Buying a Condominium? Carefully Assess the Related Association Fees First

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by JoAnn Sabas

Are you like many customers of The Milford Bank who are looking to downsize from a large single-family home or start small with a first home? Then perhaps a condominium is right up your alley. If so, you may be becoming familiar with homeowner’s association agreements, which list mandatory fees for maintenance, capital improvements and other items for these housing units. These documents can be quite complex and detailed to ensure a uniform appearance among the many members’ homes.

What this means is that you should look beyond the price tag on your condo when determining whether or not you can afford the overall costs. Remember, some of the association fees may not be expenses you would necessarily incur as the owner of a single-family home. So, to avoid unforeseen costs that could put your financial stability at risk, let’s take a look at both typical inclusions and things to be wary of in these agreements.

To begin, standard homeowners association agreements generally charge maintenance fees for property aspects that are communal, such as landscapes, elevators, swimming pools, clubhouses, parking garages, fitness rooms, sidewalks, security gates, roofing and building exteriors. Depending on the neighborhood, the cost of living and the quality of the residences, these fees can range anywhere from $50 a year to several thousand dollars each month. Highly valued properties or locales excluded, you could generally expect something in the $200 to $400 range. In addition, a homeowner’s association may levy one-time fees, commonly referred to as “special assessments,” on members to cover major expenses, like the repair of a roof or a new HVAC system.

Conversely, here are some potential costs that could sour the deal for you:

  • Pre-existing conditions. Review your association’s rules before diving into the purchase of your condominium. You may find that you’ll be held responsible for a prior owner’s failure to maintain the unit. To avoid a nasty surprise upon moving in, confirm that your property is already in line with all association building, maintenance and appearance guidelines. After all, you don’t want to get started on the wrong foot with your residence’s governing body. Buying into an undisclosed problem will likely cause tension with board members or neighbors from the get-go. Also consider your own personal attitude when it comes to adhering to regulations about the type of flowers you can plant or colors you can paint. Some homeowners place great store on such freedoms; if this is you, be sure to read the fine print.
  • Fee assessment and funding. Does the association have catastrophe insurance, or will you be expected to pay out of pocket for damages caused by a flood, hurricane or tornado? How does the association determine fee increases in general? Can you obtain minutes from previous meetings? Is a record of dues and fees kept and maintained, and is it accessible? What do the association’s financial reserves look like? Consider that 70 percent of association-governed communities are underfunded, with most only being 52 percent funded. These are all questions to have answered before, not after, signing on the dotted line.
  • Amenities. You are going to be on the hook for amenities such as clubhouses, tennis courts and pools whether or not you use them.

The Milford Bank is in the business of ensuring the future financial health of our clients. Never hesitate to consult one of our financial professionals before making a home-buying decision.

The Milford Bank is an Equal Housing Lender.