Going Up and Not Coming Down
Saturday, June 3, 2006
Condo fees can vary dramatically, based on a building's location, age and amenities, among other factors. But fees tend to have one thing in common: They go up. And lately they've been going up more.
"Utilities and insurance have [raised] condo fees into a whole new stratosphere," said Katie Allardyce, senior vice president for CFM Management Services in Alexandria, which manages about 45 communities around the Washington area, most of them condominiums. Before a few years ago, she said, fees mostly increased by 2 to 3 percent a year, just keeping pace with inflation. Now, jumps of 5 to 15 percent are not uncommon.
Consumers are already feeling the pinch of rising interest rates and higher prices for gasoline and other goods. Property taxes are rising with tax assessments. Condo fee increases add to the budget strain -- especially for people who stretched to buy their units or those who are on fixed incomes.
Condominium owners own their units individually but own in common shared areas such as roofs, lobbies and outdoor space. Fees go to fund owners' common needs: maintenance, landscaping, utilities for shared areas, any amenities. Fees are generally set by the condo association board, made up of owners and elected by owners as well.
People have different reasons for how they want fees set and how much they want to see them go up. Stan Karson, former president of the association governing 1510 Condos in Arlington and a 26-year resident, said people who have lived in the building the longest tend to be more skeptical about raising fees. Karson said fees in the 40-unit building are roughly $250 to $350 a month. People who are looking to sell soon may want lower fees, Karson said, but large reserves of cash also tend to be attractive to buyers.
Stephen Bupp, president of Columbia-based community association manager Condominium Venture Inc., said that generally, his property management company will present the board with a budget and a summary of the fees it will take to fund it. Board members review the budget and then decide what services or improvements will be funded and at what level. Most of the budgets for properties his company manages are more than $1 million. "Pretty large budgets are being decided on by a volunteer board of directors," Bupp said.
In cases of condo constructions and conversions, the developers set the fees. As people buy into the building, they take control from the developers, eventually forming a board and setting their own fees.
And fees may tend to be lower in new or newly converted buildings because a developer has an interest in keeping fees low. Tom Welch, a real estate agent with Brian Logan Real Estate in the District, said he has found that fees increase once owners take over control of the building from developers and see what kinds of amenities they need.
Cassie Cataline, vice president of marketing for developer KSI Services Inc., said developers do have an interest in keeping fees low, but no more than anyone else. "It's in everyone's best interest" to not overpay, she said. "KSI does not artificially reduce fees in any way." Cataline said that, for example, residents could decide they want a gate manned 24 hours or a pool open more weeks, making fees higher. But fees will go up no matter who is in charge of setting them, she pointed out.
Elliott Simons, president of the association for Cross Fox Condominiums in Columbia, has dealt with increases of about 15 percent in each of the past two years, since management of the complex was taken over by Bupp's CVI. Previous management companies had not suggested significant increases, Simons said, so reserves were low and some costlier maintenance had not been taken care of. "All of a sudden, we got whomped with this big 15 percent increase," he said. Considering and passing the large fee increase was "quite an adventure," he said.
Simons said older people in Cross Fox, a 244-unit community built in 1969, had trouble dealing with the fee increases. "I was accused of kicking people out on the street because they couldn't afford it," he said. And those who don't go to the association meetings where increases are explained take them the worst, he said. "For them, this condo fee is a mystery, a big black hole."
Two of the main culprits for higher fees are utilities and insurance costs, which together generally make up 60 percent of a condo association's budget, Allardyce of CFM said.