Condo living is a lifestyle that many homeowners enjoy. Like all types of Fort McMurray homeownership, there are pros and cons, and some important aspects to consider before jumping in; We will touch on two of these: CONDO FEES and RESERVE FUNDS.
First. Let’s clear up the most common misconception we hear from buyers in the market; that some nefarious “they”, is in charge of fees and can raise and charge you anything at anytime for no real reason at all. This is false. Condo corporations are all of the individuals who own units in a condominium complex. Each condominium corporation has a condominium board, which is basically a group of the owners in that particular condominium complex, who volunteer their time to be on the condominium board. Board members are voted in every year at the Annual General Meeting and should be approachable at any time of year when residents have concerns. As a governance board, this group calls the shots (within the rules established in your bylaws; and certain decisions require all owners input, in which case a vote must be made: like democracy, your vote counts! Because the Board members are volunteers and do not get paid for their time, and typically have regular jobs like the rest of us, it is common for a condo corporations to hire a professional condo management company. Under the board’s direction, the management company oversees the maintenance and day to day operations, and pay the bills, however some condo corporations do decide to self manage, even in Fort McMurray.
Condo Fees (also known as co-ownership fees), are billed to co-owners, typically on a monthly basis. They cover necessary expenses for the regular maintenance of common areas of the building which could include items such as window washing, insurance, common area cleaning, lawn maintenance, snow removal, repairs, management expenses, contributions to the reserve fund (piggy bank for future capital cost replacements or repairs-we’ll talk about this in a minute) and sometimes utilities. As an owner, you do have some say in how your condo fee is spent. Here are some MUST KNOW important information to help preserve and protect your Real Estate investment (because that is really what condo fees are all about):
How are condo fees calculated?
Fees are normally set annually by the condominium board after budgeting yearly operating expenses and reserve fund contributions. The total amount required to cover the condominium’s expenses and contribute to the reserve fund is divided amongst the unit owners. Most commonly, how much you pay is based on the unit factor assigned to their specific unit. Unit factors are proportional to the size of the unit (the larger your unit, the higher your unit factor). Your board should supply you with yearly financial statements and a budget for the upcoming year that will support the required condo fee.
What is a RESERVE FUND and how is it used?
A reserve fund is basically a savings account(that capital replacement piggy bank we referred to earlier), that can only be used for replacement and non routine repairs of common elements of the condo that are the condominium corporations responsibility. In Alberta, all condominium corporations must establish and maintain a reserve fund (that big savings account) to cover the costs of its common property. A reserve fund study, report and plan determines the lifespan and cost of the elements of the condo that the condominium corporation will need to repair or replace in the future, to budget accordingly how much money will need to be contributed to the reserve fund every year. This reserve fund study and plan is required by Alberta law at least once every five years and should be available to owners to review. It is very important that purchasers (and owners!) understand the importance of the reserve fund, as these funds are built up over time and can have financial impact in the future if the plans are not followed.
Additional costs can occur.
Just like owning any other type of home, the unexpected can happen regardless of the best financial planning and maintenance. When the unforseen occurs (such a huge hail storm or the rising insurance costs that homeowners across North America are experiencing) If there are not enough money in the reserve fund or the operating budget, the condo corporation could charge a special assessment. This often comes as an unpleasant surprise because it means having to contribute an additional (sometimes large) sum all at once. Think of it this way. If you bought a home, and the hot water tank had just been replaced 2 years ago, based on average lifespan of a hot water heater you shouldn’t need to replace it for at least another 5-7 years. But if your hot water heater fails early- you as the home owner, would need to pay to have it repaired or replaced immediately (unless you like cold showers), even though it wasn’t in your budget. The same concept applies to condominiums.
Is the condominium corporation in a good position?
As a condition of your offer, you can have the advantage of looking at the reserve funds and all of the condo documents that are available such as reserve fund plans, financials, budgets, meeting minutes and bylaws. As a potential future owner, you should thoroughly review all of these documents to familiarize yourself with the ongoing business and financial position. To avoid surprises and reduce risk, we recommend you also have these documents looked at by a Condominium Document Analsyt that will review the facts and information found in the Condominium documents and create a simple to understand report for review.
Consider this…Owners of single family homes should set aside at least one percent of your home’s value every year for home maintenance. For example a $360,000 house, this works out to $3,600 per year, or $300 per month. This does not include utilities, like many condos. So if water, power or gas is included you need to factor that into what you could reasonably expect condo fee to cost. Also factor in any additional amenities. Does the condo you are considering have a gym, pool, workshop or other amenities that may save you $$$$ in outside membership fees? Regardless of what housing type you choose, costs to maintain, repair and insure must always be factored in. This is exactly what a condo fee is intended to do.
Is Condo Life for you?
Condo life can offer a Maintenance- FREE life style. If you would like to explore the Fort McMurray condo market and discuss whether a condominium is the right choice for you feel free to reach out to one of our experienced Lore Group Real Estate Professionals