Common expenses always go up

“This is a terribly politically incorrect position to take but the truth is that people who don’t have extra money shouldn’t be living in condominiums.”
—Audrey Loeb

A close relative from Belleville was telling my wife about a neighbour who was planning to buy a condo. She is a senior and she thought that a condo lifestyle would be enjoyable.

A couple of weeks before she signed the offer, she was told that the monthly common expenses were about to go up by $16.00 a month. The woman backed out of the deal because she figured that she could not afford to pay an additional $16.00 a month.

What would have happened to her if she had bought the unit before the announced increase in monthly expenses?

Monthly fees need to rise
A condo corporation needs revenue to pay for all the maintenance and services that it provides for the residents. If the level of service is going to be maintained, or even increased, then condo fees must rise by a minimum of 2% a year just to keep up with inflation.

Hydro and water bills are going up far higher than the rate of inflation to pay for municipal maintenance and upgrades that have been ignored for years and I have not yet saw a condo building that could do without either.

As the buildings age, more money is needed to pay for repairs and the equipment eventually wears out. The owners need to pay up as normally, they are the only source of income that a condo corporation has.

Freezing the common expenses
Any board that brags that they deliver zero condo fee increases, year after year, is robbing the future to pay for present.

A condo corporation is like a city cab. If you stop paying for oil changes, tune ups and regular servicing, the taxi will eventually fall apart. If you cut back on car washes and interior detailing, not only will it be a piece of junk, it will look like a piece of junk.

The present owner gets all the benefits from cutting back on maintenance and care but the future buyers will be paying a hefty premium to keep the beat-up cab on the road.

How did they do it?

Here is a listing from the MLS. The important question is how does the board get away with it.

The answer is simple; that board neglects needed maintenance and repairs, ignores the roach infestations and they hold AGMs every couple of years or so. The owners put up with it because their common expenses are low so they think they are getting a piece of the action.

Low-income owners
Low-income owner-residents, absentee owners and new buyers are a condo corporation's curse as most will resist any increases in the monthly common expenses. If they become a large percentage of the owners, the board may be forced into cutting maintenance, starving the reserve funds and hiring low-cost contractors.

The building will suffer.

Condo maintenance fees are rising!
Rising hydro and gas costs will mean higher condo fees
MoneySense
by Romana King
October 17th, 2014
Online only

Condo and townhome-owners be warned: Your maintenance fees are about to go up. A lot.

According to reports from Ontario’s Energy Minister, Bob Chiarelli, any homeowner that pays an electricity bill can expect a 42% increase in prices by 2018. Add another 18 years and you’ll be paying 68% more for your hydro.

So, why should Ontario condo-board owners be worried? Because a significant, prolonged increase in utility costs will need to be recaptured somehow; more than likely this will mean an increase in your monthly maintenance fees.

68% of condo owners had no idea their monthly maintenance fees could increase

This will be scary news for almost two-thirds of condo owners. According to a 2012 TD Economics survey, 68% of condo owners had no idea their monthly maintenance fees could increase, while 38% weren’t confident that they could afford a fee increase.

Strange, considering all the media attention that’s focused on rising condo fees. Sure, most of the media attention has been on how developer’s artificially keep maintenance fees low for the first few years, or the focus has been on board mismanagement that led to escalating costs, but the overwhelming reason for maintenance fee increases is an increase in the cost of living.

Don’t believe me? Just ask your nearest condo board member. While wars are currently being waged over how to keep costs low, condo associations can already see the writing on the wall: Rates are about to rise!

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