HOA and Condo Association Costs To Rise in 2009
Many associations are facing rising operating costs, which are likely to necessitate increasing assessments beyond an anticipated amount in 2009. Under normal circumstances, a forward-looking association will usually augment assessments annually.
"Boards are encouraged to raise assessments at least 3 percent each year," said Tracy Davis, a property manager and marketing director with McGill Management, based in Arlington Heights. When associations are consistent in this action, separate assessments can generally be avoided. Davis conceded that some boards may wait two years to bump up the monthly levy.
But there are board associations that maintain assessments at a constant level despite rising expenses.
"One we work with did not pass an increase in the operating budget for 12 years," said Brad Schneider of Condo CPA in Elmhurst.
This board kept drawing on its reserve to pay bills until finally the account was depleted. Finally, the directors had to draw up a realistic budget document that jacked up assessments substantially.
"In the past several years, many associations have had to increase their assessments significantly more than the average increase of 3 to 5 percent," Schneider said.
Some did so because of developers who had advertised low, inadequate assessments for marketing reasons. Most were forced to do so as the result of dramatic increases in certain expenses, such as utilities and insurance. Schneider particularly underscored the huge rise in fuel costs in 2006 and electricity charges in 2007.
Let's focus now more closely on growing expenses and what continuing impact they can be expected to have on association budgets and assessments.
Many firms that are heavily dependent on vehicles in the services performed for associations notified customers of an upward price adjustment for their higher gas costs, according to Tim Allwardt, President of Aegis Properties in Chicago. "Several companies [added] a fuel surcharge for travel, particularly scavenger companies," he said.
The same has been happening at some of the properties managed by McGill.
"I had a landscaper send a notice stating that they [would] be adding a 5 percent fuel surcharge to our monthly bill," said Davis.
The cost of paving maintenance has also risen substantially this year due to the cost of oil.
"Seal-coating of parking lots and asphalt repair have had a huge increase," said Allwardt. "I have seen 40 percent increases over last year's pricing. There is a real concern that the price will continue to increase."
By free-lance writer David Mack
speed14@urbancom.net