Posts Tagged ‘Condo’

Home Owner Association (HOA) dues are driven by both fixed and variable costs. In some instances the property owner will get an additional assessment sometimes called Special Assessment for expenses that were not budgeted for or for cash shortfalls.
Fixed costs are monthly/quarterly maintenance costs such as landscaping or pest control. They also include the management fees the managing company charges the association for their work. Variable costs include utilities and unforeseen expenses such as plumbing repairs and repairs due to theft and vandalism. Additionally, if there are delinquent property owners that have not paid their assessments there may be a line item budgeted for this. It is ultimately the owners that are current on their payments that are paying for the shortfall in assessments in one way or another. Either through the increase in the assessments to make up for the deficiency, or through a special assessment.
Before purchasing a property that is part of an owners association, it is a good idea to review the following documents: current budget, annual financial report package, board and member meeting minutes delinquent owners and their portion of the budgeted dues, CC&Rs and Bylaws. Also, look at the amount in the Reserve account; this should be well-funded in order to replace roofs, parking lot repairs or building structures. If the association has not reserved adequately for such an expense, property owners will get a surprise bill for a portion of the expenses which can be in the thousands.