HOA Loan and Insurance Quotes

I understand that there is a 1% origination fee, payable at loan closing. Submitting this form puts me under no obligation. *


Subscribe to Blog

Your email:

Follow Us

Looking for answers?

condo association blogCan't find the answer you're looking for?  Ask your question here and we'll post it in our blog.

Browse by Topic

Condo Association Management Blog

Current Articles | RSS Feed RSS Feed

Association rents common area parking garage to condo owners

Posted on Mon, Jan 02, 2012 @ 08:05 AM
  
  
  
  
I own two units in a large high-rise downtown Chicago condo building and pay $180/month to rent one space in the garage. The garage is a huge profit center for the condo association. $180/month seems to me like "double taxation" since theoretically I own some small percentage of the garage, which is classified as common element. (There is no deeded parking here, but that may be a direction the board should consider.) My question is this: since the garage is common element, can the condo association legally charge more than their prorated per-space costs to owners needing parking spaces?

Tags: , ,

COMMENTS

I'm not familiar with your local laws, but the logical answer to your question is "yes". The condo owners are all being treated equally in this matter, and each is deriving benefit from each rented parking space (i.e., the rental income offsets part of the association's expenses, thus reducing the size of each owner's monthly HOA fees).

posted @ Monday, January 02, 2012 8:17 AM by Alan H.


Tour Board of Directors are correct. The rental charge is normal in most condominiums and is appropriate.

posted @ Monday, January 02, 2012 8:19 AM by Charles Adler


Condo associations are supposed to be non-profit to avoid the expense of paying taxes. If your board is charing a higher monthly fee than offsets the expense of maintaining the parking area then I would think they would have to pay a tax on the income. Do some research and try to find out how they came up with $180/mo. Remember, however, that there is more than just maintenance costs associated with running a parking area. There is also vandalism and extra costs to stop misuse everytime someone comes up with a brilliant idea to dodge the rules.

posted @ Monday, January 02, 2012 9:47 AM by Renee


I like it. As a Realtor and Condo owner, it is a good thing that owners pay for what they need and use. If the owners that don't own a car, they aren't paying the tax and upkeep for the parking garage. What can be bad about that? I assume the parking fees are used as income to take care of the garage's expense. If I were a green thinking person and used public transportation, this is a perfect set up. Only down side is if this money is being poketed by a board member or management company.

posted @ Monday, January 02, 2012 9:52 AM by L.Weiss


If you do a little research of your gov docs I'm sure you will find that the BOD has the authority to charge the members for use of the common elements.  
 
Renee is correct in thinking the HOA would be subject to paying income tax on this income, but not for the reason she states. Exempt function income includes "payments from members for special use of the org's facilities, apart from the use generally available to all members." IMO, since rental of the garages is open to all the members this is not exempt function income and would be subject to income tax.

posted @ Monday, January 02, 2012 10:54 AM by mary


I posted the original question and appreciate all the responses. I agree with L.Weiss that owners should "pay for what they need and use" but would add that they should not pay a great deal more than what they use, with the excess going to offset other association expenses and thereby reducing all owners' HOA fees. This practice benefits non-parkers at the expense of parkers and that's the "bad" part, L.Weiss. It is true that if garage charges were reduced to just cover its operating expenses, regular assessments to all owners would have to be increased to offset the lost garage income. To me that seems fairer and more "appropriate", regardless of what is "normal." Tax and environmental issues were not part of my question.

posted @ Monday, January 02, 2012 12:05 PM by Anthony G Finder


Most of us missed your critical question. Can a fee be exhorbitant? Perhaps the answer is 'Yes' by basic supply/demand/price. My Condo has free outdoor parking lots, and limited indoor heated parking at $90/month. We only have a waiting list of 2 or 3 owners for indoor parking. BUT if we had dozens, there is nothing wrong with increasing our price muntil the supply/demand/price equation is satisfied. Perhaps your Condo should charge #360 per month if the demand were there.

posted @ Monday, January 02, 2012 2:30 PM by verda


No, Verda, my critical question is this: How can it be OK for the association to make ANY profit, exorbitant or not, on the rental of common element to an owner? Does this not create two classes of owners: those who park and thereby pay much more than their fair share of total association expenses and those who don't park and benefit from the overcharges to those who do park? Should not expenses for maintenance of common element amenities be borne by all owners according to their percentage of ownership and not with regard to which owners avail themselves of those amenities? Our association does not charge owners extra for the use of the health club, pool, library, shuttle service or other maintenance services or amenities. Why is the garage different? That this may be a common practice doesn't make it correct.

posted @ Monday, January 02, 2012 3:47 PM by Anthony G Finder


Here are some figures from my association's 2010 financial statement to sharpen the focus of my question: 
 
Garage revenue: $1,384K 
Garage expenses: $97K 
 
If you do the math, this represents a 1,287K profit or a 1326% markup. Even allowing for the fact that a small percentage of garage revenue is derived from fees to guest parkers, this seems to me to qualify as a real problem.

posted @ Monday, January 02, 2012 4:23 PM by Anthony G Finder


It is difficult for outsiders to estimate what is equitable or fair based on limited information. You need to find out from the association via the management agent or the board how the charge was derived. Here are some factors that you would need for an assessment if the amount is "overcharged" or not. 
 
How much revenue is drawn from fees to guest parking? 
 
What is the liability and possible expense of the Association for allowing guest parking? 
 
How much of the fee is put in reserves for future repairs/rebuilds/improvements? 
 
While it may appear that there is a "profit" it may be that they are putting monies, as they should, in reserves for future capital expenses on the garage. Without reviewing your documents, it appears that this is a limited common element in which the association can rent or assign, unlike open parking, a pool or other common element items which are open to all owners (but can often be restricted to those that are not paying, though that may be difficult to enforce.) 
 
The questions I would have are: Did you review your documents? 
 
Have you contacted the association via the management agent or board to see how the fee is derived? 
 
If not, I recommend that you do those things first. Without knowing Illinois statutes regarding condominiums, it is also difficult to assess. The laws for non-profits also do not extend to one part - they extend to the whole organization. Money put aside for future expenses is also not a "profit" even though some homeowners have tried to argue that in the past. However, the board should also know the anticpated reserve expense. 
 

posted @ Tuesday, January 03, 2012 10:53 AM by Joe Schuirmann


I purchased a parking space for $17.5K in 2005 at our condo commmunity where I own a condo unit as well. ALl of the parking spaces are attached to a public alley way - owned by the City. Our condo docs lead me to believe that our community owned the alley but we do not. However I have to pay $20 per month for a parking space that I already purchased. The parking spaces that only SOME unit owners purchased (45 parking spaces total and 111 condo units total) are identified as LIMITED COMMON ELEMENTS. Parking space owners (not renters) have paid approx $9K annually since 2005 to date and the money has been spent on other common area maintenance. Since 9-2005 the only expense for our parking spaces (not the public alley since we do not own the alley) was for crack sealing ans coating and restriping once - so approx. $5K has been spent since the community became a condo association in mid 2005. My condo docs refer to the public alley as a "common element driveway" however we discovered later after the purchase that the City owns the alley - not our condo association. Is it illegal for parking space owners to be charged for limited common element since our actual parking spaces are not common elements - they are owned by those that chose to pay $17.5K for a parking space. And is it illegal for our Assoc. to collect approx. $80K from 45 parking space owners and apply approx only 6% of that money toward an asthetic "repair" in 2011? Our community is in Virginia. 
 
 
 
Thank you very much for your expertise.

posted @ Wednesday, January 04, 2012 5:23 PM by Kim Whitley


Kim, 
 
 
 
I would think that those  
 
parking spaces that were purchased by the members are no longer limited common areas. That term was applied to all the parking spaces before the assn decided to offer them for sale. Now they are owned by the members who purchased them. Did you recieve a deed for the space? Who performs maint on those areas, including snow removal when necessary? If the assn does this then that may be why they are charging $20/mo. which would be justified. Some of that money should be put into a reserve account for future paving. Also it would be nice if they accounted for the income and expense of these parking spaces separately so that the 45 members who purchased the spaces can see exactly what their monthly fee is being used for. 
 
BTW, for an action to be illegal it must be against the law. Therefore if the BOD is not violating the gov docs and/or state law then it is not illegal for them to charge the monthly fee or to not spend all the monies collected on the maint of the parking spaces. Also, as mentioned above, IMO, these parking spaces can no longer be called limited common areas.

posted @ Wednesday, January 04, 2012 8:29 PM by mary


Post Comment
Name
 *
Email
 *
Website (optional)
Comment
 *

Allowed tags: <a> link, <b> bold, <i> italics