Friday, January 13, 2012

Understanding Your Condo Fee

What Does Your Condo Fee Cover?

One of the biggest misconceptions we hear in the property management industry is what a condo fee covers. Many people incorrectly view these as extra costs charged by the association or the condo management company in an attempt to make a profit. This is not the case! Monthly condominium fees are technically a lien placed on a unit annually that owners can choose to pay off monthly. This fee is is calculated based on your beneficial interest (square feet) in the condo and is used to manage the day to day upkeep of the common areas. This can include:
  • Utilities
  • Master Insurance
  • Landscaping
  • Janitorial
  • Management Fee
  • Pest Control
  • Fire Alarm Maintenance
  • Plumbing, electrical, or general maintenance work in the common areas
Condo Fees start creeping higher when your association has amenities like:
  • Elevator
  • Pool
  • Workout room
  • Concierge

High vs Low Fees

You might be surprised what questions we get (or don't get!) when new buyers are thinking about getting into a condominium. They don't want to know the association reserves, the history of the roof, or the boiler condition. The #1 question we get is regarding the condo fees. This figure, unfortunately, can be very misleading for someone moving into a condominium. Many new buyers see a low fee and assume "Great! My monthly payments will be low, lets move right in".

Supplemental Fees

The issue with a "bare-bone budget", or low condo fees that just barely cover your operating expenses of the condominium, is that it often leads to supplemental fees. If your roof needs a replacement and your condo fees have not been high enough to fund a proper reserve account, you may be paying a large lump sum all at once. Some associations actually prefer to run their condominium this way; They keep fees low and issue assessments as they are needed.

Know Your Facts!

There is no right or wrong way to manage a condo in this regard. Just be sure that when purchasing a new property, you inspect the supplemental fee history and the reserves! Educate yourself on the how the condominium has run in the past and you can plan how it will be run in the future. Know what your fees covers and when the last increase was. Information is king!

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