Buying a condo may be an affordable option for many homebuyers – but buyer beware of the ongoing costs.
There are potential hidden costs of condo ownership that may not be realized initially. A condo may be less expensive than a house but it’s important to consider these costs before making a purchasing decision. These are just a few of the areas to consider when it comes to condo ownership.
Potential Special Assessments
A special assessment is a charge by the condominium corporation. It is a separate fee on top of any monthly or annual fees and the board of directors can charge this assessment without the condo owner’s permission. This may occur if there are unforeseen expenses, repairs were not budgeted for, or there has been a lost lawsuit against the condominium.
Condo owners can best avoid special assessments by having adequate money in the reserve fund. Since many condos don’t have a good reserve fund, this is an important question to ask before purchasing a condominium. New construction units won’t have a sizable reserve fund yet, but there also shouldn’t be any major, unexpected repairs in a new building. Also, read through the by-laws of the corporation about special assessments and the Condominium Act to know your rights as an owner.
Review Condo Fees
Although the initial cost of the condominium may be low, the fees can be extensive. Most condos will have the same fees as homes such as insurance, taxes, and utilities. Owners will also be responsible for paying a monthly condo fee which is used to help pay for continuing maintenance to the building, including the amenities. The fee may also cover some or all of your utilities although this practice varies. Additionally, the condo fee will likely cover major building repairs but will not cover any maintenance fees related directly to your unit. If you decide to renovate your unit, you will have to cover this cost.
Monthly condo fees are usually related to the size of your unit. Before you purchase a condo, review the condo documents such as old minutes of the condo board meetings. This will help get an idea of how fees have changed over time and how costs may be handled.
Since condo life is community living, you can’t always anticipate what other costs may occur. If you live in a building that has a small or nonexistent reserve fund, you can expect to have a rise in monthly fees over time. Buildings that are not well-built or well-maintained will also cost unit owners more in fees over time. Before purchasing a condo, make sure to review the maintenance of the building as well as any plans for keeping the building maintained. Consider attending condo board meetings as well. Look for a proactive board that anticipates costs and looks after the long-term maintenance of the building.
These are just a few of the costs that condo owners can experience. Be sure to keep these in mind when you’re shopping for a condo. Although condos offer a reasonable home buying option to many people, do some research ahead of time to look into the current and potential costs of buying a condo. This will help condo owners to budget appropriately and choose the condo that meets their needs.
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