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What do condo fees include? (and how they impact your next home purchase)

“Always pick your yard based on your Summer lifetstyle.”

~ KARL

March 5, 2018 - Karl Yeh

Thinking about buying a condo or townhomes? What are condo fees and what do they include? In this episode (part one of our two part series on condo fees), we discuss what do condo fees pay for, how often they are paid and what's a reserve fund. We also explore if you can opt out of condo fees, if there is a cap on the fees and why are they seem so high. 

 

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Transcription:

Karl Yeh:

Hi everyone. Welcome to another addition of Homebuyer's School.

Today, I'm joined by Karen McDonald, a Community Manager with Brookfield Residential.

And today, the question we're gonna answer is:

What's included in condo fees?

And this part one of our two-part series on condo fees.

So Karen, probably one of the most common questions you're gonna gt is, so what's included, actually, [00:01:00] in condo fees?

Karen McDonald:            

Yeah, and it is something we hear all the time.

What's included in condo fees, Karl, really depends on what type of multi-family home you're buying.

So say with an apartment style, you'd be buying the maintenance of the exterior, the landscaping, snow removal, all common areas.

But with apartments, you'd also have some kind of central utility included, your heating, your water, possibly electricity, cable, that kind of thing.

Townhomes, redivided townhomes, [00:01:30] you'd be paying for just the exterior maintenance, the landscaping, snow removal, the insurance on the building, maintenance fees and the reserve fund, as well too.

Karl Yeh:                             

Do you find- and I wanna touch on the reserve fund after a bit- but do you find that the condo fees are higher depending on the type of multi-family you're in?

Karen McDonald:            

Absolutely. Absolutely.

When you're considering the total cost of condo fees, you have to know what you're paying for and compare it when you're buying a townhome as well too. In an apartment [00:02:00] style, you will have some utilities that are included in that condo fee.

So while that may seem a lot higher than, say, a townhome, in the townhome, where you are metered for your own utilities, you're probably paying that separately from the condo fees. So think about it as a whole.

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What's a reserve fund?

Karl Yeh:                             

Yeah, so in you were mentioning the reserve fund earlier. What does that mean?

Karen McDonald:            

The reserve fund is an amount that is allocated out of the budget for any kind of future repair maintenance [00:02:30] of common areas, exteriors.

So over time, in a new build, it is built up so that any kind of repair or maintenance, over time, that needs to happen gets taken out of that.

In an older condo apartment-style home, you need to kind of check and see what the reserve fund is in advance and see if it is something that in 10 years will be able to maintain the common area.

Karl Yeh:                             

Is it something more for- obviously, [00:03:00] I don't think in a new build there would be that much reserve fund, right?

But if for a resale, it's something that you definitely want to take a look at because- Is there anything preventing you from asking if they've withdrawn from that reserve fund?

Karen McDonald:            

You should be able to find that out, absolutely.

In a resale, you should be able to go to, likely the management company and find out what repairs have been done, if the reserve fund has been tapped already.

In a new build, you are protected to some degree [00:03:30] because you have things like your warranties in a new build that you don't necessarily have any kind of maintenance or repairs that need doing right away.

So there is a difference between the two. The information should be readily available to you, though, to find out.

Karl Yeh:                             

Can you mention any other items? I know you mentioned maintenance and some utilities.

Anything else that the condo fees usually go towards?

Karen McDonald:            

Really, overall, it is that maintenance-free lifestyle.

So when you're looking at [00:04:00] the landscaping, the snow removals, all of the utilities. It could be the recreation facilities. Swimming pools, if that's included as well too.

You have to look at the whole building, you look at the whole development. Some people have day cares that they would be paying for within their amenities. So there is so much to take into consideration.

Karl Yeh:                             

So I guess with a multi-family that has a lot of recreational or amenities- [00:04:30] I guess the condo fees you'd expect to be a little bit higher.

Karen McDonald:            

Absolutely. But that's the lifestyle that you're paying for.

Karl Yeh:                              That's true. That's true.

Karen McDonald:            

If you're buying something that way, you're looking for that fitness center, you're looking for that swimming pool, that day care. All the amenities included.

Karl Yeh:                             

Do you think that it's possible to opt out of certain kind of fees? 

So like, "Oh, well I'm never gonna use that weight room." Or, "I'm never gonna use that swimming pool." Do I have to continue paying for that?

Karen McDonald:            

Yes, you absolutely do.

If you're buying in a development that has [00:05:00] all of those facilities available, you're buying into that development, and so that is a must. It's an absolute. The only way to opt out is to not buy there.

Are condo fees paid monthly?

Karl Yeh:                             

Okay. So how do you go about paying these fees? Do you pay monthly? Is it included in your mortgage? How does that work?

Karen McDonald:            

You would be paying on a monthly basis to the management company. You would set that up in advance with the management company specifically. It is, again, separate from your mortgage.

Why are condo fees high? or perceived to be high?

Karl Yeh:                             

Mm-hmm (affirmative).

So there's a perception [00:05:30] that sometimes condo fees can be a little high. How would you go about addressing that?

Karen McDonald:            

Well, I think it's, again, determining what you're paying for within the condo fees.

To a large degree, you're paying for the same thing in a single-family home. It's the maintenance, the insurance on the building, reserve fund, landscaping, snow removal.

All of that.

So I think thinks it's just that the perception is that along [00:06:00] with all of the utilities and if you have what seems like a higher payment, then it's kind of a waste of money. But it really is the lifestyle that you're looking for.

And to a large degree, you're paying it in a single-family home, as well too. It's just not in a tidy fund every month.

Karl Yeh:                             

Okay. Well I never really thought about that. Last question for you then.

Is there a cap on condo fees?

Is it sort of like, "Well, this is the maximum you're gonna pay ever in condos?" Or is it [00:06:30] just kind of open?

Karen McDonald:            

There is no cap on condo fees.

It is, again, depending on what it's maintaining. And depending on, largely, the cost of escalating pricing, on landscaping contracts, maintenance fees.

If there's repairs to be made in general common area, that's gonna cost. And so it's something that every homebuyer has to take into account. But in general, I'd say the cost of inflation is what they should go up [00:07:00] on a yearly, every second year basis.

Karl Yeh:                              Yeah, but it also depends on the property that you're-

Karen McDonald:             Absolutely.

Karl Yeh:                              Great. Perfect. Do you have anything else to add?

Karen McDonald:             No.

Karl Yeh:                             

Awesome. Well thank you very much for joining us. Remember this is Part One, so tune back in for Part Two. You'll see that on top there. And we'll catch you next time. Thank you very much.

 

Your turn:

Let us know if you have additional condo questions or home buying questions that we can answer by submitting them in the comments section below. 

Homebuyer's School publishes new content weekly so subscribe or check back regularly for the latest information, strategies and tips from homebuying experts.  

About Karen McDonald:

This is my 12th year with Brookfield Residential.  I have been involved in 8 sites now with 7 in multi-family and 1 Single Family.  I received my certification as a New Home Sales Professional from PHBIA in 2008. 

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