Condominiums seem like the perfect piece of property. They’re smaller, low maintenance, and less expensive than a house. They may be hitting all the marks on your checklist, but do you know about the extra fees that condos require besides your rent?
If you don’t look for them or ask, these hidden fees can give you quite a surprise when it comes time to pay them.
The condominium corporation requires money to meet its financial obligations. It needs to pay for insurance premiums, snow removal, grass cutting, repairs to common property, reserve fund, tree trimming, etc. The main source of income for the corporation is the money paid by the owners in their condominium contributions (often referred to as a condominium fee).
The board sets condo fees by taking into consideration the budgeted needs of the corporation and the unit factors (for each unit). If the owners pass a resolution to amend the bylaw, the condo corporation can adjust how condo fees are calculated. Make sure you know how your condominium contributions are calculated, and be aware that condo feescan and do go up! A condominium corporation has the right to collect unpaid condo fees.
A special assessment (also known as a special levy) is a financial contribution that can be imposed on condo owners in addition to their monthly condo fees. It may be requested as a one-time lump sum or as an additional monthly payment. Special assessments are like a fee and are often proportional to the percentage of common expenses each unit has, as per the declaration. Therefore, a smaller suite’s special assessment will be lower than the one paid by a larger suite.
Special assessments require careful consideration by boards and communication with owners, including letters, advance notices, and even an information meeting to explain the necessity and why the assessment needs to occur. There are various ways of levying an assessment: It can be added to the fees for any number of months, paid in installments, or in one lump sum payment. It should be noted that as soon as special assessments are contemplated, they have to be noted in status certificates so that potential buyers are made aware of this forthcoming expenditure.
The Condominium Property Act requires that condominium corporations establish and maintain a capital reserve fund to provide for major repairs and replacement of property and common property owned by the corporation. As buildings age, they need to be repaired and maintained. However, this money is not meant for regular repairs done annually.
Each condominium corporation will have a different amount in its reserve fund. The corporation determines how much money it should save by conducting a reserve fund study. The reserve fund study is prepared for use by the condominium board, owners and buyers. The Alberta Government does not review it. If the corporation does not have enough money in the reserve fund to cover significant repairs or incurs other large unexpected expenses, the board may require each condominium owner to pay a special assessment to cover the costs.
Reserve fund studies aren’t an annual occurrence; they’re only required once every five years. Once completed, the board must develop and adopt a new reserve fund plan. Before implementing the plan, it should be presented to the unit owners for their information.
Now that you know all about these extra fees, you can make a proper decision about buying or renting a condo. To reiterate a few important notes, some of these fees, like the condo fees, are a reoccurring monthly charge. Others, like reserve fund study fees, are billed out only once every five years. It’s your choice to determine whether or not you can fit these added expenses in your budget. As long as you’re aware, you can plan.