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Condo Association Fees: What Do They Actually Cover?


Question:

You have purchased a condominium, and in the closing you received a credit for condo fees owed. But, what do the condo fees cover?

Condo fees are created as part of the creation of the condo association, and are assessed based on the percentage of ownership that each unit within the condo holds. Fees are typically assessed either monthly, quarterly, or annually, dependent upon what services are provided as part of the dues.

Fees are assessed for the purpose of providing funding for common area expenses, and are set (at a minimum) on a monthly basis by the condo association board. At a minimum, common area expenses should include funding a reserve fund for a future roof replacement, and in a larger condo association, can be extremely complex condo association documents.

In a small condo association, the fees are generally a fixed amount, since there are few shared expenses. In a larger condo, involving hundreds of units, the budgeting process is detailed and complex, and fees can be assessed based on projected annual expenses, with variable amounts for such items as common area utilities.

Items usually included in condo fees are:
1. Reserve funds for large items. Basically a savings account, set to provide for the future replacement of major components such as roofs, driveways, boilers, and air conditioning systems.
2. Fixed annual expenses. Items such as common area real estate taxes, maintenance contracts, and planned improvements such as painting, lawn care, and payroll costs are generally included in this category. These amounts are generally fixed annually.
3. Variable costs. Many condo associations have opted out of charging a flat rate for utilities for the common areas for items such as heating and lighting, and instead charge these expenses on a monthly basis to the owners, based on the current billing. Other variable costs can include things such as valet services, parking fees, and other services provided specifically to that condo owner.

Items not usually included in condo fees are maintenance to your individual condo unless the item being serviced could have a deleterious affect on other condo association owners. To truly understand what is included in the condo fees you are expected to pay, the answer is to obtain a copy of the annual budget from the Board or its manager. Failure to pay the dues can lead to foreclosure either by your lender or the condo association.

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