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Tag Archives: property manager

Maintenance fees take a toll on Toronto condo owners

Monthly charges seen as growing problem for industry.

Susan Pigg – Toronto Star

Four years ago, Craig Gagliano did something virtually unheard of in Toronto’s condo industry.

The resident of the west-end Toy Factory Lofts and president of its condo board cut monthly maintenance fees for each of the building’s 213 units — by a stunning 30%.

While the price of living the carefree condo life continues to climb in buildings across the GTA — often at rates well above inflation — the well-kept Toy Factory Lofts still boast some of the lowest monthly maintenance fees in the city.

Toy Factory Lofts 43 Hanna Ave
They now run just 31 cents per square foot for units without parking or a locker, almost half the city-wide average of 59 cents per square foot for similar units, according to new building-by-building analysis of Toronto condos.

That adds up to about $306 per month, compared to the city-wide average of $530 per month, for a 900-square-foot unit.

Comment: I have trouble believing the city average is $530 for 900 square feet, not from what I have seen on MLS with my own eyes. Doing a quick search, just downtown (which includes a lot of newer condos with lower fees) I find that 54 out of 83 listings in the 900-999sf range have fees higher than $530/month. Only 24 have fees lower. That indicates to me that the average is higher than $530/month.

The low fees amount to more than just hundreds of dollars in savings per month for owners of the sought-after historic former factory in Liberty Village. They can have a major impact on a condo’s resale price.

Comment: But yes, the low fees there are a major selling point.

“Our rate of property value increase has outpaced similar buildings and I believe it’s by virtue of the attractiveness of the low maintenance fees,” says Gagliano.

Comment: That and you are the only loft conversion in the area. And an awesome building., which has already taken a hard look at price appreciation in various buildings, is now pulling back the veil on maintenance fees with a new online feature. It will allow buyers to get a sense of maintenance fees — and how much they’ve climbed — in almost 700 buildings, as well as townhouse projects, across Toronto. What it can’t really tell you is the reasons behind the costs.

One of the first things every buyer asks about is maintenance fees. They are the thing that is hurting the condo industry the most.

Comment: They aren’t really hurting the industry at all. And there isn’t anything anyone can do about them.

“People who buy homes don’t have monthly (costs) nearly as high as what some of these condos are charging. Granted, you don’t have to shovel your driveway or take your garbage out, so there is a service component in a condo that needs to be reflected. But condo fees are largely out of whack.”

Comment: Not so much. My new roof cost just over $8,000. Turn that into a monthly cost. Add in my water bill. Add in the portion of my insurance that covers the structure and liability. Add in the cost to have someone clear my snow and mow my grass. Take all the repairs I do over 20 years and amortize it into a monthly cost and add that in. Some condos would cover my gas bill, which is not low. Others cover my hydro bill – all of which are very high these days. The only costs that a house owner doesn’t have would be security/concierge and property management.

They are also confusing, seemingly uncontrollable and the second-biggest cost of condo ownership, next to a mortgage, which is why the team has been amassing data for well over a year now from MLS and other real estate sites.

One of their most shocking discoveries was the high costs of a parking spot, on top of the $35,000 and up it costs at time of purchase.

Buried in monthly fees are parking charges averaging $43 a month but as high as $148, the team found.

“That makes it cheaper to just rent parking in some cases,” says Harrild.

Four Seasons Private Residences
Not surprisingly, luxury condos and hotel-condos like the Four Seasons Private Residences are in the top 5 list of highest maintenance fees at well over $1 per square foot.

Comment: But you get valet parking and all sorts of perks for that. The fees aren’t higher for nothing, there are things being paid for.

But there are a number of other standouts, like The Indigo in the St. Lawrence Market area, where fees are now 90 cents per square foot. Units sell, on average, for $229 less per square foot than others in the area, according to their research.

Comment: Yes, that building is terrible. No one wants to live there because of the high fees. There are some buildings on Southport, in Etobicoke, where the fees are nasty. Like $1,000/month on units costing $250,000. And don’t even get me started on the big old ones around Avenue Road & St. Clair. I showed a unit once that had fees of $4,400 a month! I couldn’t afford to live there if you gave me the place for free!

Toy Factory suites have seen an almost 21% price appreciation between 2009 and 2014. Indigo units dropped an average of 5%, according to the data.

Indigo property manager Joanne Selvagio was highly critical of the comparison.

“Every building is different and unique and has differentials in costs based on its age and infrastructure. Toy Factory is an eight-storey building with 213 units. We have 104 units and there are increased costs to running an elevator 27 floors as opposed to eight floors.

“You can’t compare a seven-year-old building to a 25-year-old building. It’s apples to oranges.”

Comment: Yes and no. But he does make the point that more units spread the cost out more.

The Indigo Condos
They have taken some of those factors into account, he insists. In fact, one of the biggest surprises in all the data crunching was that old buildings don’t necessarily have higher fees.

Comment: Most do.

Of condo buildings built or converted between 1975 and 1980 (Indigo was built in 1993), fees averaged 57 cents a square foot, says Langschmidt. He singled out the 121-unit Candy Factory Lofts on Queen St. W., converted in 2000, where fees average 39 cents per square foot.

Comment: What about condos built between 1970 and 1974? Or 1980 to 1990? That is a strangely narrow 5-year window to select. I think I smell cherry picking…

Buildings with a pool, gym and concierge tend to pay a 31% premium in fees. He also cites property management companies for escalating costs: The team is now compiling a list of companies that will show the average fees in buildings they manage.

Comment: Of course, the more facilities, the more you have to pay. Pools are the worst, they hike fees significantly. Condos managed by Brookfield, in my experience, have the lowest fees. Simerra-managed buildings tend to be high.

Developers are also aware of growing concerns about fees and are quietly questioning the need for basketball courts, movie rooms, wine storage and libraries that may seldom get used.

“There’s a rethinking going on that less is okay,” says Paul Golini, executive vice president of Empire Communities. “People are telling us, ‘We’re here for the neighbourhood.'”

Tasso Eracles, chairman of FirstService Residential, which manages about 300 condo buildings, says cutting costs is much harder than it appears, especially without compromising the state of the building.

Heat, hydro and water can account for 40 to 50% of costs and are climbing 8 to 10% per year. (Post-2010 buildings have meters in each unit, giving owners more control over energy costs.)

Comment: Hydro has tripled in the past 11-12 years. So a $50 hydro charge for a single condo is now $150, adding $100 to their condo fees every month. Plus the costs for all common areas. And not all buildings have individual metres. Some do, some don’t. For water, gas and/or electricity. Every building is different.

Concierge, cleaning and other services can be another 25%.

Comment: Someone has to pay those guys who sit at the front desk 24 hours a day. Even at minimum wage, that is $10/hour, 24 hours a day – almost $90,000 a year.

Provincial requirements, like an adequate reserve fund to cover major maintenance and repairs, are also a major fixed cost, says Eracles, and those costs could increase further as the province revamps the Condominium Act.

But Gagliano strongly disagrees.

What’s needed, he stresses, are more condo boards with “the collective courage required to make difficult decisions” like reducing staff. (Selvagio points out that Indigo has 24-hour security, at owners’ insistence.)

Comment: Toy Factory has security as well. Not sure if they are there 24 hours, but they also find the money to pay staff. And they recently renovated common areas.

Gagliano went line-by-line through The Toy Factory’s reserve fund, along with engineers who have to give it final approval, questioning every assumption of future costs, some far beyond a reasonable rate of inflation.

It’s not a question of bleeding reserve funds, but “bringing the engineer onside with a new view of austerity, as to how to meet the new limits prescribed by law (in the reserve fund) and protect the interests of the owners.”

The Toy Factory board stepped up preventative maintenance aimed at prolonging the expected lifespan of major components of the seven-year-old conversion. Hallway heating was reduced by four degrees in winter and air conditioning turned down four degrees in summer.

Some residents complained, but the building’s budget for gas, water and hydro was $352,000 in 2010, Gagliano says. Last year, it was $261,000.

The Toy Factory’s property manager gets a 10% bonus for viable cost-cutting solutions.

There’s growing concern in the condo sector that board members need training to handle budgets and other condo responsibilities, which is being considered in the Condo Act review.

Some condo residents, like Gagliano, have come to believe it’s better for buildings to impose the odd special assessment — a one-time fee for unexpected expenses — than continue to boost monthly fees.

Comment: I agree wholeheartedly. Better to pay a $1,000 lump sum once than $100 extra every month. People don’t see the logic in that.

“The reason The Toy Factory is so successful is that it has a board with smart, business-minded people,” he says. “It is proof that maintenance fees can be kept in check.”

Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.