Garry Marr – Financial Post

For a mere $60,000, you can get yourself a condominium in Toronto’s still-expensive housing market. The only catch: the condo fee.

In the city’s west end, albeit away from the glitter and glory of the downtown core, Ben Myers, vice-president of condominium research firm Urbanation Inc., which tracks the Toronto market, has watched prices plunge in some buildings because the fees have jumped through the roof, scaring off potential buyers.

“Some of these old buildings,” says Mr. Myers, “they are really deteriorating, so they need to raise money to fix things.”

In one case, he says, a unit measuring about 900 square feet recently sold for $60,000, but it came with a hefty condo fee of 98¢ per square foot — $882 — per month.

Comment: So what? Try some of the big old ones with fees in the $1,600/mont range. I showed one in the summer at St. Clair and Avenue Road with fees over $4,000 a month. But for the fees, my people would have bought it. Sure, it was 3,750 square feet with 4 parking spots, but still.

“The building was basically falling apart,” says Mr. Myers.

Still, the issue of fees doesn’t seem to faze many Canadian condo owners or would-be owners.

A new survey shows a majority of respondents have not taken into consideration the fact fees may rise. Worse still, many condo owners appear to have little wiggle room when fees do increase.

The Toronto-Dominion Bank Group-sponsored survey by Environics Research Group contacted 609 residents in Montreal, Toronto, Calgary and Vancouver between Oct. 20 and 25. Respondents had to be currently living in a condo, had recently purchased a condo or were considering purchasing one.

Among the findings of the poll, released last week: 68% didn’t realize condo fees can increase at any time and 38% said they didn’t feel confident they could afford an increase.

Comment: I am scared for the intelligence of the condo buying community if more than 2/3rds of them did not know condo fees could rise. Did they not read the status documents? Did their lawyer not tell them about the budget?

“It’s scary,” says Farhaneh Haque, director of mortgage advice at TD Canada Trust, about how unprepared consumers are for any sort of increase.

The bank also doesn’t factor in the ability of consumers to pay off their liability should fees increase. When consumers are qualified for a mortgage, only 50% of the condo fee is included.

Comment: Which makes no sense. I suggest another mortgage chance, include 100% of condo fees when qualifying.

“We figure if you were buying a house you would have maintenance fees outside that we don’t factor. So when we qualify condo factors we deduct the fee by half,” says Ms. Haque. “We try to address the condo fee when we consider the affordability issue.”

She says the fee can be a factor but is a lifestyle issue as some people are willing to pay higher fees for such amenities as a swimming pool, a health club or even 24-hour security.

“For some people, it is like having a second mortgage,” says Ms. Haque.

Data compiled by Mr. Myers for the Metropolitan Toronto area show fees have indeed risen.

In the third quarter of 2012, the average fee in the Toronto condo resale market was 59¢ per square foot per month, up 2¢ from a year ago. In the new condo market, the average monthly fee was 49¢ per square foot, up a penny from a year ago. The gap between the two markets is due to the fact older condos sometimes include heat and hydro costs.

Comment: And due to the fact that builders notoriously under price condo fees to make the building attractive. Or, they are set 3-5 years before the building completes and things have changed during that time.

In general, condo purchasers are buying into the development’s business, which is a share of the condominium corporation, says Ray Leclair, vice-president of public affairs at Toronto-based Lawyers’ Professional Indemnity Co., which provides title insurance to Canadians.

Mr. Leclair notes that Ontario requires what is called a reserve fund study to make sure a condo board has allocated enough money for future repairs. Future obligations could also include lawsuits.

“People might say there’s $2-million; that’s a great reserve fund but not if the obligations are $4-million,” he says.

Toronto condominium developer Brad Lamb, who believes most consumers do understand that condo fees will go up, says the number of units in a building is probably the most important aspect of any fee. More units, means costs are spread out.

Comments: Almost all of my condo buyers assume fees will rise, they know it will happen.

He also refutes whether condo fees are any more onerous that the costs of home ownership. “I’ve owned plenty of homes and they are money pits. You’re always pouring money into the roof, the furnace, plugged water lines, stopping raccoons. It’s a nightmare.”

Comment: I figure I spend at least $300/month on maintenance of my house. Add in $50/month for water, $100 for gas and maybe $25 for insurance. That would be at least $475 in condo fees. Add in $60 for a gym membership, my time for landscaping and snow shoveling. My costs work out to similar to a $600 condo fee, give or take. And I don’t have the same amenities, no concierge, no cleaning staff, no undergound parking, no pool, etc. I bet I am paying something close to $0.40 to $0.45 per square foot.

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Contact the Jeffrey Team for more information – 416-388-1960

Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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