What Is a Condominium Fee?

A condominium fee is paid by all property owners of a condominium complex to cover ongoing maintenance costs. The fee is often based on the size of the condo unit, the amenities that the building offers, and any anticipated annual expenses.

How Condominium Fees Work

Condominium fees are the agreed-upon sums paid by each owner of a condo unit to the condo association for maintaining the overall appearance and upkeep of the community.

The condo, or homeowners association (HOA), is an organization that votes to decide on the rules as well as enforce them for the members living in the community. The condo association also meets regularly to prioritize work projects and submit and consider bids for work to be done for the entire complex. Those who purchase a condominium become a member of the association and pay a periodic fee as mandated by the HOA.

A well-managed condo or homeowners association will maintain a reserve fund for handling any unexpected maintenance projects. These condominium fees, or HOA fees, must continue to be paid even after any mortgages have been paid off. In essence, each condo owner within the development is setting aside money for repairs on a regular basis.

The condominium fee covers the costs of maintaining the exterior as well as some of the common areas of the interior that include:

  • Lobbies
  • Patios
  • Landscaping
  • Swimming pool
  • Elevator
  • Snow removal

Condo fees can range from $50 to $1,000 per month depending on the size of the property, whether the building is a high-rise, or there are multiple buildings. The monthly fee also depends on the amenities offered such as a concierge, tennis courts, a community clubhouse, or a park.

Key Takeaways

  • A condominium fee is paid by all property owners of a condominium complex to cover ongoing maintenance costs.
  • The fee is based on the condo's size, the amenities offered, and any annual expenses.
  • Condominiums are appealing for those who want maintenance-free living.
  • The condo association may charge fees or assessments if there's not enough money to cover major improvement costs.

Pros and Cons of Condo Fees

Condominiums have a lot to offer, and their maintenance-free lifestyle sounds appealing, but there are distinct advantages and disadvantages of owning a condominium and their fees.

Pros

Condominiums often appeal to people who don’t want to worry about the upkeep of their property and grounds. A key selling point of a condo is the low maintenance nature of the living arrangement. Whether someone is downsizing or in retirement, a condominium might be an attractive option and well worth the monthly fee.

A condo fee helps to prevent the building or any single condominium from falling into disrepair. The appeal to condo ownership is knowing that the condo's property's value shouldn't go down. Conversely, one of the drawbacks of living in a home is the possibility that a neighbor’s neglected property will detract from the appeal and resale value of the entire neighborhood. If an owner is planning on selling the condo at some point in the future, upgrades and upkeep can maximize the selling price.

Condo owners typically avoid the large repair costs associated with homeownership, particularly if it's an older home. If for example, a condo fee is $250 per month, the annual cost of $3,000 might be small in comparison to the cost of a large home repair. Plumbing, sewage, painting the home, the cost of replacing appliances could easily add up to more than the $3,000 annual expense for the condo. Also, the pros of condo fees include the ease of dealing with maintenance costs and the time saved in getting repair and service bids from vendors.

The difference in property taxes between a home and condo should also be considered when downsizing to a condo. If the home being sold has a lot of land or is bigger than the condo, it's likely the condo's property taxes are lower. Using our earlier example, if buying a condo saved $1,000 in annual property taxes versus the home, that's four months of condo fees paid for from the savings.

Budgeting expenses is easier with the monthly condo fee versus a home. In other words, the condo owner is able to spread out in equal monthly installments the repair costs that go into maintaining the property. The predictability of payments can be especially important to senior citizens living on a fixed income.

Cons

The condo fee will be used in the calculation of any mortgage qualifications and in some cases may push the borrower beyond the allowed income-to-expense ratios. If, for example, the mortgage payment is $1,100 per month while the condo fee is $400 per month, the total cost is $1,500 per month without including any other expenses or debt payments. If a borrower can only get approved for $1,400 per month and condo fees in the area are usually $300 per month, the borrower will likely need to look for a smaller condo—that can be financed at $1,100 per month mortgage.

Another drawback to condominiums is that the fee covers the upkeep for all of the condos and if some owners neglect theirs, the responsible owners might have to pay higher fees to cover any extra expenses. Some homeowners prefer to be solely responsible for their own living quarters and repairs. Also, some owners might be able to perform their own repairs at a lower cost than could be negotiated through the condo association dealing with service providers. However, they'd be stuck paying the condo fee for services they don't need.

The condo association may need to charge special fees or assessments if there is insufficient money in its reserve funds to cover major improvement costs such as a new roof, driveway, or elevator. Also, the association can increase the condo fee over time.

During an economic downturn, some condo owners might foreclose on their mortgage payments and as a result, are unable to pay their condo fee. A foreclosure is when the bank takes over the property because the borrower was unable to pay the mortgage payments. Oftentimes, the condo in foreclosure becomes neglected. Some home-owner associations may require the remaining condo owners, to cover the condo fee for those who have foreclosed on their mortgage.

It's important to note that at any time a member can't pay their monthly fee, it might lead to a lack of funds for the association to properly maintain the property. Other owners might be assessed a special fee to cover for the shortfall so that the property doesn't fall into disrepair.

Ultimately, owning a condo is a decision to live in a communal setting where everyone agrees to pool their monies for the betterment of the community.

Pros

  • Condo fees provide maintenance-free living for condo owners

  • Condo fees provide easy budgeting for upkeep costs

  • Condo fees help to avoid major repairs associated with homeownership

  • Condo fees provide amenities that a home might not such as a clubhouse

Cons

  • Condo fees can be expensive and range from $50 to $1,000 per month

  • Condo fees can be increased over time

  • Condo associations may impose additional fees for major repairs

  • Members may need to cover the condo fees for those who foreclose or can't pay