|Common Element Fees - What you need to know!!|
By: Jayson Schwarz
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Part of buying a resale condominium is understanding the fact that you are entering into a legally binding agreement to pay certain monies every month to the Condominium Corporation (the “Condo”) for the operation of the building and common elements associated thereto. In other words every month you are on the hook to pay the Condo your common element fees (the “fees”).
Common element fees are the costs of maintaining your condominium. These costs cover a variety of things and without being conclusive, they may include staff (security or concierge); guest suites, recreational facilities such as pools, party rooms and spas, water, hydro, gas, building insurance, cleaning, maintenance, taxes, property management fees, landscaping, snow removal, reserve fund contributions, reserve fund studies, accounting, and legal.
Every building is slightly different and the fees will vary depending on age, size and complexity. In order to determine what the fees include you need to obtain the status certificate (so make sure your deal is conditional on status certificate review) and review the budget and the last statements of the condo. This is something your real estate agent will be able to get for you.
In a resale condominium, generally, after the turnover meeting and the obligation of the builder has ended, an elected board of directors chosen by the owners, will manage the services and often times oversee the management of the property or contract a property management firm.
A portion of the common element fees you pay is put into a reserve fund for special assessments of the property as is needed and these monies go to paying for repairs such as roof replacements, re-painting and re-carpeting the hallways, new windows and doors, and re-paving the parking garage. When there is not enough money in the reserve fund to cover these special assessments, the costs are distributed proportionately among the unit owners and are levied for a period of time deemed appropriate by the board or pursuant to a reserve fund study.
Reviewing the status certificate before you purchase your unit will let you know how much is in the reserve fund and give you an idea whether there is enough money to cover these costs as they arise. The age of the condo may also aid in assessing whether major repairs will be necessary in the future. In addition this is an opportunity to discover if a “Reserve Fund Study” was, is or shortly will be conducted and if known what increases if any are to be expected.
Common element fees generally increase yearly at the rate of inflation, however, this is not a set amount and fees could increase by more or less than the rate of inflation depending on what the board deems necessary to operate the building. Fees are set to pay for the proper maintenance of the building and to put money into the reserve fund.
Fees are due on the first of every month and most condos encourage post-dated cheques or pre-authorized payment plans. If your fees are in arrears for an extended period of time the condo Corporation can register a lien against your property. If you are in arrears for more than six months the Board can pass a resolution to proceed with a power of sale.
If you are selling your condo be sure to give the condo written notice that you are leaving and ensure that your post-dated cheques or pre-authorized payment plans are not negotiated and/or you no longer consent to have your bank account debited
Common element fees are an integral part of the condominium world and in the same way you need to pay to maintain that freehold house you pay someone else to take care of your condominium home. Remember every condominium project is different and rates may be set to rise so be careful, take your time and investigate so there are no surprises
Jayson Schwarz is a Toronto Real Estate Lawyer.