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Our condo HOA monthly fee is $950. It was $700 when we purchased in September 2018. All of the increase was higher costs associated with upkeep and maintenance, not improvements or added services.
Now it’s likely the increase in July will be 7.4% to $1,020. ($840 a year).
Annually the increases averages 4.82% since 2018. For reference the annual rate of inflation since September 2018 was about 3.65%, but that is not directly applicable to running a complex of nine buildings where repairs are needed on everything from elevators to fountain pumps.
The complaining and criticism have already begun. Imagine 108 senior households agreeing on spending money – the tennis court needs repair (I don’t play tennis) – building one needed elevator repairs (I live in building 3). Why do we need a full time property manager? etc., etc. We are also prone to wanting things done when and how we want them done and often critical when they are not.
Above all is the desire to maintain property values, but that may not be the priority for some who did not plan or consider increasing fees. To be sure, HOA fees offset building and outside expenses of owning a home and they pay for added amenities like a pool, tennis courts, etc. However, owners still have property taxes (around $14,000 a year) homeowner insurance, HVAC maintenance, repairs and replacement, interior painting.
Nobody who lives in this community paid less than $500,000 for their condo even going back to 2011 when it opened. I know because we looked at the models back then and concluded we couldn’t afford to buy. The last unit sold for over $900,000 (there are different sizes).
It will be interesting to see who wins this HOA debate. Will it be the short term, $840 more annual expense view or the longer term maintain all necessary and desirable services and values view?
I would not suspect that a $840 a year added expense would be significant for families living here, but that may not be accurate, it may depend on the income versus net worth dilemma.
One thing for sure, the cost of living always goes up. Why are people, especially retirees, often surprised.
I can see why people might be getting a little upset over the increase in the HOA monthly fee. It’s approaching, in some instances I imagine, what they pay in property tax. The difference is that the HOA fee is directly re-invested in the place they live, while the property tax is not.
I don’t like paying $100 for an oil change, but it preserves the value of my car. I am less fond of paying $6000 for a new engine. Sometimes you need to pay a little (relatively) now to avoid paying a lot later. But some people are more about limiting the monthly budget than protecting/enhancing the long-term value of their assets.
True in some cases, but if you can buy a $900,000 condo in one of the wealthiest town in Nj, perhaps the northeast, you likely don’t have a limited monthly budget – or shouldn’t.
We moved into our condo after years of home ownership. The HOA experience has been eye opening. I reviewed the financial statements of the HOA prior to our purchase. I thought I knew what I was doing There were reserves. Were they sufficient? Contingent liabilities and deferred maintenance were not apparent. The owner of our unit had passed away before we purchased, and the heirs offered no meaningful disclosures. The condos were built about 30 years ago. We had an inspection done and minor issues were resolved. Less than a year after purchase, we attended the annual HOA meeting held at the end of our driveway. The major topic was a roof replacement that would require an assessment of $12000. The roofs had never been replaced. I wrote the check. I wasn’t happy as if I had known about the projected assessment, I would have negotiated with the condo owner for a price reduction. Our monthly fees have increased, but costs do go up.
Ha, that’s nothing. Here at the retirement village, we have to maintain 200 acres of lawns, and we own 57 roads we have to pave and plow. We also own the sewers and water mains.
The big thing now is the roofs, and how to replace them. Some roofs date from the 70s! There are 929 units in about 400 buildings, and it would cost about $15 million to replace the roofs. The monthly meetings are a riot, and I am not speaking metaphorically.
The people who moved in 30 years ago were middle class, and now wealthy people are moving in; this creates enormous conflicts between people who are running out of money and people who want luxury amenities. However, a roof without leaks is not an amenity, so something has to be done.
As Treasurer of the village tax district, I spent the winter approving invoices for snow removal. Our budget was $40K, but we spend $140K – ouch! Fortunately, we still have the capital to pave 2 roads this year, and two roads next year, as the residents on the worst road continue to complain, while those whose roads were paved last year complain about something else.
Many residents just don’t get communal living. You don’t own your roof – you own 1/929th of all the roofs, they’re a limited common element. We did bring in a outside speaker to give a presentation on how communal living works, but none of the complainers attended.
We also owned a condo in an association that owned the streets and all of the infrastructure. They were built in the 70s. I didn’t feel that our contingency funds were sufficient to cover potential upgrades such as roads, water lines, and sewers. That was one of the reasons we decided to move.
We’re actually in pretty good shape on those things. Of the 57 roads, about 75% have been paved within the last 7 years, and we have the money to fix the infrastructure. Driveways and walkways are a bit of an issue, but we’re working on them.
My wife and I bought a new free-standing home in a NJ development that was started about 12 years ago. It will ultimately have 315 homes. We pay $367 per month to the HOA. If fact, there is an open meeting tonight. The HOA fee covers the usual maintenance items and the contingency fund is adequate. Unfortunately, the clubhouse flooded during the winter due to a frozen pipe in the fire suppression system and has been closed since. I hope to find out tonight which insurance company is going to pay for the repairs and remodeling. We assumed when we bought the home that we will have to absorb fee increases and also may have assessments if the need arises. Since we are not attached to any other homes, we are responsible for all repairs and maintenance of our home. The builder did provide a 10 year warranty on his work. It is tricky to predict the future. Something is bound to go wrong.
I love your last sentence! 🙂
I’ll add my two cents as a condo owner and an HOA board member. We are a community of 3 buildings with 197 condominiums units ranging in Size from 1-3 bedrooms. Located at the New Jersey shore, many residents own this property as a 2nd home enjoyed mostly in the summer months, but there are many full-time year round residents too. We engage a professional management company and have a full-time on site manager.
As a board member I can say that we are as concerned about HOA fees as all the residents but our overriding priority is to maintain the integrity of the building, grounds and amenities (we have a pool, clubhouse and beautiful grounds) and maintain financial stability of the community for current and any future repairs.
while maintenance fees have increased over the past few years we are very transparent with all owners as to the reasons and amounts of increases by holding quarterly open board meetings which all owners are invited to attend.
our population consists of various ages and demographic groups most of which are concerned about expenses and property values. Although we don’t have a lot of turnover, property values continue to rise and this is a direct result of the way the property has been maintained.
Our approach is not very different than an owner of a single home but it does impact ALL regardless of their economic situation and might cause more stress on some than others. Overwhelmingly, the residents/owners are quite happy with the running of the condominium association and property. We have very few collection issues for HOA fees.
It is not only the ever increasing HOA fees, but also special assessments that cause residents to revolt. We had a recent HOA fee increase to cover reserves for roof replacement, which will be needed in 20 – 30 yrs. Residents opposed it, saying ” We won’t live that long to see the roof replaced, why should we pay now?”.
In an ideal world, reserve shortfalls etc. would be reflected perfectly in home values. However, my realtor friends inform me that most buyers give cursory thought to reserve funds in relation to monthly dues. Thus, home values get dinged “less” when reserves are short changed. Naturally, this factoid gives rise to questions such as, “Why should I fund future owners? After all, I will be here for only 5 years more, and nothing major will break during that time!” Another example of self-interested rational behavior (“free riding”) getting in the way of collective good. In economics, we term this is the “problem of the commons.”
We had a special assessment to replace roofs around 2000. They asked the unit owners if they wanted to build up reserves for future roof replacements, of course they said no – we just paid.
We are trying to build up reserves for road paving, so we can pay as we go, but it is an uphill battle.
There is also the FHA thing, where they are increasing the reserve requirements by 50% to qualify for a conforming mortgage. They didn’t give condos any time to prepare, just announced it as a new rule.
The roof may not need replacement while I am living there, but it is wearing out every year that I am living there, so it’s not fair to stick a future owner with the bill for something that was wearing out before he/she moved in.
Ah, good point, but of course contributing to the long term viability of the community is part of the deal. That is something people need to realize.
It’s like saying we shouldn’t pay property taxes because we no longer have children in schools. Or why should I pay SS taxes as I may never collect. When I buy insurance I hope I never collect a penny.
This comment is related but slightly off topic. It turns out that you can buy a loss assessments” rider to your HO-6 policy. For a modest fee (< $50 per year for $50K of coverage), you are coverage for special assessments that arise from a “covered claim” such as hail damage. Assessments for regular repair and maintenance are not covered.
In our HOA, we have encouraged everyone to get this rider because our insurance deductible is more than the cost of replacing the roof. (Every insurance firm quoted a separate deductible for damage due to wind/water!) Not a perfect solution but the loss assessment rider will ease the pain when (not if) a major storm / tornado hits and takes out a few of our buildings.
Unfortunately, you can’t buy insurance for normal usage, and that’s where the problem really is.
I agree. I think people get the concept of the HOA before they buy a unit, but they don’t stop to think of the additional expenses that they did not have as homeowners. They probably didn’t have an elevator, maybe no pool and clubhouse, and they didn’t have to pay an administrator. Roof replacement is a huge expense to HOAs, and the costs have gone up much faster than overall inflation. So if they haven’t done a roof in a while, there will be some sticker shock. Some probably deferred or just plain ignored maintenance, so now they expect to do the same.
People need to do a little homework before jumping into an HOA. I bet there are books available to help educate buyers. You know, just like there are books to help people with personal finance.
Right on. What you may save from not owning a home is easily offset. The tradeoffs may not be equal. I know I didn’t think of it, but then our main motivation was one floor living.
Maintenance costs increase for everybody. It really doesn’t matter whether you own in a community with an HOA, a CCRC or stand alone house. Nobody wants to pay more, but the alternatives aren’t appealing.
Of course you are right and that was basically my point.
I purchased a condo in 2005 and lived there since. The condo fees were $450 at the time and are now $1200/month. This calculates to 5% annual compound interest.
Some points to note:
The good news is the monthly fees cover building insurance, maintenance of the pool, gym, landscape, cleaning, utility bills for all common areas, trash/recycling, a building manager and two maintenance guys. Our association is well run and well funded.
The set up here is perfect for aging in place. Supermarket (pantry) across the street, I can see the hospital from my window, and downtown is walkable distance.
Better still I have not raked a leaf or shoveled snow in 20 years!
I love condo living but the costs seem to be outstripping official inflation rates. That being said the costs of owning and maintaining a sIngle family home isn’t cheap either?
Some of our roofs are nearly 50 years old, and the insurance companies haven’t made an issue of it – yet. We have commercial insurance, not personal policies.
We have a little over 200 units / 18 story building and the associations insurance covers the building shell and structure. I assume because of the $$$ involved this is a commercial policy. I was advised by one of the board members of the 20 year requirement. I am not sure if this is a Florida thing for hurricane resilience or a way to keep the premiums manageable?
Sounds like a good location. Even though we are 7/10 of a mile from where we lived for 45 years in a town of 15,000 we can’t get to anything without driving, except ironically the gas station.
Your #1–exact same thing with our condo buildings. The developer set the dues low (subsidized them) to help sell them. And it was our first reserve study that brought this to light.
Yep…home ownership comes with its own unique set of costs. In the last 18 months alone I’ve had to replace 8 Velux window units, and a 12′ x 8′ triple-glazed pane that blew its seals and misted up between the glass panels. The flashing where the wood burner flue penetrates the sunroom roof started leaking and needed redoing, and some coping stones on the roof apex worked loose over winter and had to be re-mortared back into place. The expenses just never stop.
My condo experience was rough. Just 2 months after we movede in the HOA sued the developer for significant building defects. The HOA for the 205 units ultimately settled for about $2.5M.
After using the settlement for most of the defect repairs, the HOA fees went up by 45%. Was that realistic? If anything, it was not enough. Turns out the engineering study never included repaving the roads. So the wave of people selling was incredible.
The larger developments can mitigate the increases across a large number of units. But if you have less than 100 units, hold on for the ride.
We sued the builder and several sub contractors too. Got a settlement, but not significant. Our building, the first built is now15 years old.
We also had a major settlement with the builder for construction defects. We had the repairs done and still have a large slush fund for future work that will be needed.
As I mentioned in DrLefty’s home moving piece, we’re casually browsing the property market at the moment, but we’ve decided to steer clear of developments with HOA fees — mainly because of the lack of control over potential increases. That said, if we did end up buying somewhere with an HOA, I’d want the fees to be realistic and properly justified, with a fully funded reserve rather than kept artificially low just to keep residents happy. The same goes for the contingency reserve — fully funded, not sitting at the bare minimum.
My father-in-law’s experience with his Spanish property is a perfect illustration of why. The HOA board had spent years caving to the loudest complainers and keeping fees unrealistically low for an easy life. When a major issue with the pool eventually needed fixing, there was nothing in the pot — and every owner got hit with a one-time special assessment to cover it. Entirely avoidable, had anyone been willing to do the right thing from the start.
Exactly right–you want to avoid that big, unplanned assessment hit. Increases in dues are annoying but at least you can plan and budget for those.
Our HOA fees increase a flat 10%.
I meant to mention this in my post about selling our condo, but there was an article in the WSJ about 10 days ago about surging condo fees around the country and how they’re hurting condo resales. That’s why we feel very lucky to have sold ours easily at a modest profit (around 10% over seven years, though that doesn’t count sales costs).
We talk about this a lot on our HOA board and do what we can to cut costs. For example, we hired cheaper window washers this year after deciding we don’t need them to climb onto balconies and clean the sliders—we can clean our own sliders. We also recruited volunteers to put up and take down elevator pads for moves and large deliveries, saving the HOA having to pay for that. But for elevators or garage gates going out of service, you pay what you pay. Especially in a community with lots of seniors, those things need to keep working.