Date published: 12/10/2023

The trap of low co-ownership fees

Collectively, we owned the old Champlain Bridge. We neglected it for years, pumped money into it to keep it afloat in its final days, and eventually had to shell out more than 4 billion to cross the same shore, using the same access routes. Can we draw a parallel to co-ownership? While it may seem logical to think that low co-ownership fees are an advantage and high co-ownership fees are a disadvantage for a buyer or a long-term co-owner, think again because reality might be quite different.

Many co-ownership buyers have the same reflex as property buyers: to stretch their purchase budget a bit, buy, and then hope that there won’t be too many unforeseen issues in the near future. However, (even though it’s not a good idea) an individual homeowner can stretch out a renovation or do it themselves. A co-owner does not have this control. As a result, the specter of a special assessment can loom over a co-owner at any time, and some co-ownerships are more prone to special assessments than others. Why is that?

Is a co-ownership with high fees necessarily a bad one? It's true that a co-ownership that offers a variety of common areas such as a swimming pool, a gym, a central garden, and recreation rooms will have more fees than one that offers none. It's also true, for instance, that a co-ownership pool is more expensive to maintain than a private pool. But it's equally true that these entertainment areas are generally found in large and very large co-ownerships. So if an individual can afford to have a gym, a pool, and a yard to maintain on their own in their suburban house, the bill for all this, divided among 200 co-owners, will not be that high. Therefore, this is not a major factor in co-ownership fees. On the contrary, a co-ownership that claims to have low co-ownership fees is portrayed as being well-managed, frugal, and economical. But is that really the case?
In both scenarios, the answer does not lie in the monthly amount of the co-ownership fees but rather in the following factors:

  1. The asset management plan;
  2. The amounts collected for various funds;
  3. The co-ownership's different preventative expenses;
  4. The co-ownership's past claims history.

A co-ownership that neglects these points in the short term will have low co-ownership fees. A co-ownership that does not invest in points 1, 2, and 3 will generally have more claims (point 4). A co-ownership that neglects these four points will sooner or later hit a wall. This wall will present itself in two forms:

  1. Drastic increase in co-ownership fees – in the form of catch-up;
  2. Special assessments.

Therefore, one thing must be remembered: a high amount of co-ownership fees may indicate that the co-owners are generally well-off and demonstrate foresight. The funds will be replenished, disbursements for major works planned and staggered, and maintenance will be periodic and efficient. For other co-ownerships, high co-ownership fees will only be the catch-up from several years of neglect, which former co-owners will have benefited from at your expense. Keep your eyes open!

 

Charles-Antoine Carra  CPA, CMA
Gaudreau assurances
514 374 9944 x259
1 877 860 1412
3737 Crémazie Est, bureau 1001, Montréal QC H1Z 2K4
ccarra@gaudreauassurances.com

 

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Charles-Antoine Carra
Chroniqueur
Charles-Antoine Carra