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Thu Dec 27, 2012, 08:54 AM

HOA fee questions about my condo association

This seemed like the best group to ask these questions.

Earlier this year I bought a 2 br/2ba condo in a desirable suburb in Florida. When I bought the condo, my HOA fees per month were $325, which I thought was quite reasonable and comparable to what I had seen with other condos in my area.

A month ago, the HOA sent us all a notice saying they had a new appraisal of the property and the cost to repair/replace everything had increased. The last appraisal was in 2008.

We had two options: a) keep the monthly fee at $325 and run the risk of big assessments if the roof caved in, etc.; or b) raise the monthly fee to $492.83 and have no special assessments. The members voted to raise the fee, so now it's set at $492.83. To save you the math, the fee has now gone up roughly 52% in 4 years, or around 13 percent per year.

The buildings and property are roughly 28 years old and in very good condition, from what I can tell.

Questions: 1- Is this really typical nationwide of what is happening right now ?
2- What kind of inflation can I look forward to, in this area (hard question, I know) ?
3- Short of selling my condo in the future, what can I do ?

Thank you very much for your time.

Steve

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Reply HOA fee questions about my condo association (Original post)
steve2470 Dec 2012 OP
JayhawkSD Dec 2012 #1
steve2470 Dec 2012 #2
trof Dec 2012 #3

Response to steve2470 (Original post)

Thu Dec 27, 2012, 10:21 AM

1. Not being familiar with your complex of course, but doesn't sound bad.

Our HOA in California, 35 years old and in well maintained, goes through the same process every four years, and you are fortunate that your association is responsible enough to actually do it. Our fees went up from $185 when we first bought 18 years ago, to $365 currently. There was also a $2500 assessment for the purpose of "restoring the reserve account." However, having gone through that process, they have been stable at $365 for five years.

Three things contribute to the increase. Items wear out that are not included in the reserve funding, items for which funding is provided wear out sooner than expected and therefor are not yet fully funded when that happens*, and the cost of replacement/repair of capital items increases and that increase has to be allowed for.

*The funding in the reserve is graduated, built up ofver the lifespan of the item so that full funding for it occurs when it reaches its expected lifetime. If something is expected to last thirty years but fails after fifteen, then only half of its replacement cost has been set aside at that time.

Our irrigation system was not included, for instance, as the original accountant did not know that it would wear out after thirty years and need extensive replacement of valves and controllers to the tune of $100,000. So we had to spend that money, and then we had to add contributions to the reserve to create the $100,000 to be there 30 years from now when it happens again. The monthly fee had to be increased to cover the costs of repair, and it had to be increased to cover the cost of additional funding of the rserve.

When a condo is built the original HOA is the builder, since he owns all of the units. He is the one setting the monthly fees and he will naturally set them as low as he can to make the units more saleble. There are laws governing how the "reserve study" must be conducted, but there is flexibility within those laws, and it sounds like your association is correcting some "optimistic assumptions" made by the original association calculations. I would not make any assumptions that siimilar increases would become common, and it sounds like you have a responsible board which is taking the hard actions now in order to prevent even harder action later.

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Response to JayhawkSD (Reply #1)

Thu Dec 27, 2012, 10:40 AM

2. Thanks for your time and the information

Yes, I am grateful the board was responsible enough to do it. Of course, I'm hopeful that future increases will be at the overall inflation rate or something close. If they continue to rise ~13% a year, I will be forced out of the complex at some point. Trust me, if they propose a large increase in the next 4 years, I will go to the board meeting and ask pointed questions.

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Response to steve2470 (Original post)

Fri Dec 28, 2012, 08:39 AM

3. I'm sure insurance premiums are going up too.

Our HOA is a single family home neighborhood, not condos.
Until the real estate boom went bust here around 2009, the value of our common property (modest clubhouse and boat launch/dock) increased yearly.
Higher taxes.

With increased property value and rising construction costs our 'homeowners' and liability insurance went up too.

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