Common expenses or “condo fees”; you will have to pay them once you become an co-owner. They are an important element to consider before your purchase.
Condo fees are the backbone of the annual budget of a co-ownership. They should be proportional to the financial requirements of a syndicate of co-ownership to allow it to carry out the maintenance and insure the conservation of the immovable.
This budget will be adequate only if it is the result of foresight. Sound budgetary planning will necessarily be the result of taking into account all the current expenses of a co-ownership, namely those inherent to the maintenance of the real estate and the management of common portions.
In other words, this budget must allow the financing of all foreseeable major work, including the repairs or the replacement of the common portions at the end of their usefulness. The contingency fund is without any doubt the most important item to be funded because the execution of this work of the utmost importance depends upon it. The basis of the calculations used to fund it should be investigated. Do not hesitate, if needed, to call upon the members of the Board of Directors of the syndicate to discuss this item. They should be candid about it.
The insurance premiums of a co-ownership are also an item of the budget not to be overlooked. They have increased dramatically in many co-ownerships in recent years. The reasons are numerous: an increase in the occurrences of losses caused by water damage of all kind and the aging of the buildings.
WHAT YOU SHOULD KNOW ! For marketing reasons, some developers show unrealistic operational budgets to potential purchasers. Many directors also use this ploy to be elected at the next general annual meeting of the co-owners. Do not be fooled by empty speeches and reassurances. Be aware! Be sceptical of anything that is too good to be true and proceed to your own due diligence!
WHAT TO KEEP IN MIND : Insufficient or inexistent contingency funds are the result of commons expenses that are too low or even nominal. Sooner or later, reality will prevail and haunt the community of co-owners, which will become the victim of drastic increases to their common expenses. These unpopular decisions cause the deterioration of the atmosphere and social cohesiveness of the co-ownership, which generate conflicts between divided co-owners. On the one side, you will find those in favour of the work to be carried out, and on the other side, you will find the co-owners that do not have the financial means to meet their obligations.
WARNING ! Some co-ownerships proceed with “special assessments” to pay large invoices, such as those for the insurance policies. Many co-owners support this approach based on the pretext that it facilitates the resale of the condos. Avoid these unnecessary assessments by analyzing carefully the operational budget of the co-ownership. If you find that this is the practice in the immovable, we recommend that you seek to buy elsewhere, as this attitude often indicates an unethical approach to the management of a co-ownership.