What do condo fees cover in Ontario? Fees, reserve funds and special assessments

What condo fees cover in Ontario

The Condominium Authority of Ontario (CAO) calls them common expenses, and also describes them as condo fees or maintenance fees. They are the regular payments owners make to maintain shared parts of the property. The CAO's examples include the parking garage, hallways, lobby, recreation centre and elevators. A second use is contributions to the reserve fund, which pays for future major repairs.

The CAO's guide to how condos work adds that fees can be used to insure the building, maintain common elements and fund the reserve fund. In practice, then, a monthly fee is a share of the corporation's annual budget: the running costs of the shared property plus savings for large repairs.

Two things are not on that list, and you should ask about both. First, fees are not the whole cost of ownership. The CAO describes special assessments and chargebacks as other expenses an owner may face. Second, what the fee includes beyond the shared costs differs between corporations, so one building's fee may or may not include items that another bills separately. Ask for the budget and a line-by-line answer, and see our guide to buying a condo in Waterloo Region for the wider checklist.

How condo fees are calculated

The CAO says each unit is allocated a percentage of the common expenses based on its size, parking space and locker. The builder sets those proportions in the declaration when the condominium is created. Your fee is your unit's percentage applied to the corporation's budget.

That has practical consequences. A larger unit generally carries a larger percentage. A unit with a parking space and a locker carries more than a similar unit without them. If the budget rises, each owner's share moves with their percentage.

When you compare two units, compare the percentage as well as the dollar figure. The percentage tells you how your share would move if the corporation's costs change.

The budget, audited statements and fee increases

The CAO says condo corporations must prepare a budget every year and audited financial statements using accepted accounting principles, and that owners receive them before the annual general meeting. It encourages owners to read them to understand the corporation's financial health.

For a buyer, those documents show what a fee covers. Look at what is spending most of the budget, whether the corporation is putting money into the reserve fund and whether the line items look realistic. The CAO's status certificate page says fee increases should be clearly noted and disclosed. Ask your lawyer to flag any increase or planned change in the certificate, and ask the listing agent whether any is expected after the sale.

If you are measuring a condo against a house, remember that a fee replaces some of the costs you would carry yourself, and it is also a cost you cannot choose to defer. Our net proceeds calculator and costs and taxes page help you work out what a sale leaves and what a purchase costs on the day it closes. The monthly side comes from the corporation's own documents.

The reserve fund and what it pays for

The CAO defines a reserve fund as an account that condominium corporations maintain solely for major repairs and replacements of common elements and assets. It is not a general operating account. Corporations must do periodic reserve fund studies to check that the fund is on track.

A study has two parts, according to the CAO. A physical analysis lists the corporation's assets, with when each was acquired, how long it should last and what replacement will cost, for items expected to need major repair or replacement within 30 years with a cost over $500. A financial analysis then checks the fund and recommends a funding plan covering at least 30 consecutive years.

There are three kinds of study. A Class 1 study is comprehensive and includes a physical examination of the property. A Class 2 study is an update with a site inspection. A Class 3 study is an update without an inspection, based on records and interviews. The CAO says a Class 1 study is required within one year of the declaration being registered, and then Class 2 and Class 3 studies alternate every three years.

After a study, the CAO says the board must review it within 120 days and propose an adequate funding plan. It must send owners notice within 15 days, including a summary of the study, the funding plan and any departures from the professionals' recommendations. As a buyer, ask for the latest study. Whether contributions will need to rise is a fair question to put to a lawyer reading the status certificate.

Special assessments in Ontario condos

The CAO describes a special assessment as a one-time fee charged to owners when the corporation needs additional funds quickly, often for unexpected expenses or major repairs. The CAO lists emergency repairs, unforeseen costs, litigation expenses and capital projects as reasons a board might consider one, when the regular budget or reserve fund cannot cover the need.

Your share is worked out with the same percentage used for common expenses. You must pay it, and the CAO says the corporation can put a lien on your unit if you do not. It also says some owners may dispute improperly charged or disclosed assessments through the Superior Court of Justice. The CAO lists alternatives a corporation can consider, including a borrowing by-law or higher condo fees, and says sound reserve funding and realistic budgets reduce the need for assessments.

The point for buyers is that a low fee is not automatically a good sign. A corporation that has set aside little for repairs may rely on assessments later. The status certificate must disclose special assessments charged since the current budget year, and its reserve fund information shows how the corporation has prepared.

The status certificate: what it shows and what to check

The CAO's status certificate page describes it as a document that gives key information about a specific unit and the corporation as a whole. Anyone can request one. The corporation can charge up to $100 including all applicable taxes and must provide it within 10 days.

The CAO lists what it may include:

• The declaration, by-laws and rules
• The current budget and audited financial statements with the auditor's report
• Reserve fund study findings and the fund's current status
• Common expense amounts for the unit and any arrears
• Details about expense increases and the reasons for them
• Special assessments charged since the current budget year
• Names and contact information for directors and officers
• Insurance certificates for active policies
• Judgments and any litigation involving the corporation

The CAO says buyers should have a lawyer review the certificate, with attention to fee increases, special assessments, reserve fund status, legal issues and arrears. It also suggests reviewing its Condo Registry and getting advice before purchasing. Order the certificate early and make your offer conditional on a lawyer's review of it, as your agent and lawyer advise. Our guide to working with an agent covers how conditions fit into an offer.

What to compare between buildings

Fees only make sense next to what they buy. Put two properties side by side on the same questions.

• What percentage of the common expenses does the unit carry, and what does the fee include?
• What does the budget spend on each year, and is the line for the reserve fund growing?
• When was the last reserve fund study, which class was it and what funding plan did the board propose?
• Have there been special assessments, and why?
• Are any fee increases noted in the status certificate?
• Is there any litigation, and are there arrears?
• What does the corporation insure and what must the owner insure?
• What do the rules say on pets, rentals and smoking?

Buyers who plan to stay a long time should weigh the reserve fund and the study history as heavily as the monthly figure. Those are the signals that show how the corporation handles large costs.

Townhouse condos and towers

The CAO's guide to types of condominiums describes a standard condo corporation as having individual units with shared common areas, such as a foyer and amenities, and a vacant land condo as typically starting with empty lots, resembling a subdivision with shared infrastructure such as private roads and sewer systems. The CAO does not set out what a townhouse or a tower fee covers. That is set by each corporation's declaration.

So the useful question for a townhouse or bungalow townhouse condo is who maintains what: roofs, exterior, driveways, snow and grounds. A corporation may handle a good deal of that or very little, and the fee reflects the answer. In a larger building the shared costs may include things a townhouse lacks, such as elevators, a lobby or an indoor pool. Neither type is cheaper by rule. Read the declaration, the budget and the status certificate for each property. Our guide to condo, townhouse, bungalow or life lease compares the structures, and where to downsize shows the options by municipality.

If you are considering a life lease or a land lease community instead, the fee structure works differently. The province says life lease sponsors are not required to carry out reserve fund studies, though many do; see what is a life lease in Ontario. Some adult lifestyle communities also describe shared recreation centres. See adult lifestyle communities and ask each one what its fee covers.

If you have a fee dispute after you buy

The CAO regulates condo governance and disputes. Its Condominium Authority Tribunal is an online tribunal for certain condo disputes, with a total fee of $200 ($25 filing, $50 mediation and $125 adjudication) and no lawyer required, according to the CAO's tribunal page. Whether your issue fits the Tribunal is a question for the CAO or a lawyer. Our resources page lists help for finding one.

When you are ready to look at condos, you can ask to be introduced to an agent on the eXp Realty operating team, and your lawyer should read the status certificate before you go firm.