Condo fees - too high or too low?

Condo fees are like the weather. Almost everybody likes to complain about them.

Most of the time, condo owners are likely to complain about the seemingly excessively high fees - and sometimes they're right. I myself have had the next to impossible task of trying to sell a condo that had comparatively high maintenance fees.

But what about when condo maintenance fees are impossibly low?
There was an article in today's Globe & Mail that talked about the perils of low maintenance fees.

Low maintenance fees can be attractive to buyers because it lowers their overall monthly carrying costs. However, if you expect to sell your property for good, competitive value down the road, you can't live in a house or condo without having to invest in its upkeep on a regular basis. In a house, there are some big-ticket items that you have to maintain - I.e. roof, driveway, windows. That's no different in a condo. There's a very large roof, a very large parking area and often hundreds of windows that at some point, all need replacing.

Where does that money come from?
A portion of condo maintenance fees is supposed to go towards everyday type maintenance.
Another portion is supposed to go into the reserve fund, to take care of those costs that only come up every 20 years or so. Everyone is supposed to share in the cost of that repair, not just those who happened to live there at the time.

But what happens when something wears out unexpectedly fast?
What if the parking garage has bad leaks that caused the the structure to crumble beyond expectation?
And what if the maintenance fees were too low to create a sufficient reserve fund to pay for those repairs?
Where does that extra money come from?
It comes from the unit owners.

If the condo board needs to raise money for an unexpected repair, they can levy a "special assessment" which is distributed proportionally to the unit owners based on square footage (just like maintenance fees).

And those fees can't be dodged. They go with the unit.
So if the seller tries to dodge these fees by selling their unit, the buyer should be aware of them.

Standard practice when buying a condo is to have a condition in the purchase agreement that enables the buyer and/or their lawyer to review the status certificate - a document about the condo corporation's current "state of fiscal health" as well as any specific special charges that have been levied against that unit.

So a condo buyer would see that the seller is trying to dodge the special assessment and then the buyer has the option of negotiating that "discount" into the purchase price or walk away from transaction.

This is not an unusual tactic by the seller.
But the problem intensifies when more than a few unit owners try to sell for the same reason. All of a sudden you have a large number of units for sale on the market and that means they're competing against themselves for the few buyers. So they try to get around that by lowering their prices and find themselves in a spiral of falling property prices .

When you have a condo that's well run, it has a healthy reserve fund and a management board that is prudent in spending money to maintain the value of every unit-holder's investments, then everyone wins.
You get a well maintained building.
You get a building that's desirable to buyers.
You get a building where owners don't want to leave.
And the units are likely going up in value because of it.

So if you're thinking of buying a condominium, don't just look at the dollar amount of the maintenance fees. Have a close look at where they spend this money.
Are they spending enough? Too much?
How well is the reserve fund is managed?
What kinds of people are actually on the board making these decisions?
Remember, the board is just made up of other condo unit holders like yourself - ones who wanted to get involved. That doesn't necessarily mean that they have financial property management experience.

With condo ownership, it truly pays to get involved in the management of the corporation to help ensure that you protect your own investment in the property.