1. Condo-Buying Walkthrough: Introduction
  2. Condo-Buying Walkthrough: Condo Characteristics
  3. Condo-Buying Walkthrough: Who Buys Condos?
  4. Condo-Buying Walkthrough: Reasons To Buy A Condo
  5. Condo-Buying Walkthrough: Choices When Buying A Condo
  6. Condo-Buying Walkthrough: Condo Features To Consider
  7. Condo-Buying Walkthrough: Condominium Fees
  8. Condo-Buying Walkthrough: Finding Good Deals On Condos
  9. Condo-Buying Walkthrough: What Should You Spend On A Condo
  10. Condo-Buying Walkthrough: Obtaining A Mortgage For Your Condo
  11. Condo-Buying Walkthrough: Conclusion

Condominium fees are monthly dues paid by each unit owner. The fees are commonly based on the percentage of the development that is owned by each owner. For example, the owner of a three-bedroom, 2,000 square feet unit will likely be assessed more than the owner of the two-bedroom, 1,500 square feet unit next door. Fees can also differ based on each unit's view, which floor the unit is located on, and so forth. The fees are used to pay for expenses such as maintenance of the common areas, property and liability insurance for the building's exterior and common areas, and certain utilities, such as the water or electricity used in common areas. Condominium fees generally do not cover insurance for individually owned units; each unit owner is responsible for securing adequate property and liability insurance.

Average fees

Condominium fees vary based on the development and market. It is difficult to establish an "average" fee since many factors determine each development's fees. Developments with swimming pools, tennis courts, and fitness centers may have higher maintenance and liability costs and therefore higher condominium fees. Large, multi-level developments – with elevators, fire suppression systems, and extensive HVAC systems – may also necessitate higher condominium fees.

Prior to making an offer on a condominium unit, it is important to investigate the development's condominium fee history. The seller or the condominium association's treasurer should be able to provide several years of history so that buyers can review trends and find out how much the association has in its reserve fund. Potential buyers can also compare the development's fees to others in the area. If the fees seem too low, the development could be in disrepair, or it might not have enough reserves to handle unexpected maintenance expenses. Fees could also be low to entice buyers while the developers sell all of the units. Once the property is turned over to the condominium association, however, the fees could increase significantly.

In certain developments, condominium fees may be equal to or greater than the mortgage itself. It is important to find out why the fees are so high and to determine if the property is being efficiently managed. Costly repairs and replacements, for example, can often be avoided by simple preventative maintenance. Additionally, property managers may not be taking a cost effective and direct approach to contracting maintenance tasks. For example, a property management company might hire a property manager, who contracts with a pool maintenance company, which hires a foreman, who supervises the person or crew that cleans the pool. Each layer costs the association more money.

Reserves and Special Assessments

A percentage of each unit owner's monthly fees may be placed in the development's reserves. These funds are used to pay for non-routine expenses such as replacing the roof, painting the exterior or renovating a lobby. If the reserve fund is not large enough to cover these expenses, all unit owners may be charged a special assessment to help cover the costs.

Special assessments can range from about a hundred dollars to many thousands of dollars, depending on the special project. Rising insurance costs, too, can deplete a development's reserve funds, forcing the association to levy a special assessment. This is increasingly becoming a problem for areas prone to natural disasters such as coastlines that are hit frequently by hurricanes.

Non-Payment of Fees

All homeowners' associations, whether for condominium developments, townhome developments or single-family subdivisions, face the possibility that an owner or several owners will default on payment of fees. The problem has become so widespread since the 2008 economic crisis that certain states have enacted new legislation to assist associations with collecting unpaid fees. Associations can seek a lien in court against a property based on any unpaid fees, and either the association or a bank can initiate foreclosure proceedings.

In some states, the association is allowed to demand rent payments on delinquent units to be handed directly over to the association instead of to the unit owner. In Florida, for example, an association can evict a delinquent homeowner, find its own tenants to occupy the unit or find new renters for an abandoned unit, and collect the rent directly (the association must first foreclose on the unit ahead of the bank, taking title to the property).

When the association forecloses on a property, lenders may be averse to making futures loans on properties in the development, which can make finding new owners a challenge. Both non-payment of fees and unoccupied units can drive up the price of monthly dues for all other unit owners.

Condo-Buying Walkthrough: Finding Good Deals On Condos
Related Articles
  1. Investing

    Don't Ignore Maintenance Fees When Buying Real Estate

    Buying an apartment or condo costs more than just the price of the unit. You will also have to pay maintenance fees which can often be hefty.
  2. Investing

    Are Fees Depleting Your Retirement Savings?  

    Each retirement account will have a fee associated with it. The key is to lower these fees as much as possible to maximize your return.
  3. Investing

    8 Investing Fees That You Should Never Pay

    In investment management and financial planning there are a plethora of fees that are unnecessary.
  4. Investing

    A Guide To Investor Fees

    Fees are one of the most important determinants of investment performance and something that every investor should know.
  5. Managing Wealth

    How To Optimize Your Portfolio and Reduce Fees

    Investment fees aren't avoidable altogether, but there are strategies investors can employ to keep those fees at bay and reduce the impact on returns.
  6. Tech

    Are Financial Advisor Fees Too High?

    Fees charged by financial advisors run the gamut. Are you getting a fair deal or paying too much?
Frequently Asked Questions
  1. Who Decides When to Print money in India?

    Find out the role of the Reserve Bank of India, or RBI, and the amount of authority given to the government. Learn who is ...
  2. What is the Difference Between a Forward Rate and a Spot Rate?

    Learn about spot and forward contracts, how spot and forward rates are used for spot and forward contracts, and the difference ...
  3. What are Some Examples of Stratified Random Sampling?

    Learn what simple random sampling and stratified random sampling are, some examples of stratified random samples, and how ...
  4. What are the Differences Between Affiliate, Associate and Subsidiary Companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. Read on to find ...
Trading Center