In addition to their monthly mortgage payments, it's wise for condo owners to also understand what's covered in the amount they hand over for their monthly condo fees, not only for their existing unit, but also for any new condo property they're considering moving into.
Condo fees are typically calculated on the number of square feet of your individual unit. The total cost of running the building's common areas is divided amongst all unit owners, and includes both everyday costs and a separate account, called a reserve fund, for major repairs.
While some of your condo fees will go towards the building's everyday costs and maintenance, the percentage that's set aside for your building's reserve fund will go into a separate bank account, which is specifically set up to take care of major replacements and non-routine repairs of the common elements and assets of the condo. Examples of day-to-day expenses include common area repair and maintenance, insurance, and administrative costs, while the major expenditures directed to the reserve fund could include a new roof or boiler.
When researching the affordability of a condo you're interested in moving into, be sure to investigate not only the day-to-day running costs of the condo but also how financially prepared the building is for unexpected or major repairs and renovations. Question "ultra-low dues" up-front to avoid special assessment surprises later.
From The Shamez Virani/Virani Team September 2016 Newsletter - Courtesy of Market Connections Inc.