No Fixed Address: What to watch out for when it comes to condo fee increases
Tarion new-home warranty only covers buyers for a couple years for most builder defects
Paul Foggia had borrowed to his limit and was living at the edge of his budget when he purchased a brand new condo in downtown Toronto in 2012.
"As soon as I walked in, that was it," he said. "You walked outside, you could see the whole Harbourfront Centre. It was just beautiful."
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But that beauty became a beast to pay for. The debt-laden Toronto man saw his maintenance fees jump by 20 per cent over three years.
When they hit $500 a month in August 2015, he says he had no choice but to move and rent out his condo.
"I knew [condo fee increases] were going to happen eventually, but I never thought it was going to be as much as what happened," he said.
The 33-year-old contacted CBC Toronto's Housing Woes Facebook group to make others aware that they could face the same situation.
"This happened to me, and there's so many buildings going up so quick, this has to be happening to more people," he said.
'Big increase in common expenses'
Foggia said common spaces throughout his building were constantly breaking down including the BBQs, the treadmills and the hot tub — and other construction issues in the parking garage. The building's management attributed the fee increases to those issues, he said.
Real estate lawyer Lauren Blumas said she advises clients to look into past increases in a condo building before buying, but that's obviously not possible if you're buying into a new build like Foggia did. Foggia's fee increases, however, sounded unusually high, Blumas told CBC Toronto.
"That sounds to me like, in part, a mismanagement of that property that's causing a dramatic increase," the lawyer said. "That's a big increase in common expenses."
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But Harry Herskowitz, a lawyer who specializes in the Condominium Act, said it can be very difficult to anticipate how much fees will climb, especially in terms of utility consumption and maintenance on a new building.
"I don't want to say it's mismanagement, but maybe they had to spend money on repairing something, maybe something wore down prematurely, and there was an inadequate reserve fund," he said.
Herskowitz said if a condo board attempts to boost maintenance fees by more than 10 per cent in a year, that's considered a "material change" and the purchaser can get out of the condo agreement. Most owners, however, can't afford to do that, he said.
"The difficult part is when you see a market like we've had in the last 10 years, if you pull out because of common expense increases, you're going to lose the equity you've earned over the last years," Herskowitz said.
Time limits on home warranty
There is some protection for buyers, but it's limited.
Defects with new homes, including condos, are covered in Ontario by a government-mandated warranty called Tarion.
The not-for-profit company will try to resolve disputes between the builder and the homeowner, or will pay when something under the warranty needs to be fixed.
Major structural defects are covered for seven years, but smaller issues, like those detailed by Foggia, are under warranty for one or two years.
By year three, if there are defects that are discovered, it's on the condo board to deal with it.- Safia Lakhani , real estate litigator
According to records obtained from Tarion, the warranty start date for the common elements of Foggia's building was November 2011.
"Tarion coverage will handle deficiencies throughout year one and two, but by year three, if there are defects that are discovered, it's on the condo board to deal with it," said real estate litigator Safia Lakhani, who specializes in construction law.
Lakhani said she would be particularly concerned for people looking to sell their condos after consecutive fee increases, or major defects found after the warranty has lapsed.
"In terms of selling, you're in a mess because the status certificate, which you have to produce for potential buyers, will clearly say we did a reserve fund study on this date and these are the anticipated costs of doing the work the building needs."