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Condominium Fees

Darlene Ursulak is a careful and informed consumer who has owned two condominium suites, and has never been caught off guard by a large jump in monthly maintenance fees.

But Earle Shiohet, a major investor in property, stays far away from condominiums, citing what he calls "the great unknown of condo fees." The former real estate lawyer points out that horror stories about fees doubling or tripling are rampant.

The fees, paid monthly by owners, can include hydro, heating, taxes, maintaining gardens, snow shovelling, cleaning and repairs. But they may not include all of the above — each building is different. In a new building, the builder estimates the fee.

Condo buildings are managed by boards of directors that are elected and report to the shareholders — their fellow owners. Boards decide how to run the building and, among other things, draw up the yearly budgets, which determine what the monthly maintenance fees will be.

Ms. Ursulak's experience in her five years of condo ownership could have a lot to do with the fact that she does some research before buying. "When I was purchasing," she recalls, "I talked to my lawyer, and asked about the status of the building and if it was in good financial shape. I also talked to people I knew about different buildings. One building I enquired about had had a couple of special assessments, so it was good to know about that. I did try to speak to a member of the condominium board, but I was discouraged from doing so."

 But Mr. Shoihet warns that "people have to realize that when they buy a condominium, they have partners. Yes, they have title to the property, but in the common areas, they're throwing their lot in with everyone else." Agent Richard Silver of Bosley Real Estate Ltd. explains that condo boards put aside money on a regular basis to pay for the major repairs that will come up, such as new windows or a roof. "Sometimes though, to keep fees low, not enough may be set aside," he adds. "In the case of an older building, the buyer should try to get the status certificate and the reserve-fund study. The study should show things like, in five years, the windows will be replaced; in 10 years, the garage will need repairs, and so on, at a cost of X dollars. That should indicate if there are enough funds set aside." If a condominium corporation has purposely kept fees low for a number of years, the residents are likely happy … until the roof needs repairing and the garage needs repaving, and the costs are in the hundreds of thousands. Whoops! Fees go up and special assessments are levied.

What, if any, recourse does an owner have if suddenly faced with monthly condominium maintenance fees that are doubling or tripling? A responsible owner should be paying attention to all matters regarding the condominium, especially budgets. In the event of what seems like an unwarranted jump in fees, a resident can try to band together with other owners of like mind and attempt to have the board members voted out. That's a last resort though. Better to exercise caution in the early stages. "I think the best protection is for buyers to have their documents looked at by condominium legal experts," Mr. Silver says. "In the majority of cases, there are no contentious problems or issues. However, before buying, it's really vital to have condominium specialists look at all the documentation. That can help prevent surprises."

- from the Globe and Mail



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