How are Maintenance Fees Set?

How are Maintenance Fees Calculated?

Total operating Expenses PLUS a commitment of an additional contribution to Reserve ( that’s what we call  the forced savings account)  

Special assessments are extraordinary items that need to be paid for Once announced. Usually these expenses are Amortized over 3 or 4 years and offer owners a PAY it now price. Once a special Assessment has been declared even selling your unit provides no escape.

Money can be borrowed to make capital repairs and is paid for from the special assessments. The Board of Directors need to pass special By Laws to permit borrowing.

Sample budgets include;    * For discussion purposes only

			% of CEF
	Common Element Fee			1,500,000
	Interest & Other			11,400
				1,511,400
Note	Expenses:
3	Gas		4.8%	29,000
3	Electricity		17.2%	322,600
3	Sewer & Water		5.3%	59,700
3	Intercom		0.1%	2,300
4a	Cleaning Contract		6.7%	125,500
4b	Building - Exterior		1.3%	23,700
4b	Building - Public Area		0.6%	11,900
4b	Building - Flooring/carpet		0.4%	7,900
4c	Plumbing		0.4%	7,400
4c	Venting		0.8%	15,000
4c	Air Conditioning		0.7%	12,300
4c	Boiler/Furnace		0.7%	12,300
4c	Elevator		2.5%	46,000
4c	Fire & Safety		0.8%	15,000
4c	Electrical Repairs		0.1%	2,000
4c	Heat Pump		1.4%	25,700
4c	Recycling System		0.1%	2,000
4d	Grounds - Equipment		0.4%	7,300
4d	Grounds - Landscaping		0.8%	15,000
4d	Grounds - Parking Lot		0.6%	11,000
4d	Grounds - Public Lighting		0.1%	1,500
4d	Grounds - Storm Sewer		0.3%	5,000
4e	Paint - Exterior		0.0%	500
4e	Paint - Public Area		0.2%	3,000
4f	Snow Removal		0.5%	9,500
4g	Garbage Removal		0.7%	13,000
4h	Recreation		0.2%	3,000
4i	Janitorial Supplies		0.1%	2,000
4i	Pest Control		0.1%	1,000
5	Staff Salaries/Benefits		0.0%	0
5	Office Expense		0.3%	5,000
5	Communications		0.3%	5,000
5	Interest and Bank Charges		0.1%	1,500
6	Security		16.6%	311,000
7	Management Fee		5.4%	101,800
	Insurance		1.5%	28,300
8	Professional Fees		0.8%	15,000
9	Reverve Fund - Assessements Repair and Replacement		28.0%	500,000
			100.71%	1,511,400
	Surplus (deficit)			$            69.00
	working subtotals			1,500,000

Contribution to Reserve Fund is calculated by an inspection of the Building by Professional Engineers. This report is called a Performance Audit. The receipt of this report calculates the Remaining Economic Life of each building component. The result of this, is the Cash Flow Reserve Fund Study which explains when things will need to be replaced as they wear out and what monies should be on hand.

Reserve Fund Studies will be conducted every 5 years in accordance with the Condominium Act.   Condo Act 1998    This is now being updated with the New and Improved condo act that is pending approval.  Details here  

If you are considering a condo; ask questions.  Understand its a lifestyle and community that you are purchasing.

Humber Bay  and Toronto West Condo's?   Love to hear from you.

Condominium Status Certificate

Do you think it should be the real estate sales professional’s responsibility to request a Condo Status Certificate or the solicitor’s. We all know that you must have one if you are closing a deal that involves a condo – but do you think it is better to get it ahead of time or just let the lawyer request it?

Traditionally, the process of requesting a Condo Status Certificate required tracking down the appropriate person at the condo corporation, making your request in writing (usually by fax) and then having to mail payment by certified means before they will even get started on the request. Next you can wait up to 10 days before the Condo Status Certificate is ready and arrange a courier to pick up the massive document.
Seems like a complicated, time consuming way to go about getting something, especially given the fact that it is 2013 and technology makes virtually every other aspect of our life effortless.
GeoWarehouse has made the process of requesting Condo Status Certificates a little bit easier. While many are not fully available for online viewing, they can be requested online through the GeoWarehouse Store.
What does this mean to you? It means that you can simply access the GeoWarehouse Store, request a Condo Status Certificate online, pay by credit card and then either receive it electronically or, if it is not available electronically, arrange to have it picked up. http://www.geowarehouseblog.ca/condo-status-certificate-online-say-it-aint-so/

I love the concept of ordering the Status Certificate online and waiting for the E Mailed link to everything. ByLaws, Financial Statements, Insurance Certificate, Rules and Regulations, Declarations and the updated Status Certificate.  Easy to read, adjust the font and just download the appropriate PDF'd section.  A condo management's contact details are obtained when you negotiate the offer with the owner of the unit. 

Received online.
Lawyers are angry because they need to print it for their clients
Clients are unhappy because the lawyer charged them for printing it.

In my experience the conversation goes something like this;
Lawyer: If I print it...   I need to charge you....  Thats a dollar a page. 
Buyer:  HUMMM   Pause ...  Nahh...   Its ok.  What's in it?
Lawyer: Rules about what you can and can't do,  what you legally own and what the state of the condominium building is in.

You are already angry at what the lawyer charges for a closing; cost is everything.

RESULT?  No one reads the Declarations or By Laws re; pets, commercial vehicles, using your condo as your International business headquarters or hundreds of other details like you're getting the right locker and storage unit and any proposed Maintenance Fee increases or scheduled Capital Repairs in future years

Danger?  None. We are all reliant upon the Title Insurance should something run aground.

Personally?   I request, pay and pick up the Status Certificate, read the By Laws and check the legal descriptions... because, I have been on the Board of Directors of a number of Corporations; and have an accounting back ground I understand the Financial Statements. Your lawyer is the best source to re read the Declarations and By Laws during the Conditional Period in your Agreement of Purchase and Sale. Stan Gelman has spoken of the need to review the entire bundle of documents.

Audrey Loeb of Miller Thompson released a really good whitepaper titled “Condominium Ownership – What You Need to Know” http://www.millerthomson.com/assets/files/article_attachments3/MT_A-Residents-Guide-Living-and-Buying-a-Condominium_A-Loeb.pdf

While it is possible to get Special Assessment Insurance with your Home Owners Policy it is better to subject them to additional scrutiny.

I would like an original signature under seal from the condo corporation that the facts at that particular moment in time are true, rather than a faxed or emailed Status.

Wouldn't you?

Condo Corp applies the money you owe where it likes first

If you are behind and have other claim or insurance items outstanding with a Condo Corporation in Ontario;  Case law is clearly on their side.

Owner had set up a pre-authorized payment plan for her common expense payments. In addition to falling behind in the payment of several monthly common expense payments, the owner also was indebted to the Corporation for two chargebacks. One was for plumbing services relating to a leak which the Corporation claimed emanated from the owner’s unit, and the other related to damage caused by the owner to the common element garage door. A lien was then registered against the unit, a notice of sale was issued and the Corporation subsequently commenced an action for possession of the unit. By this time, the Corporation claimed that the total amount owing was in excess of $42,000. This included arrears of common expenses, the two chargebacks, legal costs relating to the lien and the sale proceedings, plus interest. 

This case  is reassuring for condominium corporations as it upheld the practice of most condominium corporations: allocating common expense payments to the oldest indebtedness, including chargebacks. 
http://www.condoreporter.com/allocation-of-common-expense-payments-by-condominium-corporations/


What's the moral of this story? 

Rent Controls will impact your Toronto Investments

A lack of affordable housing has been problematic in Toronto for decades. Metro Housing is in decay and has a huge backlog of repairs in addition to a long waiting list of applicants.   Rent geared to income housing is a small portion of the rental pool and in the last 20 years individual investors have purchased units for rental purposes and placed them in the secondary markets.

The Federal Government has introduced the Affordable Housing Act with Bill 140 passed in January or 2012 but municipalities have yet to embrace available 140K per unit in construction or remodelling assistance. 

The LTAHS provides recognition of the important role played by municipal Service Managers in long-term planning of the housing and homelessness service systems in Ontario. The Strategy also proposes a new approach for funding of housing and homelessness services that is intended to reduce administrative complexities and create greater local flexibility in identifying priorities and innovative solutions. In some areas, the new Housing Services Act is less prescriptive and gives Service Managers greater flexibility than the previous SHRA.
http://www.toronto.ca/legdocs/mmis/2011/cd/bgrd/backgroundfile-39040.pdf

It's not that a landlord has a tough time finding tenants;  The Residential Tenancies Act provides free legal services to Tenants in addition access to Duty Counsel at Hearings.  The Landlord must now be represented by a licensed Paralegal or Lawyer, unless they are experienced in the process.

The Human Rights Tribunal has decided that Credit Bureau's and Beacon Scores can not be used to determine the applicants ( tenants ) worthiness for an apartment or rental unit. (I would like to try that at my Bank with a Mortgage Application)  http://www.ohrc.on.ca/en/about-commission

But the governing Liberals are unlikely to see the rent control question the same way. Ontario’s Minister of Municipal Affairs and Housing Linda Jeffrey said this in a statement at the end of April:
The post-1991 rent exemption was originally introduced – and has been maintained over time – as an incentive for private landlords to build new rental accommodation. This incentive not only helps to renew the rental housing stock but also creates jobs in the construction sector. As such, any changes to this incentive could have an adverse effect on the rental housing sector, the economy and job creation.The NDP are hoping for a change of heart, especially as the provincial opposition have the Liberals survival — with a crucial budget vote yet to come — in their hands. They’re also arguing that the construction boom intended by the rent control changes haven’t been successful.
Forster notes that most of the new construction have been condos, sold to investors and then rented out second-hand, and not rental buildings.
“This misguided rule has not accomplished what it was meant to, and very little new rental housing has been built,” said Forster. “For tenants living in these newer buildings, it has been 20 years of uncertainty and unfairness.”http://o.canada.com/2013/06/04/ontario-ndp-wants-to-close-rent-control-loophole-open-since-1991/

Backgrounder - Rent Increase Loophole by William Wolfe-Wylie

Governments control increases to HST/GST that have increased maintenance fees; The Ontario Government controls the Hydro Billing Rates (because they need approval)   Cities and Municipalites control Tax rates, water and sewage pick up fees billed directly to Condo Buildings.  NONE can be lawfully passed to a tenant in a Rent controlled building.

Vacancy Factors in Toronto are current near 1%.

If there is no available social housing, and Independent Condominium Investors have stepped up to invest in their properties and the Government then CAPS the rental increases [while clearly charging more for different services] there will be a sharpened increase in the number of TENANTS looking for units as landlords EXIT the rental pool as their profit margin is impacted.

If the NDP are successful in capping the Rent will you keep your rental unit or sell?

I personally think there are too many PLAYERS  tinkering with the real estate market; from Double Land Transfer taxes in Toronto to increasing Lot Levies, Shortened Amortization Periods, multiple providers of tenant counselling services and well meaning but hazzardous legislation setting profits and ROI.

When did it become embarrassing to make money? What's your opinion?

Keeping It?  or Selling it?  Call me!

https://plus.google.com/109283965469179719942

Humber Bay Shore Condos Provide strong ROI

For those who are concerned about a "bubble" there needs there needs to be an excess of inventory that causes Toronto condominium to go vacant ( without a tenant ). There seems to be a continuing population growth in Toronto, Ontario that IMHO is summed up as safe have and educational / vocational opportunity.

This is borne out by many years of competitive markets not only for condominium purchasers but also renters.  New buildings  ( mini communities IE Beyond the Sea, Windermere by the Lake or Eau de Soliel ) are attracting buyers worldwide. Stable and Low Mortgage Rates are just feeding the buying.

The rental market in Toronto condominiums is heating up, with increasing numbers of units being leased rather than sold and rents continuing to rise in the first quarter of 2013, an analysis by the market research company Urbanation suggests.
There were 31 per cent more condo units leased in the first quarter than a year ago, Urbanation found, and rents were up 4.4 per cent, a gentler jump from the 5.9 per cent increase that occurred between the first quarters of 2011 and 2012 but still a significant rise, said Pauline Lierman, Urbanation's director of market research.
The average rent was $1,856, or $2.33 per square foot, in the first quarter compared to $2.11 in Q1 2011.
That jump in rent of more than 10 per cent in two years is mainly a product of demand, with the most desirable units in downtown locations close to transit lines and amenities, Lierman said.
"The vacancy rate is barely over one per cent for rental condominiums," Lierman said. "The market has remained tight." http://www.huffingtonpost.ca/2013/05/14/toronto-condo-rents-soar_n_3274279.html?utm_hp_ref=canada-business

In my own experience I have observed that condos are renting for half their purchase price divided by 100 to calculate monthly cash flow. For example at $400,000 for a well appointed two bedroom, two full bath unit, it is not uncommon to seek rents at $2,000 to $2,200 depending on building amenities. [ 400k divided by 50% then divided by 100 results in a rental of $2,000 per month ]

With average downpayments of 35 - 40% Investors can calculate a reasonable ROI   compared to keeping money in the bank or a GIC.

With restricted credit policies and aging buyer demographics larger homes eventually will fall out of favour by cost and size.  Then add in a vacancy rate near 1%,  Condo investors are looking at the upside of holding their investment long term and that is what real estate is all about. 

Would you like to invest in a few condos?   Call me.