Q: I own a condo that I rent out. The association charges me $100 per year as an “annual administration lease fee.” Isn’t this creating two “classes” of owners in the association?
What do you think? Thank you for your time and feedback.
A: We’ll break your question down into two parts: fees and whether the association has created two classes of owners.
On the issue of fees, they’re everywhere. Association management companies now have a whole list of fees for everything, including bike fees, pet fees, key and fob fees, garage door opener fees, duplicate copies of association document fees, leasing fees, home transfer fees, home sale processing fees, and many more, such as a long list of late fees and other homeowner fines.
Some of these fees and fines go directly to the homeowners association, while others are paid to the management company. Years ago, management companies would have charged the association either a flat fee or a fee per unit owner. But competition has served to unbundle fees and push management fees lower.
But these “lower fees” come with a catch: Companies charge individually for all the services that were once included in the overall management fee. The result is higher overall fees.
In addition, homeowners associations don’t want to raise their monthly assessments by too much each year. But it’s relatively easy to add fees that only apply to some unit owners.
Homeowners associations have great latitude and discretion in running their associations. While Sam has seen a number of clients who do get upset at the fees, associations these days seem to add more fees each year.
On the issue of two classes of owners, we doubt that most people would truly see owners who rent their units as a different class. Other than the annual rental fee, you or your tenant get all the same ownership rights as everyone else. And, while you do pay an extra fee, it probably does not rise to a level to truly create a second class of owners any more than the annual fee some associations charge for those owners who elect to use storage lockers, bike rooms or other items individually charged to homeowners.
We get your point: The fee is likely a profit center for either the management company or the homeowners association. So, attend the next board meeting and bring up the issue. Ask the association to take another look at the fee structure. Many associations levy not only a one-time leasing fee but also a fee when the lease renews. You should check to see whether you’re paying this fee annually.
We welcome comments and anecdotes from our readers about association fees. Let us know if you have had success challenging your association on any fees charged.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (Fourth Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them through her website, bestmoneymoves.com.
©2022 Ilyce R. Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency, LLC.