CONDO FEES, FINANCIAL STATEMENTS, AND SPECIAL ASSESSMENTS
Condo living is perfect for many people.
Congratulations on your decision in considering to purchase a condo!
Condo living is perfect for some folks, especially if you do not want to shovel snow, cut grass or think about when and how to replace a roof or deal with plumbing issues. These expenses, referred to as common area expenses, are the responsibility of the condominium association. The condominium association pays these expenses out of the operating budget, maintained by the collection of condo fees.
It is important that you know condo fees are not included in your mortgage payment and need to be considered when budgeting your monthly expenses.
Condo fees will vary depending on the size of your unit, what the complex has to offer, for example some have pools, fitness facilities or security. A portion of the fees collected are used for the operating budget and a portion is set aside as a contingency or reserve fund, that condominium associations are required to maintain, for the management of capital expenses.
Every association is different and it’s your job to know what is covered by the association as a whole. It is important to obtain the condominium documents including the rules and regulations as well as the current financial statements before making your purchase. Condominium documents are required by most lenders as a part of the mortgage application. You will want to see healthy financial statements and if there are any special assessments in place or projected for the near future (a condo review company can provide a full report – for a cost).
A special assessment is an amount of money needed in order to pay for a project or outstanding debt that was not part of the annual budget. For example, a major leak in a roof that requires thousands of dollars to repair or a mechanical system like a boiler may fail and need to be replaced. The payment of the special assessment is calculated (like the condo fee) by each unit owner’s interest in the common area. The amount may be requested immediately from each unit owner or may be broken into installments depending on how the association decides to handle it.
Remember you are in charge when writing an offer to purchase and educating yourself on the strength of the condo association is an important step to ensure you are comfortable removing conditions to complete the purchase. Feel free to contact the office if you have any questions.