Do Condo Fees Include Property Taxes

Do condo fees include property tax? This is a common question first-time condo owners, or potential condo owners often ask. Condos offer a more carefree way to enjoy home ownership, but understanding fees outside of the mortgage payment isn’t as simple. Many people are unsure about what condo fees cover and how property taxes fit into the equation.

This blog will clarify what condo fees typically cover in a condominium corporation and explain why property taxes are a separate responsibility.

 

Understanding Condo Fees

Condo living offers the benefits of shared living spaces, where amenities and maintenance responsibilities are divided among residents. Condo fees, also known as maintenance fees, are regular payments made by condo owners to cover the expenses needed to maintain these shared areas and services. 

These fees ensure that the building and its amenities are well-kept, providing a comfortable living environment for all residents.

Typically, condo fees cover a range of services and costs. These can include maintenance of common areas, utilities, and contributions to the reserve fund, which is used for major repairs and upgrades. 

It’s essential for condo owners to understand what these fees encompass to manage their finances effectively and avoid unexpected expenses.

Here’s a breakdown of how condo fees are determined:

• Annual budget: The condo corporation prepares an annual budget outlining all projected expenses for the year.
• Reserve fund study: Regular studies assess the amount needed in the reserve fund to cover future major repairs and replacements.
• Shared expenses: Costs are divided among the units based on their proportionate share, meaning larger units, such as a 1,200 square foot unit, will have higher condo fees compared to smaller units, like a 600 square foot unit.
• Approval process: The proposed budget and fees are typically reviewed and approved by the condo board and, in some cases (but only rarely) by the owners.

What Condo Fees Cover

Condo fees cover a variety of expenses that keep the condo complex running smoothly. These fees help maintain a good quality of life for residents by taking care of shared spaces, amenities, and essential services. Knowing what condo fees cover can help condo owners see the value in their payments.

The specific items covered by condo fees can vary depending on the condominium corporation and the amenities available in the building. If a condo has a pool, fitness center, round-the-clock security, or other desirable amenities, condo fees are likely to be higher than in one without those amenities. 

Additionally, smaller condos’ maintenance fees may seem higher because of the reduced amount of units to amortize the costs over.

However, there are common elements that most condo fees will cover, ensuring that residents have access to well-maintained facilities and services.

Property Taxes: A Separate Expense

Do Condos Have Property Taxes?

While condo fees cover many aspects of maintaining a condo community, property taxes are a separate responsibility for individual condo owners. Property taxes are paid directly to the municipal government and are based on the assessed value of your condo unit. This means you need to budget for property taxes in addition to your condo fees.

Property taxes fund various public services, such as schools, roads, and emergency services, which benefit the broader community. 

Unlike condo fees, property taxes are not managed by the condo corporation, and failing to pay them can result in significant penalties. Understanding this distinction is important for effective financial planning as a condo owner.

Property taxes are a separate expense outside of condo fees and mortgage payments. This means owners need to budget for both condo fees and property taxes.

Why Property Taxes Are Not Included in Condo Fees

Property taxes and condo fees serve different purposes, which is why they are managed separately. Here’s a quick breakdown of the reasons:

Condo Fees and Taxes Have Different Purposes

• Condo fees are collected by the condominium corporation to cover maintenance and operation of the building and shared amenities.
• Property taxes are collected by the municipal government to fund public services like schools, roads, and emergency services.

Property Taxes are Assessment Based on a Condo Units Value

• Property taxes are based on the assessed value of individual units, meaning each condo unit has a different tax amount. Including property taxes in condo fees would complicate the fee structure and make it unfair, as it would be difficult to distribute the costs equitably among all owners.

Condo Fees and Taxes are Managed By Different Agencies

• The municipal government is responsible for assessing and collecting property taxes.
• The condo corporation focuses on maintaining the building and its amenities, ensuring a clear division of responsibilities.

Budgeting Tips for Keeping Condo Fees Low

Here are some expert tips from experienced property managers that condo boards should bear in mind when striving to keep condo fees in check.

Conduct Regular Maintenance

Ensure that regular maintenance is performed on all common areas and building systems. Preventative maintenance can help avoid costly repairs and extend the lifespan of shared facilities, ultimately keeping condo fees low.

Upgrade for Energy Efficiency

Invest in energy-efficient upgrades for the building, such as LED lighting, energy-efficient HVAC systems, and improved insulation. These upgrades can reduce utility costs, resulting in lower condo fees for residents.

Review Service Contracts

Periodically review service contracts with vendors and service providers. Negotiate better rates or consider switching to more cost-effective providers to reduce ongoing expenses without compromising service quality.

Optimize Reserve Fund Contributions

Regularly assess the reserve fund to ensure it is adequately funded for future repairs and upgrades. Avoid over-contributing, as this can unnecessarily increase condo fees. Use reserve fund studies to determine the appropriate contribution levels.

Encourage Resident Involvement

Encourage residents to participate in cost-saving initiatives, such as energy conservation and reporting maintenance issues promptly. Engaged residents can help identify cost-saving opportunities and support the condo board’s efforts to keep fees low.

Partnering with a Property Manager to Manage Condo Fees

Working with a professional property manager like ICC Property Management can help you effectively manage condo fees. Property managers bring expertise in budgeting, maintenance, and vendor negotiations, helping to keep costs low while maintaining high standards for the condo community.

Contact us to learn more about our services.