Condo Fees – What, Why and How Much
Why is it that the owner of a 1500 sq. ft. condo suite can pay three times more in condo fees than the owner of a 500 sq. ft. condo suite in the same building?
The owner of a larger condo suite may pay three times more to cover common area expenses, parking spot and administrative costs of the corporation than the owner of a smaller condo suite. Yet they derive no greater benefit.
What this means is that owners of larger condo suites subsidize the condo fees paid by those who own smaller condo suites within a single building.
After a condo corporation estimates the funds required for the coming year they typically determine condo fees using an approach that appears to be for convenience rather than fairness.
The most typical way to determine how much each condo owner pays in condo fees is the size of their condo suite.
Owners of larger condo suites pay more than owners of smaller condo suites. To some extent this makes sense. Larger condo suites have more walls, windows, pipes and ducts. Larger condo suites may also use more utilities although this is more likely determined by number of residents in the suite and other factors.
The reality is that many of a condo corporation’s expenditures are usage based. Families and young adults can be harder on common areas of the building. Families generally use more electricity, heat, water and air conditioning than those who live alone. Larger condo suites are likely to have fewer residents than the smaller suites that are more popular with young adults and families.
Reasonableness dictates that more people residing in a suite means greater use of common amenities and heavier utilization of utilities. More people typically means more wear on carpets, walls furniture and amenities. Fairness suggests that individuals in these suites should contribute more to compensate for their heavier use. Internal considerations and convenience prevent this from occurring.
An estimated 40% – 60% of condo corporation expenses are to pay for common area expenditures. This includes heating and cooling. It also includes exercise room, party room, swimming pool and other amenities that may exist in the building.
Larger condo suites pay more for all of this while deriving no additional benefit. When the condo corporation has a holiday party or barbecue financed using condo fees, owners of larger suites contribute a larger share.
A fairer approach may be for 40% of expenses to be allocated according to suite size. The remaining 60% could be allocated equally to all suites or per person based on registered residents.
This is the first of a three-article series on condo fees
- Part 1 – Who Pays your Condo Fees
- Part 2 – Are your Condo Fees too High
- Part 3 – Cost of Condo Living and Condo Fees