Condo fees콘도 관리비 (common expenses)

What are they?

Condo fees are the common expenses that every condo owner pays to the corporation each month. In English you will hear common expenses, condo fees and maintenance fees; they all mean the same thing. The Condominium Act defines common expenses as the costs of the corporation doing its job, plus anything the Act, the regulations or the declaration calls a common expense (s. 1).

In a freehold house, you pay yourself to fix the roof or clear the snow. In a condo, the corporation does those jobs and all owners split the cost in the proportions written in the declaration. Along with the mortgage and property tax, fees are one of the three big monthly costs of owning a condo.

What do they pay for?

It differs from building to building, but these are the main items the CAO and the Act describe. Check the condo’s budget and the listing for what is included.

• Upkeep and repair of the common elements: lobby, hallways, elevators, garage, roof, outer walls, landscaping, snow removal.
• Reserve fund contributions: savings for future major repairs and replacements, collected as part of the fees (s. 93 (4)).
• Services: cleaning, building maintenance, the licensed condo management company, security or concierge, garbage.
• Building insurance: the corporation must insure the units and common elements against major perils such as fire (s. 99), and the premium comes out of the fees. Your own belongings and upgrades inside the unit need your own condo insurance.
• Amenities: running and repairing the gym, pool, party room and so on.
• Utilities: some buildings include some or all of heat, water and hydro in the fees; others bill each unit separately. Check the "included" items in the listing and the status certificate.

How is the amount set?

Two things set the amount. First, your unit’s share (a percentage) is written in the declaration and usually depends on unit size. Second, the board sets the corporation’s yearly budget. Your fee is roughly "budget × your percentage" (s. 84 (1)). If your parking space or locker is a separate unit, its percentage is added too.

The CAO’s example: if the corporation’s budget is $1,000 per month and the declaration says your unit contributes 5%, you pay $1,000 × 0.05 = $50. The corporation may pass by-laws on how fees are assessed and collected (s. 56 (1)).

Owners do not vote on the budget. They influence it by asking questions at the annual meeting and by electing the directors. You must pay even if you never use the amenities or are in a dispute with the corporation (s. 84 (3)).

Example

Illustration only. Check the real percentages and budget in the declaration and the status certificate.

What happens if you do not pay?

1. Missing a fee payment (including a special assessment) is a "default", and from that moment the corporation has a lien on your unit. The lien covers the unpaid amount, interest, and the corporation’s reasonable legal costs of collecting it (s. 85 (1)).
2. The corporation must register a certificate of lien within 3 months of the default or the lien expires. It must give you written notice at least 10 days before registering (s. 85 (2) and (4)).
3. If the corporation also gives the mortgage lender written notice by the day it registers the certificate of lien, a registered lien ranks ahead of even an earlier-registered mortgage (s. 86 (1) and (3)). Without that notice the lien loses this priority, and late notice limits how much of the debt comes first (s. 86 (5) and (6)). This is why lenders take fee arrears seriously. The lien can be enforced like a mortgage, including by sale (s. 85 (6)).
4. Once you pay everything, the corporation registers a discharge and tells you in writing (s. 85 (7)). When buying, check the status certificate for arrears or a lien on the unit.

How lenders count them

For a CMHC-insured mortgage, the housing cost ratio (GDS) adds principal, interest, property taxes, heating and 50% of the condo fees, and the total must not be more than 39% of your gross income. The total debt ratio (TDS) uses the same 50% of fees and must not exceed 44%. For example, a $940 monthly fee counts as $470 of housing cost.

For uninsured mortgages, each lender’s rules can differ a little. OSFI’s Guideline B-20 lists condominium fees as an item lenders must include in debt service ratios. Higher fees mean you can borrow less, so give your lender the fee amount at pre-approval. See "GDS and TDS".

Why do fees go up?

• The budget is set fresh every year, and the CAO guide says it will typically increase each year as the corporation’s needs change. Rising wages, utilities, insurance premiums and management contracts push fees up.
• After a reserve fund study (every 3 years), a plan to increase contributions often means a jump in fees. First-year budgets for new condos are often set low, so fees commonly rise after the first study (a general pattern; every building is different).
• As a building ages, big jobs (roof, cladding, garage waterproofing, elevators) get closer and reserve contributions grow.
• If the budget falls short, a one-time special assessment can come instead of, or on top of, a fee increase. See "Special assessment".
• If the corporation loses a lawsuit or runs up legal bills, that money also comes out of the fees.

What to check before you buy

• Status certificate: the unit’s fee and any arrears, increases declared since this year’s budget and why, special assessments levied on the unit, the budget’s expected surplus or deficit, anything the corporation knows that may raise fees, and the reserve fund funding table. Read it with your lawyer.
• What is included: whether heat, water, hydro, parking, locker and internet are included or extra. Comparing the fee number alone across condos can mislead you.
• Unusually low fees: the reserve fund may be underfunded or the building may have few amenities. Low fees are not always good news, so read them together with the reserve fund study.
• Pre-construction: the first-year budget in the disclosure statement shows the "projected monthly common expenses". During interim occupancy, that projected fee is one part of your occupancy fee. It can change after registration, with the real budget and the first reserve fund study.
• Closing: the seller’s prepaid fees for the month are split by date on the statement of adjustments. Any arrears must be cleared by the seller.