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5 Questions You Should Ask Your Condo Board (Don’t get blindsided with a big assessment bill!)

In an earlier blog post I wrote about the real costs of living in a condo, and the owner’s responsibilities when it comes to maintaining their unit. Here I will cover your share of the costs of running and maintaining the building itself.


WHY YOU SHOULD CARE Whether you are a prospective buyer considering investing in a particular building, a resident owner or an investment property owner, you need to understand your association’s finances. You own a percentage of all common areas and elements of the building, as well as the costs for their maintenance, repair and replacement. Depending on the age of your building, how your board plans and what is being collected monthly, you may be in for an unexpected (and significant) bill. Better to be informed and prepared! WHAT YOU WILL PAY, AND HOW I served on the board of my condo association for just under 2 years. It’s a tough job. All associations are under pressure to keep their monthly maintenance fees low. But their fiduciary duty is to plan for the long-term health of the building. It’s a very delicate balancing act: condo communities are diverse in age and life stage and units can be primary homes, vacation homes, or investment properties. Therefore, some owners are more concerned with short-term costs, while others want to invest to increase property values and build wealth. Monthly condo fees have two components: one covers the operational expenses (or maintenance fees) to manage the upkeep of the building. The other is reserves, which is money set aside for future needs, primarily the replacement of the big-ticket assets when they reach the end of their useful life. By law, communities have the option to vote down the collection of reserves every year. Some go this route to keep the monthly maintenance fees low, kicking the can down the road for other expenses as they come. Without reserves, the only recourse your board has to cover asset replacement or expenses outside of normal operations is to levy a Special Assessment. Everyone hates Special Assessments because it means writing a big fat check or financing the costs. As an example, my building recently got assessed for work required to pass our 40-year certification, plus some much-needed amenity upgrades. The price tag? $40,000 to $60,000 PER UNIT. Because for many years my community voted down reserves, I’ve paid four other assessments, all $5,000 or more over the 20 years I’ve lived here. Clearly, it is important for you to know what’s coming down the pipe in your building, whether the funds have been collected to cover them, and if you’re exposed.


1. When was the last time a Reserves Study was conducted for the building?

A reserves study evaluates all of the fixed assets/components of a building, determines where they are in their useful life, and when they should be replaced. These are all big-ticket items like elevators, cooling towers, roof, etc. The study provides the data necessary for the association to project future expenses, collect reserves now and bank them. No reserves study means no way to plan for future improvements: your community will need to react whenever something breaks down, increasing greatly the risk of unexpected assessments.

2. How well funded are the building’s reserves?

Are they collecting 100% of the recommended reserves? If they are your chances of being slammed with an assessment are significantly reduced. If reserves are not being collected, consider setting aside your own personal reserves account, because you will incur large expenses at some point.

3. When is the next building certification?

Is there a plan for it? What major projects will the building need to undertake?

The state is required to certify buildings in increments of 10 years to ensure that they are up to code and structurally sound. Each certification focuses on specific areas of the building, based on life expectancy of the common elements. For example, the building’s expansion joints and post tension cables (basically, what holds the building up) are key components of the 40-year certification. If the building fails the certification, since it’s a life safety issue, the state can condemn the building – forcing everyone to move out until the violation is rectified. This is real and has happened in the Brickell area.

You likely won’t get an answer on what the price tag will be for the project until the assessment has been presented. However, knowing the type of projects and the assets that are being considered will at least help you understand the order of magnitude.

4. Are there any major construction projects that are being considered (aside from certification)?

The older the building, the more likely it is that the amenities will need improvements or updates. Gyms are a much more important amenity now than 30 years ago, and newer buildings come with an array of additional features like spas, business centers and children’s playrooms. If the building does not have competitive amenities, property values suffer. Therefore, many older buildings are upgrading.

5. What is the insurance deductible should there be hurricane damage? Are those funds held in reserves?

Insurance is one of the 3 largest association expenses. Deductibles for things like hurricanes are typically in the high 6 figures for a medium (under 150 unit) building. If these funds are not reserved, a special assessment will be levied.

Your board should be happy to answer these questions, since the more informed the membership is, the better the discussions and decisions. When you ask them, please be kind, and remember to thank them for their hard work! Just like you, they are owners, and though they are serving the community, they are not your employees. From the goodness of their hearts they are VOLUNTEERING their time to better your community, so they deserve your appreciation!

Clearly, it is important for you to know what’s coming down the pipe in your building, whether the funds have been collected to cover them, and if you’re exposed.

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