Monthly dues to the condominium association can turn some potential buyers, especially if people see these as an unnecessary expenditure, on top of utilities and mortgage.
However, for some people, the extra cost may be well worth it. Whereas some see the fees as a luxury expense, others might argue that the fees improve the quality of their life by offering benefits that are not widely known to the lay public.
First, let's start with explaining what condominium fees are.
To understand the anatomy and purpose of condominium fees, you must understand what makes up a condominium. A condominium is made up of two parts: The individual dwelling units and common elements. The dwelling unit is the space you purchase to live in. The common elements of the building usually include the lobbies, pool, elevators, walkways, gardens, recreational facilities, lounges, etc. One part of common elements that is often forgotten is the structural elements along with mechanical and electrical services. When you own an individual dwelling unit, you also own these common elements. Therefore, since you share these common elements, you must help out with the cost for their operation, maintenance and ongoing replacement.
This is important to maintaining the attractiveness, atmosphere and property value of the property. Each dwelling unit owner has an interest in the common elements of the building since they directly affect their individual property value. This is important to those who not only want a cool place to live, but also want to make a great investment.
So, here is how the fees work. If you are an individual dwelling unit owner, you will be required to pay a monthly condominium fee for your portion of the operating expenses of these common elements. A portion of the fee is allocated to a reserve fund. This reserve fund is in place to ensure that there are enough funds available in case there is the need for major repairs and replacements over the life of the building.
The condominium fees are calculated by taking the annual operating cost of the entire building and dividing that number by your unit factor. Your unit factor is the percentage of your contribution to the common expenses. This is based on the square footage of your unit.
The specifics of your fees may include:
- Property management fees
- Building repair and maintenance
- Upkeep and the everyday care of the common property elements. These include snow removal, painting, heating/cooling system maintenance, cleaning of common elements such as exterior windows and carpets, landscaping, mowing the lawn, etc.
- Amenities such as use of the pool, lounge or party room, recreational facilities, etc.
- The corporation's insurance policies.
- Internet and/or cable access
- Salaries of condominium staff. This can possibly include on-site building managers, security guards, concierge, and maintenance personnel.
Some condominium owners see the expenses and benefits. Some the perks of paying fees might be allowing a couple, who usually spends over $100 a month for gym membership, to drop that and workout at the buildings fitness center. Others could save money by not having to purchase an internet service since the condominium might have a WiFi service. Another way of reducing your utility bill, by paying condominium fees, is by taking advantage of an association bulk cable package. Many condominiums are now purchasing a full package of telecommunications services on behalf of new owners.
Another savings, that is not money, is time saved. Included in the fees are the labor to do the yard work and housing maintenance. This is one reason that condos are popular among young, single professionals and the baby boomer generation who is now entering retirement.
If you have any questions about what is and what is not included in your monthly fees, it should be clearly stated in the buildings operating budget. You can easily get this information from the building manager or the developer prior to purchasing a condominium unit. If you are shopping for a new condominium, the fees and their breakdown should be stated in the disclosure statement. If one is being resold, it should be stated in the estoppel or status certificate.
A Few Notes
If the fees will be adjusted from time to time. Why? This is how business practices work in order to deal with the economy and other external reasons. The property might also take on new staff in order to deal with an ongoing problem or to help maintain a new addition. Each adjustment is reflected in the next year's budget.
Also, if there is an overestimation for the common expenses, it will not be refunded to you. Instead, it is applied to the reserve fund or it is applied to future expenses. Refunds usually are not given, even if you are selling your unit. Some sellers have added a portion of common expenses paid to the unit's purchase price.
Finally, the condominium fees are not negotiable. If you do not work out, swim, like to hang out in club houses or enjoy any of the other amenities, you are still required to pay a share. Depending on the laws in your state, some condominium companies can register a lien on your unit if you do not pay your share. If this happens, the company can sell your unit in order to make up for the money you did not pay.