Assessment is the one word every condo owner despises – they come and go like a Midwest twister and leave condo owners’ wallets empty. Assessments are a fact of condo association life – they are necessary to deal with the ongoing upkeep of properties, but for condo boards using assessments to correct condo association budgeting mistakes is never received well. Here are some suggestions to consider when planning your annual condo association budgets to mitigate these risks:
Always increase condo fees
Condo boards like to win one over with the condo association by holding the condo fees flat from last year. Even if the costs of services from last year are flat or even decline, I feel a small condo fee increase is always appropriate. You can’t prepare for the unknown and inflation normally gains at a rate of 2% to 3% per year. So, if you don’t increase condo fees today, the correction curve will probably catch you later and the incremental “jump” is larger. So, even a tiny increase in condo fees is better than no increase at all. Its also important to have a condo fee and assessment collection policy in place. This sets expectations for chronically delinquent owners. If you have late fees due to you HOA or Condo Association, you can try our HOA Collections Service
Have two plans instead of one in your annual condo budget
Make two condo association budget plans. One based on actual for the year plus a small percentage and an “upside” condo budget with a larger percentage for each line item. Vote to pass both the actual and “upside” condo budget plans and set condo fees according to the “upside” plan. On a quarterly basis, see where expenses are year to date. If you’re bringing in more condo fees than you need mid-year, lower the condo association fees for the rest of the year and look like a condo board hero.
Don’t be fooled by Mother Nature and Energy Cost
Two things we can’t predict – the weather (at least North of the Mason-Dixon line) and price of oil and gas. Both are volatile and can wreak havoc on your energy bills. Make sure to have some financial padding in your condo budget for gas and oil - if these are condo association common items.
A condo association loan (or HOA loan) is becoming more popular as a way to increase an condo association's cash position without having condo owners paying down large one-time assessments. At minimum, a condo association line of credit will position your HOA for times when cash is low - late condo fees, foreclosures, expected property repairs...things of this nature. By the way - consider an HOA loan for capital projects.
At the end of the day – it’s up to you and your fellow condo board members to try to budget properly, but I assure you no condo owner is happy with an unplanned “twister scenario” to their wallet, right around Christmas time.