HOA and Condo Association Costs To Rise in 2009
Posted on Wed, Feb 11, 2009 @ 06:49 PM
Many condo associations are facing rising operating costs, which are likely to necessitate increasing assessments and condo fees beyond an anticipated amount in 2009. Under normal circumstances, a forward-looking condo associations will usually augment assessments annually.
"Condo 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 condo associations are consistent in this action, separate assessments can generally be avoided. Davis conceded that some condo boards may wait two years to bump up the monthly levy.
But there are condo associations that maintain assessments at a constant level despite rising expenses.
"One we work with did not pass a condo fee increase in the operating budget for 12 years," said Brad Schneider of Condo CPA in Elmhurst.
This condo board kept drawing on its condo reserve to pay bills until finally the condo reserve was depleted. Finally, the condo board had to draw up a realistic condo association budget document that jacked up assessments substantially.
"In the past several years, many condo 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 and condo fees for marketing reasons. Most developers were forced to do so as the result of dramatic increases in certain expenses, such as utilities and condo associations insurance. Schneider particularly underscored the huge rise in fuel costs in 2006 and electricity charges in 2007. Some developers defualted omn their loans.
Let's focus now more closely on growing expenses and what continuing impact they can be expected to have on condo association budgets and assessments.
Many firms that are heavily dependent on vehicles in the services performed for condo 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 HOAs and Condo Association 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