How condo maintenance fees are calculated and spent: Reasonable Doubt

There are more than 2,500 registered condominium.

There are more than 2,500 registered condominium corporations in the City of Toronto. While those condominiums may range from skyscrapers made up of apartment-style units to blocks of townhouses, one thing that every condominium corporation has in common is the obligation for unit owners to pay common expenses.

Maintenance fees will often be several hundred dollars per month or more, so unit owners want to know how are they’re calculated and how they’re spent.

Under the 1998 Condominium Act, each condominium corporation is required to have a registered document called a declaration. The declaration is registered by the developer of the condominium corporation at the time that the corporation is legally created. It sets out the common expenses payable by each unit owner, expressed as a percentage of the common expenses for the corporation as a whole. If an individual unit has a one per cent common expense allocation, that means that the unit is responsible for one per cent of the common expenses for the entire corporation for the year, typically payable in equal monthly amounts on the first day of each month.

Often, common expenses will correspond to the square footage of each unit so that larger units pay a greater amount. However, there is no requirement under the Act for this to be the case: the developer is free to set common expenses as it sees fit, and may incorporate other considerations in setting common expense percentages (e.g., a unit on a higher floor may pay more than a unit of equivalent size on a lower floor). If units are all of similar sizes, common expenses could be equal for all units.

The common expenses for a condominium corporation are based on a budget that is approved by the corporation’s board of directors, often with the assistance of the corporation’s property manager. Typically, two or three months before the end of a fiscal year, the board will discuss the next year’s budget and distributes to each owner a notice setting out each unit’s contribution to the common expenses for the coming year. Typically, the amount that the corporation collects is equal to the anticipated expenses as set out in the budget, although some corporations may budget for either a slight surplus (in order to create a contingency fund, for example) or for a slight deficit (if there are surplus funds from prior years that can be used for the coming year’s operating expenses).

Different corporations include different items in the common expenses. One corporation’s common expenses might cover hydro, gas and cable television, while in another those items might all be individually metered and charged to the units. But to give some idea of how common expenses can be spent, below are approximate figures from a fairly typical building containing 300 residential units with an annual budget of $1.8 million:

  • Utilities: $570,000 (32 per cent) As set out above, some condominium corporations include utilities in the common expenses, while other buildings are submetered for utilities. In this corporation, hydro, gas and water are included in the common expenses.
  • Shared facilities: $435,000 (24 per cent) In this case, the condominium corporation is part of a larger development with shared recreational and other facilities. The corporation’s contribution to the operating costs of these shared facilities comprises approximately 24 per cent of the annual budget.
  • Reserve fund: $325,000 (18 per cent) All condominium corporations are required to maintain a reserve fund for major repairs and common elements. Typically, each corporation will transfer a portion of the monthly amounts that it collects from the unit owners to the reserve fund. 
  • Service and maintenance contracts: $275,000 (15 per cent) This category includes the corporation’s property manager and cleaning staff, as well as regular service contracts for elevator maintenance and repair, HVAC maintenance and repair, window cleaning and pest control. 
  • Repairs and maintenance: $95,000 (5 per cent) This category is primarily made up of minor repairs and maintenance that are not paid for out of the reserve fund but out of the general operating fund. In this case, the corporation paid for minor maintenance and repairs to items like plumbing, electrical equipment, and the garbage compactor. 
  • Administrative costs: $60,000 (3 per cent) The largest single item in this category is the insurance that the corporation is required to maintain. This category also includes costs for the corporation’s auditor and legal fees.
  • On-site personnel: $40,000 (2 per cent) Some condominium corporations have employees who work in the building, while others will use third-party contractors to do that work. In this case, the corporation uses third-party contractors for property management and cleaning staff (as set out above), and has an employee provide superintendent services. 

Some of the condominium corporation’s expenses will largely be out of the corporation’s control (e.g., items like utilities or fixed-price service contracts), while other expenses will be variable from year to year and, to some extent, discretionary (e.g., minor maintenance and repairs).

If you have questions about how their condominium corporation spends its money, many of those questions can be easily answered. The above figures, for example, were taken (and approximated) from an annual audited financial statement for a condominium corporation, which would have been provided to all of the unit owners before the annual general meeting, and about which the unit owners could have asked questions at the annual general meeting. For those owners who might not attend their annual general meeting, or for prospective unit owners who are considering purchasing a unit, hopefully the foregoing provides a useful illustration of how a condominium corporation might spend its money.

Timothy Duggan is a condominium lawyer and civil litigator with Horlick Levitt Di Lella LLP. Reasonable Doubt appears on Mondays. Contact him on Twitter at @timmyd_ .

A word of caution: You should not act or rely on the information provided in this column. It is not legal advice. To ensure your interests are protected, retain or formally seek advice from a lawyer. The views expressed in this article do not necessarily reflect those of Horlick Levitt Di Lella LLP or the lawyers of Horlick Levitt Di Lella LLP. | @nowtoronto

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