Condo Fee Increase? Don’t Worry. It’s For Your Benefit.
While condominium communities and homeowner’s association include a number of perks like not having to mow the lawn or access to amenities, these benefits don’t come for free. Owners in these communities pay an additional amount called a maintenance fee or condo fee to the association to cover shared expenses.
Condo fees generally cover four main things: operating expenses for the year (like landscaping and snow removal), management fees, insurance costs and reserve funding. Owners in these communities are required to pay these fees and should expect to see a condo fee increase from time to time.
While a condo fee increase may be an annoyance or add to a homeowner’s stress at first glance, it important to understand that these increases occur for the homeowner’s benefit. Condo fee increases can happen for a variety of reasons that typically take into consideration the best interests of the community members.
Operating Expense Increases
When a community has contracts for routine services like lawn maintenance, they know the annual cost upfront and can budget accordingly. In many cases, there are small increases built in to the duration of a multi-year contract. These types of incremental increases in operating expenses should be expected.
Reserve Funding vs. Special Assessments
In an HOA or condo community, there are project-based expenses that are not routine such as replacing roofing, paving parking lots or resurfacing the pool. If the board decides to keep maintenance fees low and simply fund operating expenses, they can collect special assessments as needed for these larger replacement projects. On the other hand, some communities choose to fund these projects over time and fund a reserve account to spread the cost over a number of years. While a low maintenance fee may be attractive to some, this could lead to special assessments or potentially a decrease in home value if necessary, projects are not addressed due to a lack of funding. A condo fee increase to fund reserves for future projects should be seen as solid reasoning for an increase.
The best way to keep homeowners informed of an expected condo fee increase is through transparent and clear communication. An annual meeting to discuss costs and upcoming projects is a popular way to communicate with the community in an open forum. Newsletters and emails are also a great way to inform residents. Owners should be aware of any increases and should be accepting of these changes, knowing the community’s best interest is at the forefront of the decision-making process.
AR Management is a full-service property management company that assists homeowner and condo associations with budgeting and financial management to ease the burden of fee increases and help communicate them clearly. For more information on how we can help manage your community, contact us today.