A high maintenance fee puts downward pressure on prices. When a buyer is determining how expensive a condo they can afford, they look at their monthly budget to calculate how much of a mortgage they can afford. They need to take into account the property taxes, mortgage, utilities and the maintenance fee. Obviously the lower the carrying costs, the more the buyer can put towards a mortgage payment… and a higher purchase price is affordable.

We see this time and time again with buildings which have high maintenance fees. They should be $0.50 to $0.60 per sq ft but some buildings in the city are over $0.80. In a 1000 sq ft suite, that can make a difference of around $300 per month. At today’s low interest rates, $300 per month is the equivalent of a $50,000 loan. So that can be the difference of your condo being worth $375,000 or $425,000.

A real life example of this are the Palace Pier and Palace Place buildings. These are luxury buildings with good amenities but more significantly, great service. I lose count of the number of staff I see working when I visit these buildings… multiple security staff in the lobby, parking garage attendant, valet parking, concierge, cleaners etc. I don’t see a fitness room as adding great cost over the long term but it’s easy to calculate the cost of all these staff. Having this staff is important to some people though so I don’t mean to criticize that choice but it’s important for buyers to understand that they result in a higher maintenance fee which results in lower suite prices.

If you live in a building with a high maintenance fee, perhaps your board could look at reducing costs by limiting concierge hours, re-negotiating cleaning and service contracts or a more aggressive reserve fund study. Although it may cause short term pain, if your maintenance fee is high because your building is trying to grow it’s reserve fund, a special assessment may be a better solution. This way you could keep your maintenance fee lower which would help keep suite values high and still grow your reserve fund. Simple to prove on paper but I’m sure would meet a lot of resistance in it’s application.