Where Do Your Condo Fees Really Go?
They say that the only true constants in life are death and taxes – and if you’re an Alberta condo owner, you can feel confident adding “condo fees” to that list, too!
Condo fees are all but a guarantee when you decide to take the plunge into condo living. Yet despite the extra expense, most owners are happy to pay them because that additional fee leaves them free to not worry about the odds, sods, and backbreaking labour most homeowners have to contend with.
While that broad-stroke understanding might be enough for most condo owners, we wanted to take a moment to tackle the question of where your condo fees really go in a bit more detail – so we brought in an expert to help us out. We’re joined today by Fabrice Vermeer – Catalyst’s Director of Finance and number-cruncher extraordinaire – to walk us through the ins and outs. Let’s dig in.
Five Condo Fee Facts and Figures
1. First Off: What Are Condo Fees?
We dug into the details of condo fees a while back here on our blog regarding what they are and what they cover. Still, a condo fee is a charge levied to each condo unit owner by the condo corporation that works to cover various expenses you incur as an owner.
These expenses can cover everything from utilities and amenities to property maintenance and funding for major repairs. But ultimately, the breakdown is determined by the needs of the building and each owner’s stake in the overall property as determined by their unit factor.
2. How Are Individual Condo Fees Determined?
It all comes down to those cold-hard numbers when determining how much owners pay in condo fees throughout any given fiscal year.
“Condo fees are based first and foremost off a condo corporation’s budget,” Fabrice confirmed in our conversations on condo fees. “When we work with a condo board to put together its annual budget for the year, we start by building up a sum total of all the contract and recurring expenses that the building and the condo community can look to encounter over the year and then the additional items such as window cleaning or landscaping updates such as new flowers.”
“Any overages or too-steep increases can start to be managed and addressed. For example, maybe landscaping is coming in too costly, and frequency-of-work is decreased to save money; contracts are revisited or renegotiated; services are adjusted,” explains Fabrice. “We start having these conversations once those expenses are pulled together, and board members understand how those numbers turn out. Then, once the total budget is completed, we break that number out unit-by-unit as monthly condo fee contributions.”
3. Exploring Condo Fee Expenses
One of the most significant considerations regarding condo fees is the annual expenses a condo corporation must address. This is a big part of why condo fees vary so wildly from building to building because, as Fabrice reminds us, “where condo fees go and what they’re used for can really be property-dependent.”
Fabrice clarifies precisely what she means: “Things like cleaning, landscaping, interior and exterior repairs, windows, eavestroughs, insurance – all of these expenses range in scope depending on your building and its needs. They are broken down by type in your building’s annual budget to give owners clarity and visibility on where the money is going.”
This makes sense, of course – a condo community with winding pathways and expansive above-ground parking will pay a lot more for something like snow removal than a building with just a short walk up to the front door. What about the rest of those fees, though?
4. Funding that Reserve Fund – and the Many Reasons Condo Fees Increase
The other significant expenditure covered by your monthly condo fees is your building’s ongoing reserve fund – plotted out and reconsidered every five years as part of your condo corporation’s legally-mandated reserve fund study.
This is one reason you might expect a jump in condo fees from year-to-year, too – particularly in our current inflationary economy! For example, as reserve funds are monitored and revisited, it may come to light that a planned necessary capital project costs more than anticipated. However, the costs were built into the reserve fund study conducted a few years back, which necessitates a bump in condo fees to offset the current increase. The same can be said for rising insurance costs, climbing contractor rates, and more: the funds have to come from somewhere, and better, they come from slightly elevated monthly fees than a surprise lump sum in the form of a special levy.
5. Alright – But What Happens If You Don’t Pay Those Condo Fees?
“Every condo management company handles delinquent accounts differently,” Fabrice illuminated on the subject, “but at Catalyst, communication is a key part of our problem-solving approach, which is why we work to reach out to owners through a long series of emails, phone calls, warning letters and at times caveats. As a result, we have an excellent track record using Debtor Daddy to keep up on outstanding condo fees.”
“Finally, in extreme circumstances, the condo board may sometimes decide to initiate a foreclosure,” Fabrice details. “This is an outcome that tends to occur more often in smaller condo communities where thousands of dollars owing can begin to interfere with the actual operation of the building in terms of being able to pay utilities, contracted services, repairs and more. When deciding between issuing a special levy or a foreclosure, foreclosure is sometimes the best option for the overall condo community. Otherwise, all owners have to come up with the shortfall, and it is not necessary to burden all owners with a cash call for the delinquency of one owner.
Nobody wants to see a unit foreclosed as the result of some overdue condo fees – which is precisely why condo management companies like Catalyst work hard to be as communicative and transparent with residents throughout the process, attempting advocacy right up until the very end.
Thanks so much for taking the time to chat condo fees with us today, Fabrice – it couldn’t be more appreciated! To learn more about where your condo fees are going, reach out to us at Catalyst Condo Management today – we’re always happy to chat about anything and everything condo management-related!