

After several searches, you finally find an apartment you like and whose fees are much lower than those of the other apartments you've visited. Warning: this is a good example of a trap you don't want to fall into. In fact, it's one of the most common mistakes buyers make.

Low condo fees are usually a developer's tactic to attract potential buyers. The deal is very attractive at first, but it's not sustainable in the long run. At some point, these fees will have no choice but to increase to keep the building in good repair.

Low fees can be a sign of neglect. They can hide a lack of maintenance, the postponement of important work, etc. They may also increase the risk of having to pay a hefty special assessment, which will be discussed below.

A neglected building loses value, and all the condominium owners lose. So be careful if you think the condo fees you're being offered are too good to be true.

The contingency fund: what is it for?

The contingency fund is a sum of money set aside by the condominium from the amounts paid in by the unit owners. Its purpose is to anticipate the financing of certain works that may be required in the common areas of the building.

The accumulated sums belong to the community. If an owner moves out and sells his or her private unit, there is no refund.

By law, the contingency fund must be at least 5% of the common expenses. However, many boards are satisfied with this amount, which is insufficient in most cases. A prudent co-ownership will allocate a larger budget to its contingency fund. According to several experts, the amount of the fund should be between 0.5% and 1% of the building's reconstruction value.

If, when you check the building's documents before buying your condo, you notice that the contingency fund is low and that no major renovations have been done recently, be wary. There's a good chance that you'll have to contribute later.

The self-insurance fund: what is it?

Unlike the contingency fund, the purpose of the self-insurance fund is to enable the syndicate to pay the various insurance deductibles in the event of a claim, whether for the building's homeowners insurance or the syndicate's civil liability insurance. The money in this fund must be liquid and available at short notice so that the syndicate can act quickly in case of need.

Can I avoid extra contributions?

Special assessments are large sums of money that co-owners must pay all at once. They can occur when a major problem requires immediate repair and the contingency fund is unable to cover the cost.

This type of contribution can put off some potential buyers, but you should know that it is possible to reduce it as much as possible with the right measures. Among other things, the risk of having to pay this type of assessment can be reduced by good management on the part of the syndicate, an adequate contingency fund and reasonable condo fees.

In short, condo fees are an important element to consider when choosing a condo. Do not be tempted by low fees, but make sure they are a reasonable amount to avoid future unexpected charges. Don't hesitate to ask the seller questions to help you make an informed decision.

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