Toronto Real Estate: Condo Maintenance Fee Crisis

40 Panorama Court -

Welcome to 40 Panorama Court., in Toronto, Canada – where units are around $50,000 on average – more than 10 times less than an average condo within the Greater Toronto Area. This sounds like a great deal. But here’s the catch – the skyrocketing maintenance fees and poor management.

According to the Toronto Real Estate Board, the average condo in Toronto sold for $454,304 in May, up 3% from the same time in the previous year. May 2016 Toronto-area condo sales are up 76% – mostly a result of the low supply of detached homes available within the Toronto area, and the record breaking prices. Many millennials are shifting towards condominiums, since they’re typically more affordable than detached homes.

If the Toronto Real Estate market is so hot, then why are the condo units at 40 Panorama Court much cheaper than average? It’s because of the lack of proper management, and expensive maintenance fees. According to (MLS) listings, maintenance fees can range from $600 to almost $1000 in this building. According to, the average Toronto area maintenance fee for 1 bedroom, 2 bedrooms, and 3 bedroom condos are $365, $588, and $786 respectively (2015).

Especially in today’s low-interest rate environment, maintenance fees are also seen as an opportunity cost to many home buyers. A $1000 monthly maintenance fee has the opportunity cost of an additional $200,000 in mortgage principle (if the interest rate is around 2.5%). Keep in mind, this is an approximate number – there are many factors to take into consideration, such as the amortization period, and interest rate.

Townhouses are a perfect example that show the maintenance fee opportunity costs perceived by buyers. There are two types of townhouses – freehold townhouses, and condo townhouses. Condo townhouses typically have a fee that covers building insurance, garbage, snow removal, and parking in some cases. Freehold townhouses would typically go for a couple hundred of thousand dollars more than condo townhouses – just because there is no maintenance fee.

Although condo townhouses are cheaper, it may have the approximately same monthly payment as freehold townhouses – since it would require a maintenance fee and a mortgage payment. Keep in mind, freehold properties typically yield a greater return on investment – they do not have the risk of being mismanaged, leading to sky rocketing maintenance fees – as seen in 40 Panorama Court.

According to The Star, 40 Panorama Court has past records of mismanagement – leading the condo to being behind by millions of dollars in repairs, and an operating deficit of a couple hundred of thousand dollars. Management and owners declined efforts to raise monthly fees to cover the cost of necessary repairs, such as parking garage (which is partially blocked), falling concrete, and elevators, which are falling apart.

Consumer Alert: Battling Rising Condo Fees

Many Panorama Court condo owners want out – desperately selling at such low prices. According to The Star, Zarik bought a three bedroom condo unit at $124,000 in 2000. Currently, there are two three-bedroom condo units for sale in the building, for $49,900 and $60,000. That’s more than a 50% drop in 15 years, where Toronto Real Estate prices have been increasing each year.

“I will never buy a condo again” Zarik admitted to The Star, after going through a decade of mismanagement, and rising maintenance fees. These factors have led the Panorama Court condo owners to significantly depreciate in value, even in the long term. Typically, Toronto Real Estate appreciates in the long term, however, this is a rare case of a property depreciating in value year over year.

 “I will never buy a condo again”

As the building continued to be in a management crisis, with severe financial conditions, the condo corporation asked the Superior Court judge to assign an administrator to manage the building, to get it back on track (The Star).

This is one example of a mismanaged condominium. Before purchasing a condo, always do prior research on the condo building – how well is it being managed? How much have the maintenance fees risen in the past few years? What do the maintenance fees include? These are the type of questions you should be asking yourself. Its also best to consult with a real estate agent in your area, as they would typically have a better understanding of which one would be a better buy.

Is the end near for 40 Panorama Court? With never ending repairs – would it be cheaper to sell off the land to developers, and split the profits among unit owners? In this 202 unit building, lets say the average unit sells for $50,000. That would be approximately $10.1 million for the developer to buy the whole building. This can be a bargain within the Toronto Real Estate, since older condo buildings tend to have more land – sometimes enough to build 2 – 3 high rise condo towers. Recently, a 5.18-acre residential infill redevelopment site in East Toronto was selling for $10.7 million to developers.

This is the type of problems that has the risk of arising in any condo building. Chris Jaglowitz, a lawyer specializing in condo law for Gardiner Miller Arnold LLP mentioned that this is a coming crisis that nobody is talking about (The Globe and Mail). To avoid being in this situation – its important to do your research, understand the building as much as you can before making a decision on whether or not to buy it.

You may also be interested in: Real Estate Investing: Tips & Tricks

Writer: Jelani Smith 

Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.

  • H. Marshall

    “Is the end near for 40 Panorama Court? With never ending repairs – would it be cheaper to sell off the land to developers, and split the profits among unit owners?”

    The writer doesn’t get it. What can the owners do with $50,000 a unit? They can’t sell at that price. Where can they go? They will want double that; at least.

    Millions have been spent repairing the bricks and concrete so the building has gained another ten or more years. The huge monthly costs will not rise in the near future.

    Finally, what developer wants that property? The $10 million is a fraction of the cost that is needed to prepare the property for re-development as it is extremely expensive to demolish a standing concrete tower. The location, though it is pretty, is not in a desirable area. Too isolated.

    Best bet as to its future? Investors will buy the units and rent them out, many becoming overcrowded rooming houses.

  • Jelani Smith

    That’s a good point – $50,000 is a low selling price, especially taking the recent repairs into consideration. However on – the units at 40 Panorama Court are currently selling between $45,000 – $70,000. The higher than average (Toronto Condo) maintenance fees make it harder to sell these units at a higher price. Hence, selling the property to developers may be one potential solution in the medium – long term, as the land becomes more valuable.

  • Richard Forster

    Habitat for Humanity should buy it. At market rents there would be enough profit to fix the mess and provide housing for people that need it. It is sad that people choose the run their own real estate into the ground, saving money or pushing costs off into the future. The loans and the stupidity will mature, so there might be hope, when the owners start thinking together.

  • Jelani Smith

    Selling the condo is definitely an option the 40 Panorama Court owners should consider. I agree with you on the mismanagement. It’s extremely important to take care of any required repairs as soon as possible, otherwise it could end up costing a fortune as seen in this case, where maintenance fees skyrocketed.

  • Richard Forster

    With the prices as low as they have been, many owners have a larger mortgage than the property is worth. Banks will not lend there, so only cash buyers can consider this property and owners selling have found that the portion of the loan is collected from the proceeds of the sale, leaving them with less money and nowhere to go. It is sad that owners sunk their own condoship.

  • Jelani Smith

    That’s true – one buyer did indicate she bought her condo unit in the low 100s over a decade ago, and now it’s worth less than half the price. If they sell the property, it would only work if the buyer/developer offers a deal that is enough for owners to cover their mortgages (which could be underwater in some cases).

  • Richard Forster

    In addition to the owners mortgage, there is also a loan on the whole property, before any consideration could be made for clearing and buying the property and re-purposing/redeveloping the site. Stupidity doesn’t last forever, so this will pass.

  • Jelani Smith

    Typically older apartment buildings have a lot more land – some have enough to develop 2 – 3 condo towers. Perhaps a developer could give an offer that would be enough to cover the building loan/owner’s mortgages and still get a good deal.

  • Richard Forster

    Or the owners wake up and run the building professionally not their way.