February 2016
When it comes to change in a condo building the most obvious places are the extensive amenities and luxurious common areas maintained by the condo corporation.
When these spaces were new they were likely modern and appealing to building residents. Ten or twenty years later, these same spaces may be unused, old or outdated.
Updating of amenities, building exterior or common areas are intended to add or maintain “value”. In practice, many condo corporations undertake updates without full consideration of how contemplated changes will add or detract from “value”.
It may not always make sense to update areas if the purpose is simply to add “value”. A more appealing building exterior may look good but few are likely to support the cost solely for aesthetic reasons. Unused amenities add no value even after a refresh.
A more practical approach is to incorporate updates or a refresh into necessary infrastructure work. That new building entrance roadway may make sense when the old one is torn up to replace the waterproof layer above a garage. A more appealing façade may be considered when it comes time to repair the outer building to prevent water infiltration. Building amenities may warrant a refresh to create more space for residents to relax or socialize.
Decisions to refresh areas of a condominium building may be determined by a reserve fund estimate. This timeline estimate is often based on engineering considerations in the absence of other relevant factors affecting “value”.
Since the primary reason for an area refresh is to maintain or create value for condo owners, an understanding of “value” is necessary. Value is generally recognized by higher selling prices for condo suites relative to similar properties in comparable buildings. It can also be recognized by frequency of use.
The most important component of “value” for a condo property is the condo suite explains Andre’ Tarjan of Royal LePage Golden Ridge Realty. Larger and nicer suites sell for more than smaller and poorly maintained suites. Condo suites with nicer floors and fixtures are more highly valued than those with building grade fixtures.
Mr. Tarjan has specialized in selling condo suites since 1986. He explains that other important factors in the decision to purchase a condo suite are monthly maintenance fees, reserve fund level and overall financial health. Higher condo fees can be viewed as a disincentive to purchase unless there is recognized value in these higher fees. Also important but often overlooked considerations are the HVAC system – does the heating and air conditioning work well, – level of outside noise heard within the suite and general level of cleanliness in the building. Specific amenities may be important to some people. Mr. Tarjan explains that little else is as important in determining the value of a condo suite.
Some believe that luxurious amenities and common areas help raise the value when selling condo suites. Another perspective is that they increase monthly maintenance fees and make condo suites harder to sell. Considering that the most important determinant of resale is the individual condo suite, this second perspective may be closer to the truth.
While building amenities are unlikely to affect “value”, the same cannot be said about the perception of community. Condo buildings with a sense of community – where residents choose to interact with each other and make use of public spaces – tend to be in greater demand than condo communities with less sense of community. Community is evident when residents willingly gather for activities and events in common areas of the building. Those buildings with active programming and amenities to support this programming tend to be in greater demand.
