With the condominium being a dominant housing type in the central core of the city (it’s anticipated that 32,000 condo units will be completed this year, exceeding the previous record of 22,473 in 2020), so understanding their make-up and the costs associated with owning one is extremely important.

As I wrote in Understanding Toronto Condominium Common Element Fees, although the monthly maintenance fees can vary a great deal between condominium corporations, they are usually calculated the same way and fluctuate based on similar factors. It’s important to understand these metrics, as it is an essential part of not only anticipating your expenses associated with different condominiums but also helping you compare apples to apples accurately when dwell hunting.

What Is Usually Covered With Common Fees?

Condominium fees, simply, are costs paid by condominium owners for shared costs in the building. These can cover things like common area use and maintenance, snow and garbage removal, smaller maintenance and cleaning and reserve fund contributions. Usually, the more amenities that your building offers, the higher the fees are.

For example, gas and hydro charges for heating and cooling the hallways, lobby and recreation areas are part of your fee (and in some instances, it includes the utility costs for your unit as well, and even cable television in older buildings in some instances).

Operating the elevators and keeping emergency systems in tune also add to your monthly charge. The building will also be required by law to have an insurance policy that covers the repair and replacement of the entire complex in the event of a fire or other damage, with the unit owner only being responsible for acquiring a policy to cover personal contents and any improvements done to the unit since its original construction (including upgraded flooring, cabinetry, appliances and built-ins).

In addition, the condominium corporation usually receives a single water bill that is paid through the proceeds of your monthly fee (though newer buildings have check-meters so that you receive your own individual water bill). Many of these are costs that a freehold property owner (owning a traditional house for example) would otherwise incur directly, so it’s important to carve out and understand what portion of the monthly fee is basic necessity charges versus building-specific expenses.

How Toronto Condo Fees Are Calculated And What One Should Watch For

Typically, these common fees are set in the Declaration by which the condominium is registered as a legal corporation. They are typically based on the square footage of your unit meaning, the larger your unit, the more you pay in fees. But this isn’t always the case. I have seen in small buildings – particularly loft conversions – whereby the fees are identical regardless of size or the units are designated as either ‘small’ or ‘large’ with two price tiers.

It may seem like a great deal if you find a condo that has super-low fees. But sometimes fees that are lower than comparable properties may indicate that proper attention to maintenance or possible lack of transparency in terms of budgeting within a condominium board is occurring. Building maintenance and repairs may be put off for some reason, meaning that you might be on the hook for a greater amount down the road. Or the building owners have agreed to pay ‘special assessments’ periodically (which are one-time charges to cover financial shortfalls) in order to keep the monthly common fees appearing to be reasonable rather than high. So it’s important as a Buyer you reach out to the property management and ask if there is a record of when and how much any ‘special assessments’ were levied.

Furthermore, don’t be fooled when purchasing a Toronto condo pre-construction. It’s not uncommon for a developer to offer low common fees as a carrot to lure prospective buyers in.  Developers are only legally required to cover the gap between the operating expenses for the first year of the condominium corporation’s operations its proposed budget. After the first year as the owners take control of the building, they tend to have to increase the condo fees significantly in order to cover the real costs (and often those required to complete deficiencies the developer refuses to complete), which can be substantially more. Any perceived savings are gone and the increase in fees can be substantial! I wrote about this and other pros and cons of buying pre-construction in my post: Dear Urbaneer: On Buying a Toronto Condominium Pre-Construction.

While condominiums vary in size, shape, and offerings, there are a number of common variables that will influence how much the common fees the common fee is per month. Let’s take a look:

— The Age & Quality Of Construction Of The Toronto Condo

Sometimes (but not always) older condominium buildings charge higher fees, simply because as building components age, they may require more maintenance. A condominium building is comprised of multiple parts. Much like in a house, these structural components eventually age into obsolescence; so it stands to reason that an older building may require more money directed towards repairs.

Things like the roof, heating and cooling systems, elevators and windows all have limited life spans and eventually need replacing- in addition to ongoing maintenance and repairs.

That’s not to say that newer buildings are spared from higher fees. Cheaper construction materials are more often used these days, which means that the lifespan for certain components is even shorter, which means that newer condos often need more maintenance sooner than their older counterparts.

Furthermore, because the Condominium Act was updated in 1998 to address financial shortfalls, older buildings pre-dating 1998 typically lacked sufficient contingency funds to attend to significant upgrades or repairs, resulting in high common fees or special assessments. The same goes for newer buildings which suffered system failures or unexpected deficiencies after the builder’s warranties expired. These days Toronto condo highrises often have on-going issues with their elevators. And I’m particularly concerned about buildings which are wrapped in skins of polyurethane panels and glazing, as they can often fail early and the cost to re-wrap a highrise (like in Cityplace, for example), can be horrifically expensive.

Here are some examples reported in the media: Toronto’s Big Un-Green Condo Problem – 80 Storey Aura Condo Residents In Disbelief After Being Told Their Water Could Be Out For Seven Weeks – and – Faulty Towers: Who’s To Blame For Condoland’s Falling Glass, Leaky Walls And Multi-Million-Dollar Lawsuits.

— Size & Design Of The Toronto Condo

The common fees can vary dramatically depending on the number of units, the design of the building, and the types of amenities. The criteria influencing the fees include the height, size, number of levels in the building and the materials used in its construction. In addition, how many units are there? How many parking spaces and lockers? Is the parking underground or outdoors on a paved surface?

Other factors include the size and location of outdoor spaces, the kind of building systems and services there are (Are utilities separately metered or included in the monthly fee, as I touched on above), the level of finishes, the amount and kinds of amenity spaces, the number of elevators, etc.

And it’s not just about what is in a given building or how it is designed, but how these fees are broken down across owners. Think economy of scale versus smaller building equals higher fees. For example, a multi-tower high-rise complex can economically support a full-service concierge and comprehensive amenity space with guest suites, pool, fitness and recreation facilities – given the cost is spread across many owners – whereas a small building with fewer owners will have significantly higher fees.

And design matters too. For example, a stacked townhouse complex with patios and roof terraces, sitting on an underground garage, may have a large massing but only contain 100 units or so. With a complicated roof system accommodating all those outdoor terraces and all the vents required to exhaust building systems, and an underground garage, the repair & maintenance costs in addition to the replacement savings programme (Reserve Fund) are expensive. Theoretically, the common fees in this building type could be more than a square vertical tower with a smaller roof and two elevators.

In other words, the efficiency or complexity of the design, engineering, materials and finishes are each mitigating factors in what the common fees will be for each condominium corporation.

— Extent Of Amenities & Size Of Common Areas

In a Toronto condo, the fees will vary depending on the costs associated with having a concierge, and the maintenance and repair for snow removal, landscaping, elevators, and recreation amenities including tennis courts, swimming pools, party rooms, fitness facilities and more.

Depending on the extent of common elements that are collectively owned, the monthly costs can vary to reflect their upkeep. For example, a building that has recreation facilities like an indoor swimming pool or tennis and squash courts, or other features like guest suites or a concierge, will have higher fees than ones that don’t. A complex with an underground garage will have a higher common fee than one with surface parking. A building on a large property with grounds to maintain and upkeep (landscaping, snow removal, etc.) will also cost more than a building with less.

All common areas need to be maintained, so it stands to reason, the larger or fancier amenities (i.e. with more components/attention needed) are more expensive to maintain and repair. And these costs are shared by all condominium owners.

— Number Of On-Site Personnel

You should expect to pay more of a premium for higher levels of service. For example, you will pay more for an on-site superintendent or 24-hour concierge on-site compared to one with a security enterphone system, or just a night time watch person.

What services do on-site personnel carry out? How many staff are there? What hours of the day are they available? Having access to things like valet parking, a full-time property manager and a 24/7 concierge, in addition to other onsite service people will naturally cost more.

— Management Expenses & Reserve Fund Compliance

A condominium board will annually set a budget to cover all operating expenses plus the funds necessary to meet the requirements of its legally required savings account called the Reserve Fund. If funds are short, or if the condominium board anticipates having to spend a significant amount of money that may not be covered by the Reserve Fund, or proceeds with a major project that won’t be covered by the Reserve Fund, it is possible that the condo board will issue a special assessment. This means that all condo owners will be required to contribute a one-time payment which is usually based on their proportionate share of ownership of the corporation, which is often based on the size of their unit like the common fees. Typical reasons for a special assessment are changes to government regulations that may require expedient updating to equipment or repairs, emergency repairs, or – in some cases – a failure of the board to budget transparently to have the necessary cash in reserve. Incidentally, some Toronto condo boards will issue a special assessment but spread the payments out over a period of time, so that the common fee will increase to reflect this and then revert to its prior monthly charge.

All condominium corporations are required, by law, to complete a Reserve Fund study which must be reviewed and updated every 3 years. A Reserve Fund Study is a comprehensive technical and building component engineering audit of all the common elements found in each condominium corporation (including the repair and replacement of every building component, system, fixture and furnishing which is collectively owned by the corporation), with a detailed analysis on their current condition and future life expectancy. The study must forecast a 30-year future projection on when major repairs and replacement of common elements are required, along with their estimated cost, from which a detailed savings programme proforma is created to meet these future costs. Based on the age of the building, the extent and complexity of commonly owned elements, and the number of units, this forced savings programme essentially protects the future value and condition of the building. However, it can put upwards pressure on common fees. Although most condo corporations have management companies and a litany of support services, smaller condos may be self-managed to reduce the common fees, though it puts more onus on the board and residents to operate and increases the possibility of errors and omissions.

When looking for a condo, an important part of the process is to ask to see a condominium building’s status certificate, which communicates important information around their financial status- and what costs could be awaiting you down the road as an owner.

Here are two excellent articles that offer background as to how these are calculated: “How Are Your Condo Maintenance Fees Calculated?”  and “Common Expenses Fees”.

— Governance

Common fees are determined by a budget that is set by the condominium’s board, frequently with input and guidance from the property manager. Usually what happens is in the final quarter of the fiscal year, the board will determine what likely expenses are to be in the coming year. They will either run their budget slightly over projections in order to build a cushion in cash or maybe slightly under if they have a surplus from the year prior. This information will be communicated to unitholders regarding changes in their common fees.

As a unitholder, you can have a say in this process. You can either become a board member yourself to directly impact the budget and fees, or you can at the very least attend your condominium board’s AGM to vote. The AGM also provides an opportunity to ask questions of your board and hold them to a level of accountability around budgeting.

And, because prior to November 2017 one could be a board member of a condominium with zero understanding of how condos operate (now one must take an online training program provided by the Condominium Authority of Ontario – which is really only an introduction to the complexity of managing a condo corporation), it is not uncommon for a board of directors to unwittingly derail the building’s finances out of a lack of awareness or through manipulation.

Check out these helpful resources on Condominium Governance “Annual General Meetings And Voting Rights” and “Condo Governance”.

Also, it’s important to understand that when you’re buying a condo you’re buying into a community which can be challenging for some. Check out this 2014 Maclean’s article called Condo Hell which shares how “thanks to neighbour disputes, crazy restrictions and incompetent boards, condo dwellers are increasingly finding themselves boxed in”. (Condo living is not for everyone.)

— Property Value & Common Fees

To your question about common fees and future property values, it’s true that a high common fee could deter a buyer – especially if the property is as much about its price proposition as its lifestyle – but it’s ultimately more important to know why the common fees are high, as much as what the monthly amount is.

If the fee reflects the unit’s proportionate share of the costs associated with the building’s services, amenities, utilities, maintenance and repairs +  reserve fund contributions – such that the common fee is a genuine reflection of the real costs of living in the complex – then a rational reasonable prospective buyer will not consider the common fee an obstacle. However, if said buyer earns an income that is insufficient to service their mortgage payment, common fee, utility costs and property taxes, that in itself may prove to be the obstacle.

Don’t forget that most of the expenses in your common fee are costs you would also have to pay to own a house, although you may elect to do your own snow removal and landscaping maintenance rather than hiring someone to do it. The reserve fund contribution is a forced savings account for future replacement of building components. Most buyers of freehold properties don’t set aside a monthly sum in a savings account for fixing their houses, even though they should in theory.

As a realtor who sells a lot of Toronto condos, my job is to ensure I can communicate to potential buyers and their representatives why a building may have fees which appear to be on the higher side: Is the common fee high because the building incurred some unanticipated expenses, and instead of issuing a special assessment the board of directors decided to increase the common expenses instead? Or maybe the condo corporation took out a loan for repairs which increased the fees for the next few years, but which will eventually be paid off and the fees will be lowered?

The reason for the high common fee is important.

Are you considering purchasing a condominium as an investment property? It’s important to understand how the state of affairs of any condominium corporation you’re considering investing in, because if the common fees increase dramatically over a short period of time, they’ll effectively erode your investment, relative to the rent you’re able to charge. Furthermore, from experience, although a tenant may gravitate to a building because it has an amenity they particularly favour (say, an indoor swimming pool because they actively engage in that form of exercise), most tenants will prioritize the location and space plan as their deciding factor in choosing a rental unit. Tenants are not, by and large, willing to pay a higher rent to have more amenities.

Buying the right property means extreme due diligence prior to purchase so that you can fully anticipate all costs, as well as consider the potential for top-dollar resale down the road.

Here’s a condominium where the reasonable monthly fees cover it all: hydro, water, heating/cooling, common elements, building insurance & parking! How amazing is that?!

We’re proud to have sold this panoramic perch at Citygate Condominium – 3939 Duke of York Boulevard in Mississauga! We called it –> A Sensational Sky-Vista Suite In Mississauga’s City Centre

This split two-bed plus open plan den, two-bath suite is a smartly designed delight! From the moment you cross the threshold, it’s apparent how refreshingly unique this volume of light-filled space is. This tranquil respite features intelligent attention to detail, custom features, and delineated zones to maximize your indoor living space! Includes one parking space and locker, and is… NOW SOLD!

Maybe you’re a ‘make-it-happen’ millennial looking for a spacious pad in the centre of things, or perhaps a corporate couple who doesn’t have time for the maintenance of a house with a yard. Possibly you’re a downsizing Zoomer seeking turn-key swish in proximity to your city-dwelling kids – and grandkids! No matter your motivation, convenient and connected condominiums like this one are definitely worth your consideration!

Want to have someone on your side?

Since 1989, I’ve steered my career through a real estate market crash and burn; survived a slow painful cross-country recession; completed an M.E.S. graduate degree from York University called ‘Planning Housing Environments’; executed the concept, sales & marketing of multiple new condo and vintage loft conversions; and guided hundreds of clients through the purchase and sale of hundreds of freehold and condominium dwellings across the original City of Toronto. From a gritty port industrial city into a glittering post-industrial global centre, I’ve navigated the ebbs and flows of a property market as a consistent Top Producer. And I remain as passionate about it today as when I started.

Consider contacting me at 416-845-9905 or email me at Steve@urbaneer.com. It would be my pleasure to assist you, and yours.

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Serving first-time Buyers, upsizers and downsizers, and people building their long-term property portfolios, our mandate is to help clients choose the property which will realize the highest future return on their investment while ensuring the property best serves their practical needs and their dream of “Home” during their ownership.

Are you considering selling? We welcome providing you with a comprehensive assessment free of charge, including determining your Buyer profile, ways to optimize your return on investment, and tailoring the listing process to suit your circumstance. Check out How Urbaneer’s Custom Marketing Program Sold This Authentic Broadview Loft In Riverside to learn more about what we do!

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Thanks for reading!

-The Urbaneer Team

Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-800

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