Owner exposure to condominium associations and their fees
This article answers the second part question asked in the article " What expenses come with a condo?".
Second part of the question:
What about association assessments for renovation, etc. What exposure does an owner have to their "whims". I would like a good handle on these type of dynamics. Thanks, ............just a brief overview would be great"
Answer:
Now, let's review this idea of condominium associations and their “whims." Contrary to popular belief, most condominium associations are not evil organizations created to rob you of your hard-earned money. Their directors don’t sit around all day thinking of ways to purposely raise association fees or charge special assessments just to fill their coffers. In reality, it is quite the opposite.
Most condominium associations are governed by an elected board of directors made up of actual condominium owners from within the community itself. This board works closely with a management company in order to assure the association’s everyday operations run smoothly. In fact, most Panama City Beach condos have excellent management companies that do a great job handling the needs of all condominium owners.
Now, to be honest, I must admit that all is not perfect in the condominium association world. There are associations that make mistakes. We have also seen management companies demonstrate horrible customer service towards owners. We have also seen instances where these management companies have employed rental desk staff who seemed to have little regard for their guests. These rare instances have been most common during the first year after construction when a condominium transitions from being developer-owned to an independent community. Again, these are exceptions to the rule. Most of these situations have already been remedied by improved customer service and/or complete management staff replacement.
If you actually break down all of the bills that are covered by association fees you will see that you are getting quite a lot of service for the money. When you add up the costs for insurance, water, sewer, landscaping, and pool maintenance alone, you will quickly realize that association dues really aren’t as outrageous as they sometimes appear to be. Fees vary from condominium to condominium as every development has different building styles and amenities which contribute to its operational costs. You should expect to pay more if you purchase a unit in a resort-style development. The building style and amenities offered contribute to such higher costs, but the extra rental dollars brought in by such a place typically make up for the slightly higher association fees.
Although there usually aren't many surprises that come up in a condominium community’s budget, there are times when condominiums do need to charge a special assessment. Out of the few condominium associations in the Panama City Beach real estate scene who have had to charge an assessment, the majority have broken it out into payments to lessen the immediate financial burden on the owners. As long as you keep your reserves up to date, associations should have the money needed for major building upgrades (elevators, roofs, etc.).
There do exist a very small number of condominium communities out there that have gotten themselves into financial trouble. Even in these rare situations, these associations raised association dues significantly and should have the situation remedied in the next few years. Finding an agent who’s “in the know” on all the various associations and their financial standings may help you to understand each buildings situation and how it would affect you as a potential buyer.
We have all seen the news of condominium associations becoming financially insolvent. This is a rare occurrence, especially with Panama City Beach condos for sale. I am happy to say that I am not aware of any gulf front condominium communities within the Panama City Beach area that have any issues of that sort. We have, however, witnessed a number of associations increasing association dues in order to compensate for late-paying owners. Most have already adjusted their budgets by now and have accommodated for this issue, thus allowing for additional time to finish clearing out foreclosure and short sale inventory.
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ipro-global
said:
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... Really awesome posting, with great knowledge. For these type of posting i am searching from last two months |
shannan
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... Really awesome posting, with great knowledge. For these type of posting i am searching from last two months. |
curmudgeon
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... as a prospective buyer, the issue for me is not whether the negotiated rates for services are reasonable (I agree that they usually are competitive). The cash outflows for an association are fairly predictable. My concern is how to quantify my risk exposure around cash inflows - are all of the owned units paying association dues? what about developer-owned units that have not been sold? Am I going to be hit with a shortfall assessment if owners begin defaulting on their dues? Your article was informative, but I would like to know more about what happens in a revenue shortfall, and how/whether I can limit my exposure. |
B
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... The insurance still has to be paid and the pool still has to cleaned (plus many other required expenses) even if a bunch of units are in default, so the association would have to hit up the rest of the units to for the shortfall unless there is a sizable reserve fund which newer complexes may not have had time to build up. |
Chris
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... Curmudgeon, You are correct in your concern. You want to have a clear understanding of the number of condos in a particular condo that are not current on their association dues. I have yet to see a bank or developer who is not current on association dues. I have seen a few buildings where the number of owners not current on dues was over 10%. It isn't a huge problem, but the associations typically raise association dues for every to make up for the shortfall in revenue. |
Penny
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... We purchased our first unit this year and did a LOT of research on the condo assocs and fees. In our research, we found that a lot of the fancier places have so called "amenities" such as golf courses, restaurants, spas, bars/clubs, game rooms, etc. and these are supposed to bring in higher rents/revenues and are supposed to justify the higher dues. It is a bunch of BS from what I can see and apparently these people have NOT ever been in business. It would seem that each of these separate entities (the hair salon for example should be paying rent to offset the cost of it) should serve to LOWER the condo fees, not increase them! It is the same with the big conference/meeting rooms, surely whomever rents those should pay for the upkeep & maintenance, but the homeowners pay for it and the original builders reap the benefits and rents of those! The bylaws are supposed to not allow for a "profit" from the amenities which is junk, the bylaws can allow for any excesses to be put into trust but its a bunch of one hand washing the others and most of the hoa's are SERIOUSLY sticking it to the owners thanks to the developers. The developers are making money off of the amenities, the owners are paying all of their expenses and the rents/fees they collect are all strictly profit. |
John
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... Hi Penny, Thank you for posting your thoughts on this subject. I’m also interest in purchasing a condo. I did some research couple months ago and had noticed this too. The amenities are a separate entity and the developer owns them, not the condo owners. Owners end up paying fees to the developers for usage/upkeep all the amenities. This is one of the reasons I hesitate on buying a condo. You probably did a lot of research on different condos at PBC. Could you list some of your favorites that you like or think has the best value for a vacation home and investments? |
