WHY ARE MY HOA ASSESSMENTS SO HIGH?

Whether you currently live in a condo or are thinking about buying one, you’ve probably wondered whether the HOA assessments are reasonable. First off, what are assessments? If you live in a building or community with shared amenities—such as a condo, co-op, or townhouse—you are responsible for covering your portion of the costs of those shared amenities. Your homeowners association (HOA) will manage these expenses and bill you on a regular basis, generally monthly. Your unit is assessed based on your percentage of ownership, so the assessments of a studio condo will be less than the assessments of a three-bedroom unit in the same building.

There are a lot of costs associated with maintaining a building. Your assessments may be used to pay for building insurance, snow removal and landscaping, preventative maintenance, communal spaces, property management fees and building staff, and some utilities. A 500 unit building that has door staff, elevator, fitness center, and pool will have more monthly costs than a four unit building with a small front yard. In Chicago, the city only collects garbage from single family homes and residential buildings with four units or less. For larger buildings, the association will have to pay for private trash removal. Some large buildings will use their size to negotiate a discounted rate on internet or cable for all residents, which is then included in the monthly assessments. The wide variety of building amenities means that it is important to pay attention to what is covered by the assessments when comparing units.

In addition to recurring bills that keep the building running, your association should be building up the reserves for high cost projects, such as replacing the roof or tuckpointing the masonry. A condo association may do a reserve study to see what upcoming costs need to be incorporated into the budget. Although it can be tempting to keep assessments low and just deal with problems as they arrive, preventative maintenance is cheaper than deferred maintenance.

If an association doesn’t have enough in the reserves, then a special assessment may be levied to cover the costs of a large or unexpected repair bill. A special assessment is in addition to your regular assessment schedule and may be due all at once or spread out into installments. If there is expensive maintenance on the horizon, an association may raise the monthly assessments or do a thirteenth month assessment so that they can avoid a special assessment. With a thirteenth month assessment, owners are billed for an extra month once a year and the proceeds are added to the reserves. This is often easier for owners to budget for than a special assessment.

While it is tempting to choose a property with the lowest possible assessments, that is not always the cheapest choice in the long run. If your association doesn’t have the funds to maintain the building, then you may be hit with a special assessment. More amenities generally mean higher assessments, but if you are going to enjoy those features that may be a good value for you.

The way to find out if a building has healthy finances is to ask questions and do your research. For prospective buyers, the HOA meeting minutes will generally be provided during the attorney review period and often include discussions about current and future repairs. For current owners, get involved and attend the HOA meetings so you can stay on top of what is happening in your building. Your assessments are well spent if they are used to maintain the building and build up a healthy reserve fund.