10 Questions you should ask about the Condo’s Budget
Welcome to a new blog series where we guide you through the questions you need to ask when buying a new condo. It’s our goal to help you discover the questions you didn’t even know you had to ask. After all, no one wants unexpected complications when going through the stress of signing a deal and moving. Depending on the whether the condo is completed, your realtor, the managing company, or the condo’s board should be able to answer your questions before you buy your dream condo.
The first topic is 10 Questions You Should Ask About the Condo’s Budget.
10 Questions you should ask about the Condo’s Budget
1. Is there a 24-hour concierge?
There are many benefits associated with a 24-hour concierge. Your concierge monitors the entry way, adding an extra layer of security. You also know whom to contact about maintenance issues or with any questions about the building. Depending on the building, 24-hour concierge may also receive your packages, take care of dry cleaning, or other tasks.
The drawback of 24-hour concierge service is that there will additional salaries to pay. This may mean higher monthly fees.
2. Is there a charge back for water and hydro? Are these charges separately metered?
You may find that your condo governance documents contain steps dictating how water and hydro are billed. This may mean that you are paying for the actual cost of the water and additional expenses, such as accounting costs for the managing company. If water and hydro are separately metered, you will pay only for the share you use. Some condos charge a flat rate for each unit in the building. Find out if the charge is based on square footage or the same for each unit in the building.
3. What is the date of budget and what is the inflation factor?
Budgets are usually passed annually. Find out when your condo’s budget was set. The budget will also account for inflation so check to see how fees and other costs are expected to increase. Expect annual increases in maintenance costs and fees because of inflation and rising utility costs.
If you are buying a brand new condo, keep in mind that the developer is responsible for any budget shortfalls during the first year. Fees may be increased during the condo’s second year to account for higher fees.
4. How much is the monthly charge for a parking space?
If you don’t buy a spot, you may be able to rent one from the building. Compare the cost to other local parking lots and garages to ensure you get the best deal possible.
5. How much is the monthly charge for a locker?
You may be able to rent a locker from the building if one is not purchased with your unit. Compare locker costs to self-storage options in your neighbourhood.
6. Is every unit in the building charged pro-rata?
Pro-rata charges are based on the square footage of your condo. Most buildings charge maintenance fees based per square foot of space in your unit. Other charges may also be pro-rata, such as water or hydro fees.
7. Is the area of the balconies included in the charge?
Condos vary on whether they include the square footage of your balcony or terrace in the pro-rata charges. It’s helpful to know in advance to avoid any shocks down the line.
8. How often does the budget contemplate that corridors and common areas gets cleaned? How often do the windows get washed?
Cleaning is included in the maintenance costs for the building but there is no standard amount of time between cleanings. That means one building may clean daily while another cleans weekly or less often. Your building may clean areas with high foot traffic more often while leaving areas like party rooms until they are booked for use.
9. Are there any user charges (ie fitness classes, party room rental)?
Some condos include special features in their condo maintenance fees so you may already be paying for fitness classes or the building party room—whether you use them or not. Other buildings let you opt in, paying user fees for special services and features.
10. What percent of the budget is budgeted for the reserve fund?
The reserve fund, also known as a contingency fund, is your condo’s rainy day fund. It’s used to cover the replacement and non-routine repairs of the shared elements of your condo building. If the roof or windows need to be repaired, the money comes from the reserve fund. If repairs are needed in the parking garage, the swimming pool, or on the elevator, the money comes from the fund. The reserve fund doesn’t cover normal maintenance or upgrading materials while making repairs.
If you’re interested in a condo, ask to see the reserve fund study to ensure that the reserve fund is in good shape. The size of the reserve fund will depend on the size and age of the building. Ten to twenty percent of the budget isn’t unusual.
If the condo doesn’t keep a healthy reserve fund, you may find yourself suddenly required to cough up thousands for unexpected repairs.
Whether you’re buying a new build or a condo in an older building, it’s important to ask the right questions about budget, maintenance, and other issues that will affect your finances and enjoyment of your space.
Check back soon to find out what you need to ask about your condo’s Disclosure Statements.
Written by: Mark Mandelbaum, Chairman of Lanterra Developments & Zev Mandelbaum, COO, Principal of Marlin Spring