If you’re looking into buying a condo, you’ve probably been instructed to watch out for condo fees. It’s solid advice; this oft forgotten expense can throw a wrench into your monthly budget if you underestimate, or forget to account for it.
You may assume that newer buildings have higher fees. It’s a natural assumption, since new usually equates to more expensive (like the sale price of new condos vs. old), and newer buildings often come with more extravagant amenities. But, this expectation is wrong. Newer condos usually have small condos fees than older condos.
What are condo fees used for?
Before we drive into how and why the age of your condo affects the cost of your fees, let’s quickly go over what condo fees are, and what they cover.
Condo fees are a mandatory expense of owning a condo. They are a separate from your mortgage payment, insurance and utilities, and go toward the maintenance and improvements of the communal spaces in your building. The cost of condo fees will vary between buildings, and can even vary between units in the same building.
Some specific examples of what condo fees might go towards include lawn care, gym maintenance, cable for a party room and a condo emergency fund. Condo fees will also handle expenses for general upkeep to the structure of the building.
Why are condo fees cheaper for new buildings?
There are two primary reasons why condo fees tend to be less taxing for new buildings.
Less maintenance/replacement required – Simply put, because the building is newer, there is less to be fixed and maintained. Even if newer buildings tend to have more amenities, there is less wear and tear, meaning less needs to be spent on upkeep. This is true for both that new gym and those new pipes.
Enticing potential buyers – Toronto’s condo market is fiercely competitive. By initially setting condo fees under market price, new buildings attempt to attract buyers to fill vacant units.
This “discount” can look especially appealing when the new building is flush with a state-of-the-art gym and a luxurious rooftop pool.
Condo fees escalate over time
Condo boards revisit the cost of the condo fees each year. As the building ages and repairs need to be done, the cost of the condo fees may increase. On an annual basis, the board will assess the needs of the building and make changes to the rates accordingly.
This mean that as time goes on, the cost of your condo fees will probably increase. So while they may start out low in a newer building, eventually condo fees are likely to rise to match those of older buildings. That doesn’t negate the savings you’ll accrue in the first few years of living in a new building, but you should be aware that these savings will probably be temporary. Keep that in mind when you’re budgeting long-term for your housing.