Condo fees are charges that residents of a condo association pay monthly, quarterly, or annually. While they allow unit owners to enjoy common areas and worry less about maintenance, they can also be a source of frustration. When condo fees keep rising, residents are confused about the reasons why. In fact, the condo board has a difficult role in keeping finances under control and communicating transparently with owners.
To clear common doubts, here are six main aspects that anyone living in a condo association should know. The final points are best practices to help board members allocate these funds wisely.
1. What Do Condo Fees Cover?
Let’s start with the basics: condominium fees usually cover maintenance expenses and the upkeep of common areas. By paying these dues, unit owners expect the property to be well-maintained. They also count on a positive, stress-free resident experience.
The association’s governing documents, such as the CC&Rs, must state what the condo dues cover. It can slightly vary from one association to another.
Here are some common examples of what condo dues cover:
- Maintenance, inspection, and repairs of facilities
- Common areas’ utilities, such as light or heating
- Communal services such as cleaning or entrance security staff
- Condo landscaping
- Property Management Company fees
- A Reserve Fund to cover emergencies or a costly project
2. How Are Condo Fees Calculated?
There are several factors to consider when calculating a condo fee. The first step is to check the bylaws. Usually, condo fees are based on the percentage of ownership. This means that if someone owns a larger share of the building, the fee they will pay may be higher.
The second step is to thoroughly track expenses and income, either with a budget spreadsheet or accounting software. If finances are not properly tracked, the condo fees will likely not be calculated correctly. This step also provides transparency to residents. That way, they know exactly how their payments are being used.
Each year, the board should plan its budget and forecast income and expenses. Condo fees are calculated based on all the expenses in the last section. The sum of these estimated amounts is then divided by the number of units in the condominium. The result of this calculation is then divided by the number of payments throughout the year. (eg, 12 if monthly or 4 if quarterly).
- Sum of all forecasted expenses divided by the number of condo units = condo annual fee per unit
- Result 1 divided by 12 = condo monthly fee per unit
3. Condo Fees vs HOA Fees – Know the Difference
Condo associations and HOAs are both community associations, but they differ in some respects. While HOA fees cover similar expenses to those of condominiums, the main difference lies in ownership. In a condominium association, residents own individual units and have joint ownership over common areas. In a homeowners’ association, residents own individual homes, but the common areas belong to the association. This means that HOA residents pay fees for facilities they do not own, while condo residents pay for areas they jointly own.
Another difference is that HOA fees rarely cover utilities such as heating, water, or electricity, whereas condo fees can.
3.1. Can a community association charge both condo and HOA fees?
As confusing as it may sound, some communities do charge both HOA and condo fees. That happens when a condominium is located in a homeowners’ association. In this case, the condo fees would cover expenses such as elevator repairs or lobby cleaning. The HOA fees would cover the costs of maintaining amenities available outside the condo.
4. How Do You Reduce Condo Fees And Avoid Special Assessments?
Many factors make condo fees increase. For example, the property’s size may affect the price. Usually, high-rise condominiums have higher expenses. The property’s age can also influence. Older properties require frequent repairs and inspections. Another aspect that the board can’t really control is inflation. When the price of basic utilities increases, the fees will automatically grow as well.
For these reasons, it is impossible to prevent these increases completely. However, applying best practices can help keep stability and avoid high, unexpected rises. Here is how:
4.1. Proper Financial Management
Poor financial management often leads to insufficient funds, which in turn results in special assessments. It is crucial for the board to accurately track the budget and make informed decisions.
By automating invoice creation and payment tracking via Neigbrs’ QuickBooks integration, boards can maintain precise financial records, identify overdue fees quickly, and minimize the risk of cash flow gaps that lead to special assessments.
Numerous condos and HOAs choose to manage themselves, while others revolutionize their administration by adopting a community management software like Neigbrs, which offers:
- Multichannel communication
- QuickBooks integration
- Secure document storage
- Customized portal to meet legal requirements
Ready to simplify your HOA management? Book a free demo today and discover all the benefits!
4.2. Apply Preventive Maintenance Instead of Reactive Maintenance
Paying for small repairs every now and then is better than paying for a consequential one at an unexpected time. Unforeseen expenditures lead to higher condo fees and frustration. Applying preventive maintenance is best.
4.3. Review Vendor’s Contracts
Reviewing vendors’ contracts each year is essential to ensure prices align with market rates. It is also an opportunity for board members to assess their satisfaction with the quality of the service they’re receiving. Hiring qualified vendors who charge fair rates is important. When working with the same service providers for many years, you shouldn’t be afraid to renegotiate your deal with them.
5. Collecting Condo Fees Online Makes Managing The Budget Easier
Budget planning and condo fee collection aren’t easy tasks. They can get complex even with the help of a management company or an accountant.
Tracking dues and expenses online makes it easy to keep your finances under control.
It helps have greater predictability about future expenses and income. It also provides better visibility over reserve funds. But it can also help in many other ways. Here are some examples:
- Automate recurring condo fee payments
- Easily see who has paid condo fees and who hasn’t
- Send reminder notifications to condo residents
- Pay vendors’ bills on time
- Easily conduct financial analysis and audits
- Greater transparency
Frequently Asked Questions on Condo Fees (FAQ)
1. What do condo fees cover?
Condo fees typically cover maintenance of common areas, utilities, cleaning, security, landscaping, management fees, and contributions to reserve funds for future repairs.
2. How are condo fees calculated?
They are based on the association’s total budget, divided among unit owners, often according to ownership percentage.
3. What is the difference between condo fees and HOA fees?
The structure of ownership drives the difference. Condo fees often include shared utilities and jointly owned spaces, while HOA fees usually cover common amenities that residents don’t directly own.
4. How to reduce condo fees or avoid special assessments?
By managing finances properly, investing in preventive maintenance, and regularly reviewing vendor contracts.
5. Is collecting condo fees online better?
Yes. It improves tracking, reduces late payments, increases transparency, and gives the board better control over cash flow.
Final Points on Condo Fees
Condo fees get confusing when there is poor financial management and transparency. There are many ways to maximize these earnings and provide a positive experience to residents. For that to happen, make sure to:
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- Know what condo fees cover and how to calculate them
- Apply preventive maintenance
- Review vendors’ contracts frequently
- Collect condo fees online
- Use accounting software
