Help me analyze this Status Certificate correctly? Maintenance fees to increase by 12.75% per year for 30years.

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Dec 20th, 2019 12:19 pm

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Dec 20th, 2019 4:38 am

olddog [OP]: Deal Addict; Jun 6, 2007; 1046 posts; 53 upvotes; Toronto

Dec 20th, 2019 4:38 am

Help me analyze this Status Certificate correctly? Maintenance fees to increase by 12.75% per year for 30years.

Currently in the process of purchasing a unit in 2.5yrs old condo downtown Toronto. Everything checked out until I received the Status Certificate which gives me some concern on the proposed increases over the years to fund the Reserve Fund.
Unit is 647sq ft with maintenance fees currently at $410/month (no Parking or Locker).

I have forwarded the status Certificate to my lawyer and will be meeting him after the weekend for some legal advise on the Status Certificate. But I figured I would gain some insight from the Gurus on RFD also.

Probably won't keep the condo past 7-10yrs but from what i gather from the Status Certificate, fees are set to continuously increase yearly by 12.75% until the Reserve Fund goals are met in 2045.
Based on this, the maintenance fee which is currently $410/month now will be $747/month in 5yrs and still continue to rise. All things being equal, I know its not unheard of for a new condo to have maintenance fees increased to build a healthy reserve fund until things stabilize. The early owners of the condo suffer this fate. However I didn't think a yearly 12.75% was the norm in achieving this goal in a downtown Toronto Condo. I have attached the Reserve Fund Study and parts of the operating Budget and Financial Statement for the building.

Am I missing something or is this what it truly means?

This will make the unit unattractive and harder to sell in my opinion. Am thinking about backing out of the deal if am not mistakened on this.

Thanks for your input. Much appreciated

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Stumbled upon RFD by mistake, best mistake of my internet life i must say......

Thread Summary

Increase in Maintenance fees

8 replies

Dec 20th, 2019 5:37 am

sherman51: Deal Addict; Mar 23, 2011; 1715 posts; 721 upvotes

Dec 20th, 2019 5:37 am

It's 5:30am and I can't sleep so the short answer is no, your maintenance fee isn't going up for the next 25 years. It's a reserve fund study. Talk to your lawyer or wait for someone else to explain fully but you're fine.

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Dec 20th, 2019 8:08 am

senasena: Deal Addict; Feb 19, 2019; 1044 posts; 1407 upvotes; Stouffville ON

Dec 20th, 2019 8:08 am

Just like Sherman said the 12.5% increases are for the reserve fund contribution part of your common fees, not the whole common fees. In your case the average reserve fund contributions per month are currently $55.84, and in 5 years will be $89. At the moment the reserve fund contributions make up approx. 13% of your common fees, the total monthly fees should increase annually at a much smaller pace than the 12.5% reserve fund increases. Since this is a new building I think it's prudent to build up the reserve fund pretty quickly, not a red flag for me.

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Dec 20th, 2019 8:23 am

rapashoo: Deal Addict; Mar 22, 2010; 2972 posts; 860 upvotes

Dec 20th, 2019 8:23 am

how many units are there in your condo?

I don't see anything that is too concerning. Of course your lawyer would advise you for what money's worth but I doubt there will be any. I see major expenditure coming in 2025, 2027 and 2030, almost $2M so condo needs to build up reserve fund for that.

And no your maintenance fee will not be $747/month in 5 years.

Dec 20th, 2019 9:04 am

cartfan123: Deal Fanatic; Sep 8, 2007; 8943 posts; 10123 upvotes; Way Out of GTA

Dec 20th, 2019 9:04 am

senasena wrote: ↑ Just like Sherman said the 12.5% increases are for the reserve fund contribution part of your common fees, not the whole common fees. In your case the average reserve fund contributions per month are currently $55.84, and in 5 years will be $89. At the moment the reserve fund contributions make up approx. 13% of your common fees, the total monthly fees should increase annually at a much smaller pace than the 12.5% reserve fund increases. Since this is a new building I think it's prudent to build up the reserve fund pretty quickly, not a red flag for me.

Actually the way various costs and insurance fees for condos are going up it is not unreasonable to model a 10-12% increase in condo fees per year. Especially when starting off of the base on a new build. And as such not out of the question to get to $700/mth within ten years. Within 5 years seems rather unlikely though.

Dec 20th, 2019 9:10 am

licenced: Deal Fanatic; Jul 3, 2011; 5776 posts; 2938 upvotes; Thornhill

Dec 20th, 2019 9:10 am

As others have noted the increase applies only to the reserve fund portion of the maintenance fees. Since this building was built prior to the change in the Condominium Act, it was one of those where builders took advantage of next to nothing amounts to initially fund the reserve so as to lure buyers with low maintenance fees.

Having said that, 12.75% isn't high to build up the reserve and wouldn't ordinarily concern anyone but considering the building is less than 200 units, a few things caught my attention that were I you I'd be specifically asking my lawyer about:

-the 12.75% is for an extensive number of years that's because it only contains less than 200 units

- that allots a significant allocation of maintenance fees to the reserve such that in another 17 years the average fee per unit to the reserve fund is $429/mth.

- the projected reserve fund is already underfunded, that is, it is not meeting cash flow projections

Dec 20th, 2019 9:47 am

olddog [OP]: Deal Addict; Jun 6, 2007; 1046 posts; 53 upvotes; Toronto

Dec 20th, 2019 9:47 am

Thanks for all your inputs.

rapashoo wrote: ↑ how many units are there in your condo?

I don't see anything that is too concerning. Of course your lawyer would advise you for what money's worth but I doubt there will be any. I see major expenditure coming in 2025, 2027 and 2030, almost $2M so condo needs to build up reserve fund for that.

And no your maintenance fee will not be $747/month in 5 years.

There are 171 units in the building.
Can you please elaborate a little bit on the 2025, 2027 and 2030 expenditure you mention?

Stumbled upon RFD by mistake, best mistake of my internet life i must say......

Dec 20th, 2019 9:56 am

rapashoo: Deal Addict; Mar 22, 2010; 2972 posts; 860 upvotes

Dec 20th, 2019 9:56 am

olddog wrote: ↑ Thanks for all your inputs.

There are 171 units in the building.
Can you please elaborate a little bit on the 2025, 2027 and 2030 expenditure you mention?

Can't really elaborate as your attachments don't say much about what those expenditures are for. You can ask the Board to give you more details on that. But based on the reserve fund table, there is $225K capital expenditure in 2025, $700K in 2027 and $1.2M in 2030. So in about 15 years life span, they are spending $2M on capital expenditure with 171 units in the building.

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Dec 20th, 2019 12:19 pm

lovestock: Banned; Oct 30, 2019; 193 posts; 248 upvotes; Toronto

Dec 20th, 2019 12:19 pm

rapashoo wrote: ↑ Can't really elaborate as your attachments don't say much about what those expenditures are for. You can ask the Board to give you more details on that. But based on the reserve fund table, there is $225K capital expenditure in 2025, $700K in 2027 and $1.2M in 2030. So in about 15 years life span, they are spending $2M on capital expenditure with 171 units in the building.

I owned a smaller condo near St. Lawrence market that had very few units. The one thing I didn’t like about it was that capital expenditures were allocated across so few units, making the maintenance fees higher.

I sold it and made a lot of money, but I prefer condos with 300+ units now. It is nice when they are brand new, but when they need work, it gets expensive.

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