Welcome to Condo’s Corner!

Brought to you by Daulton Read, President of Read Property Management

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Get ready for a weekly dive into condo living like never before with Condo’s Corner! Speaking from my perspective as a Condominium Manager, my goal is to entertain and provide valuable management insights and stories that can help you live your condo life a bit better—all with a little bit of wit, charm, and practicality.

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The Condo Fees Deep Dive: Understanding How Your Budget is Built

In the unpredictable realm of condominium living, few things are guaranteed—except, of course, the inevitability of condo fees and their steady rise. For many owners, the question lingers: Why do my fees keep increasing, sometimes dramatically, in just one year?  

Condo fees are the lifeblood of a condominium corporation, supporting its day-to-day operations and long-term stability. Many components of the budget are specific (e.g., landscaping, insurance, reserve fund contributions) and must be included exactly as stated in contracts and agreements with professionals. The rest are educated forecasts (utilities, repairs and maintenance, etc.). By understanding the process behind how these fees are calculated, owners can better navigate their role within their community, make informed decisions, and contribute to the health of their shared investment.  

What Makes Up Condo Fees?

Condo fees are created from two main components of the annual budget:  

1. The Operating Fund – Covers everyday expenses such as cleaning, utilities, landscaping, and repairs and maintenance.  

2. The Reserve Fund – Dedicated to major repairs and replacements of common elements, like roofs, windows, or parking garages. The annual funding of the reserve fund is often the largest single item of every budget.

The required contribution to these funds varies widely based on several factors:  

– What is defined as a common element in the Declaration

– The building’s age, design, and materials  

– Resident habits and expectations  

– Number and type of amenities

– Staffing levels and services provided

– The current financial health of the corporation

Each condominium is unique, meaning fees and budget needs can differ drastically from one building to another.  

Operating Fund: Balancing Today’s Costs

The operating fund supports the daily functioning of your community, and its costs often rise at rates that outpace inflation. Let’s break down the major contributors to operating cost increases:  

1. Utility Costs

From carbon taxes to delivery charges, utility costs remain one of the most unpredictable budget items. Many condominiums dedicate 10–35% of their operating budget to utilities, meaning even small increases in rates and/or consumption can have a notable effect.

2. Rising Service Contractor Rates  

Minimum wage increases and inflation have pushed up the costs of essential services like cleaning, maintenance and security. For high-rise buildings with 24/7 staffing, these increases can heavily impact the operating budget.

3. Added Services

Improved safety measures (e.g., more security personnel) and additional amenities often lead to higher fees. While these enhancements benefit owners, they come with a price tag.

4. Insurance Premiums

Insurance costs have skyrocketed due to market corrections and increased claims. Even if your condominium has a spotless claims record, higher premiums—and deductibles—can significantly affect your budget.  

5. Legislative Changes

Regulatory updates, such as those stemming from the Condominium Act, 1998 and the Condominium Management Services Act, 2015, often bring hidden costs. For instance, mandates requiring increased communication (like PICs and NOICs) or enhanced management oversight lead to higher administrative expenses.  

Reserve Fund: Planning for Tomorrow  

The reserve fund is your condominium’s financial safety net for major repairs and replacements. While many owners worry about keeping contributions low, underfunding this account often leads to special assessments or emergency fee hikes. Here’s why reserve costs may increase:  

1. Contributions for New Condominiums

New condos often start with a minimum contribution set at 10% of the operating budget. This is usually insufficient, necessitating significant increases in the first few years to build a healthy reserve fund.

2. Long-Term Repairs

Reserve fund studies project costs 30 years into the future. However, many significant repairs—like window replacements—may fall outside that window, requiring higher contributions now to prepare for future expenses.  

3. Inflation and Labour Costs

Construction materials (e.g., asphalt, glass, aluminum) and skilled labour have seen inflation far outpacing general consumer inflation. Reserve fund studies must account for these rising costs, leading to adjustments in contributions.  

4. Shifts in Repair Timing

Engineers periodically assess the condition of common elements, adjusting repair schedules as needed. Accelerated wear-and-tear or delayed maintenance can shift timelines, sometimes resulting in sudden funding needs.  

Keeping Condo Fees in Check  

While many cost drivers are beyond the control of a Board of Directors, there are strategies to manage budgets effectively:  

Operating Fund Strategies  

– Tender Service Contracts Regularly: Competitive bidding every 2-3 years ensures value for money.

– Leverage Technology: Technology and software can reduce administrative costs.

Reserve Fund Strategies

– Prioritize Preventative Maintenance: Regular upkeep can delay costly replacements.  

– Adjust Expectations: Repairs or retrofits may offer a cost-effective alternative to full replacements.  

– Plan for the Long-Term: Evaluate how current decisions affect future contributions to ensure fairness for all owners.  

Finding the “Goldilocks Zone” for Contributions

Setting condo fees is a delicate balance. Too low, and your corporation risks financial instability and special assessments. Too high, and property values suffer. The goal is to craft a budget that ensures:  

– Adequate cash flow to meet expenses  

– A healthy surplus for unexpected costs (at least 1 month of operating equity)

– Stable contributions that are fair to current and future owners  

– Compliance with the Condominium Act and best practices for long-term success  

By working closely with your property manager, reserve fund planner, and other experts, you can achieve a budget that supports both the present and the future of your community. After all, a well-managed condominium isn’t just a building—it’s a home and a shared investment.

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