What to know
- Toronto realtor Kenan Yousef says condo maintenance fees cover daily operations, utilities, and a reserve fund for major repairs.
- Older buildings tend to have higher fees due to larger units and aging infrastructure, but are often priced lower, creating an inverse relationship.
- Yousef warns newer condos may start with low maintenance fees, but increases of 20 to 30 per cent in the first few years are common.
The Toronto housing market may feel like a frustrating game of hide and seek, especially when it comes to properties with a lower selling price.
A condo might sound good on paper due to its below-market selling price, but it’s saddled with an astronomical maintenance fee that can equal to a mortgage payment. Suddenly, the cheap sticker price doesn’t sound like a good deal anymore.
To help make sense of why maintenance fees can cost so much, Now Toronto turned to Kenan Yousef, a realtor at Strata Real Estate Brokerage.
What do maintenance costs cover?
Yousef says maintenance fees take care of three main costs associated with running an apartment building. The first is the day-to-day operations, which includes cleaning services, a concierge (if applicable) and overall management expenses.
Secondly, part of the fee also covers utilities, which may or may not be included. He says in newer buildings, utilities are often a separate fee.
The third cost, the reserve fund, is where most of the maintenance fee goes towards. Yousef equates a condo owner’s reserve fund contribution to money saved for a rainy day.
“A condo, just like a person, has a savings account for a rainy day or an emergency, like if a building needs to replace the elevators or they need to replace the windows in the building. Those are typically big costs,” he explains. “The building or the condo is supposed to have a reserve fund in place in case that these costs do come up.”
Older buildings, higher maintenance fees
Maintenance fees in older buildings — built over 50 years ago — are typically higher, due to having larger layouts. Yourself says it’s typical to see 700 Sqft. one-bedroom apartments.
“Usually, maintenance fees are actually priced on a per square foot basis. On a per square foot basis, if you have a unit that’s 700 Sqft. versus a unit that’s 500 Sqft., of course, the overall cost would be much greater in this larger unit.”
But older buildings tend to, on average, have higher maintenance fees because of problems like ageing systems. Yousef says it’s “usually one of the biggest problems in older buildings.”
Lower price, higher maintenance fees
Your eyes are not playing tricks on you. Yousef confirms there’s “an inverse relationship between price and maintenance fees.”
“Affordability is still top of mind for most buyers, and when they’re searching, they don’t search for the sticker price. They search based on their monthly expenses,” he explains.
He says when banks approve a buyer for a condo with higher maintenance fees, the bank also approves them for a lower purchase price as well.
Now, Yousef warns that while not always true, a higher maintenance fee could be a sign of building mismanagement. He says when a building is reviewing its status or when a lawyer reviews its status certificate, it is something that is usually flagged.
“But that would lower the demand for a unit as well and could possibly lower the price as well.”
But new condos have their own drawbacks. Yousef says just because a newer condo has lower maintenance fees now, doesn’t necessarily mean that fees won’t go up in the future.
“Theoretically, [fees can go up] by 20 to 30 per cent. Which is not uncommon for a lot of newer condos in their first few years.”
