The Condo Fees Are HOW MUCH?!
One of the top questions asked by buyers who are considering a condo purchase is “What is the condo fee?” often followed by, “Why is it so high?” The monthly fee is an important consideration as it can range from $150-$1,000+ per month in our area and there are a few factors that play a large role.
Here are a few frequently asked questions and answers on this subject:
What are condo fees?
In a condo building, condo units are individually owned and maintained by their owners. The property (which may be one building or a series of buildings) also includes parts that are not individually owned, that are controlled by the condo association. This typically includes the grounds, roof, elevator, and any other limited or general common elements not owned by an individual owner.
What do condo fees pay for?
Condo fees are paid by unit owners to cover the costs of management, operation, and maintenance of the property. Operating expenses include the day to day operations of a condo building such as administration (sometimes in the form of property management), utilities, trash removal, or landscaping. Reserve funds are allocated for future anticipated building maintenance such as a new roof or elevator. Each component of a building has an anticipated useful life expectancy with regular maintenance costs and an eventual replacement date and cost. Condo fees are the primary revenue generation activity of a condo association, and if there are unexpected expenses, an association may need to levy a special assessment.
Why do some buildings have high fees? Is it because they have amenities like a pool and gym?
There are many reasons why a condo building may have higher than average condo fees. It is true that building amenities like a pool, gym increase the operating expenses of the building and have maintenance costs. These features can also add value for owners and increase the market value of units in the building potentially offsetting any added cost.
There are also condo buildings with little to no building amenities that have high condo fees. This is often a result of higher than anticipated costs (whether maintenance, legal or other), or improper budgeting for maintenance and repairs. Building-wide repairs can be incredibly expensive and it can be challenging for associations to estimate years in advance what repair costs will be with changing labor and material expenses. When these costs are underestimated a condo association may need to make the decision to raise condo fees in order to cover the cost of the unanticipated expenses.
Do condo fees ever go down?
Yes, but don’t count on it. It’s more common and likely that a condo association will choose to maintain condo fees without an increase, the more funds that a condo association has to use for unexpected expenses, the less likely it is that they will need to have a special assessment. Special assessments are something that condo associations try to avoid whenever possible as it can be challenging for owners to have unexpected mandatory costs. Special assessments are commonly perceived as an indicator that a condo association is having financial difficulties, and can negatively impact prospective purchasers.
How do you know what condo fees will be in the future?
The short answer is that you don’t. Having an active role in a condo association can help to positively impact the decisions that a condo board makes. The best predictor that we have of the future financial situation of a condo association is the current financial status. When you purchase a condo in DC you are provided a 3-day opportunity to review condo resale documents which include financial statements and an overall idea of the current financial standing of the association. It is important to ask and have answered any questions that you have during this timeframe and to ensure that you are comfortable investing in this association before proceeding with your purchase. When you purchase a condo you are not only buying the unit but you are also investing in the condo association, and their finances and decisions that they make can play a huge role in the future market value and resale prospects of your investment.
For more information on what to look for in a condo resale package and questions to ask, check out our blog post here.