Condo fees are charges that residents in a condo association pay on a monthly, quarterly, or annually basis. While they allow unit owners to enjoy common premises and worry less about maintenance, they are sometimes the source of frustration. When condo fees keep rising, residents are confused about the reasons why. In fact, the condo board has a difficult role to keep finances under control and communicate transparently with owners. 

To clear common doubts, here are 6 main aspects that anyone living in a condo association should know. The last points are best practices that can 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 areas upkeep. By paying these dues, unit owners expect the property to be well maintained. They also count on having a positive and 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 an 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
• Build a reserve fund to cover emergencies or 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 percentage of the building, the fee the owner will pay may be higher.

The second step is to track expenses and income thoroughly. Either with a budget spreadsheet or with accounting software. If the finances are not tracked properly, the condo fees will probably not be calculated correctly. This step also provides transparency to residents. That way, they know exactly what their payments are being used for. 

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 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 are somehow different. While HOA fees cover more or less the same expenses as condominiums, the main difference lies in the 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 the fact that HOA fees rarely cover utilities such as heating, water, or electricity while condo fees can. 

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. While the HOA fees would cover expenses to maintain amenities available outside the condo. 

4. How to reduce condo fees and avoid special assessments?

Many factors make condo fees increase. For example, the size of the property may affect the price. Usually, high-rise condominiums have higher expenses. The age of the property can also have an 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 completely prevent these increases. However, applying best practices can help keep stability and avoid high unexpected rises. Here is how:

• Proper financial management 

Poor financial management often leads to a lack of funds that results in special assessments. It is crucial for the board to track the budget accurately and to make informed decisions. 

• Apply Preventive maintenance instead of reactive maintenance

Paying for small repairs every now and then is better than paying for a consequent one at an unexpected time. Unforeseen expenditures lead to higher condo fees and frustration. Applying preventive maintenance is best. 

• Review vendors’ contracts

Reviewing vendors’ contracts each year is essential to ensure that the prices match the market rate. It is also the 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 budget easier

Budget planning and condo fees 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 allow you to easily 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 fees 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

Final points

Condo fees get confusing when there is poor financial management and transparency. There are many ways to make the most out of these earnings and provide a positive experience to residents. For that to happen, make sure to:  

1. Know what condo fees cover and how to calculate them
2. Apply preventive maintenance
3. Review vendors contracts frequently
4. Collect condo fees online
5. Use accounting software