Understanding Common Area Fees
As part of an ongoing educational series, we’re presenting this information on Common Area Fees (aka Condo Fees) to assist Unit Owners in better understanding Common Area Fees. This is a topic that most Unit Owners don’t seem to fully comprehend, which becomes apparent when there is any discussion on an increase in Common Area Fees.
People tend to want to make comparisons to other condominium associations’ Common Area Fees, a change in the real estate market value (paid more worth less), think that Common Area Fees should never increase, think that there is a correlation between Common Area Fees and Social Security, wages or salaries, etc. The truth is good budget planning of Common Area Fees is based on the actual or projected operating expenses and reasonable contributions to capital reserves (not less than 10% of the total budget) for future major expenses to repairs or replace roofs, decks, asphalt pavement, concrete patios or walks, sewer pump station components or infrastructure, etc.
Condominium ownership means that costs are consolidated and allocated based upon each Unit Owner’s Ownership Percentage. Liberty Commons has two Ownership Percentages, 0.6850% for a Unit Type 1 and Unit Type 2 (one-bedroom) and 0.8239% for a Unit Type 3 and Unit Type 4 (two-bedroom). It is important to understand that if Unit Owners owned an individual free-standing single-family house not in a homeowner’s association, that their individual costs would be substantially greater, because they are not sharing the expenses with 131 other Unit Owners.
Common Area Fees will increase on December 1, 2017 by 22.1%. 85% of this 22.1% increase is directly attributable to a few resident’s and non-resident’s actions (i.e., unresolved personal injury insurance claims, frivolous legal challenges, the need for security details at meetings, and prohibited items introduced into sewer system, etc.). Had these few individuals not taken the actions that they did and in some cases continue to, the increase in Common Area Fees would have only been 3.3%, continuing the download trend in the annual increase percentage. This is truly unfortunate and unfair that the actions of a few individuals can have such a financial impact, but all Unit Owners including the Board of Trustees are in this together and bear the financial burdens of the expenses to the Association.
The table below is a breakdown of the new budget of what Unit Owners will be paying for each expense category starting December 1, 2017.
|Loan Interest Expense||[c]||$11.54||$13.88|
|Grounds Maintenance Contract||[b]||$40.24||$48.40|
|Grounds Maintenance and Repairs||$25.69||$30.90|
|Irrigation Systems Over Contract||$0.57||$0.69|
|Snow Removal Over Contract||$4.00||$4.81|
|Preventative Meter and Pipe Assessment *||[a]||$0.57||$0.69|
|Preventative Winter Roof Maintenance *||$17.13||$20.60|
|Sewer Pump Station and Infrastructure Maintenance||[a]||$5.71||$6.87|
|Exterminator (Common Areas)||$0.86||$1.03|
|Master Insurance Policy Premiums (Common Elements)||[a]||$25.69||$30.90|
|Master Insurance Policy Deductibles (x2) *||[a]||$28.54||$34.33|
|Insurance Claim Expense||$0.00||$0.00|
|Water and Sewer||[c]||$2.85||$3.43|
|Administrative and Overhead Expenses||[c]||$3.43||$4.12|
|Legal Expenses (Court Fees and Other Expenses)||[a]||$1.43||$1.72|
|Total (Rounded to Nearest Dollar)=||$321.00||$386.00|
[a] Increases directly attributable to a few resident’s and non-resident’s actions (i.e., unresolved personal injury insurance claims, frivolous legal challenges, the need for security details at meetings, and prohibited items introduced into sewer system, etc.). If these or other individuals continue to generate additional expenses for Liberty Commons Condominium Trust, then Common Area Fees will continue to increase proportionally.
[b] Increases due to new grounds maintenance contract.
[c] Increases due to other incremental and normal expense increases and savings. A drastic increase in insurance costs was offset by Liberty Commons’ Board of Trustees by increasing the master insurance deductible to $25,000, which was a prudent change, otherwise insurance premiums and losses would likely have led to non-renewal and/or cancellation. Liberty Commons’ insurance agent articulated Liberty Commons’ risks to the Board and Managing Agent, and the Board made the appropriate decision in this matter. This is a challenge that other condominium association are dealing with as well.
* Required by insurance company to insure Liberty Commons Condominium Trust as well as some contractural requirements for contractors, service providers, etc. Risk and liabilities have become more and more of a priority, and Liberty Commons’ Board of Trustees must take reasonable and appropriate actions to ensure compliance to mitigate our exposures and expenses.
If these few individuals who are generating these unnecessary and burdensome expenses would cease and desist, then increases in Common Area Fees could have lesser impact on budgets and Common Area Fees in coming years. That is something that will require the cooperation of all Unit Owners. Liberty Commons’ Board of Trustees cannot fix their issues alone, it requires a community-wide effort. These individuals are hurting themselves as well as all other Unit Owners, whether they realize or believe this fact or not.
Payment of Condominium Obligations
Unit Owners should update their automatic deposits to the payment processor, so that their December 1, 2017, payment is correct and not late. Unit Owners should review Article 9 — Payment of Condominium Obligations.
Effective Date of Increase In Common Area Fees
Liberty Commons’ Board of Trustees have approved this budget for Liberty Commons Condominium Trust’s Common Area Fees will increase and be effective on December 1, 2017. Liberty Commons’ Board of Trustees stated that they would provide a minimum of 30-days notice and has instead provided 57-days notice so Unit Owners can plan accordingly.