Condo 101 - What is a Condominium?
Are you unsure or a little confused of exactly what owning a condominium entails?
The following information was compiled in an effort to clarify any misconceptions. The Townes of Gloucester is a condominium community.
Condos might look like a lot of other types of real estate you may have heard of—like apartments, co-ops, or townhouses—but condos have their own distinct features, rules, pros, and cons.
Information collected from the following articles: https://www.realtor.com/advice/buy/what-is-a-condo/ and https://www.bankrate.com/real-estate/what-is-a-condo/.
How condos work
Since a condo is part of a larger residential structure (although "detached condominiums" also exist), condo residents typically share certain common areas and amenities with their neighbors.
So what does this mean for a condo owner? It means you and your neighbors might park in a common parking lot or garage. You might use the same rec room or roof deck, or bump into one another at the condo complex's swimming pool or gym.
Furthermore, these shared areas and amenities are enjoyed by all condo members without the need to maintain them on their own. Instead, condo owners pay dues to a board (typically made up of elected condominium owners) who then handle the hiring of landscapers, pool cleaners, and other professionals for anything that must be maintained or fixed, from faulty elevators to gopher infestations in common areas.
Homeowners Association (HOA)
A homeowners association (HOA), whose members are the unit owners, manages the condominium through a board of directors elected by the membership. Among other things, the HOA assesses unit owners for the costs of maintaining the common areas, etc. That is, the HOA decides how much each owner should pay and has the legal power to collect that.
In general, there are monthly HOA common fees and they go up over time to address building maintenance costs and any added amenities. It’s important to factor in the monthly cost of HOA fees into your home-buying budget, especially in more expensive housing markets. Keep in mind too that condo associations can enact special assessments on all homeowners in the development for unexpected expenses or even new amenities.
How much are condo fees, and what do they cover?
Average condo fees range from around $100 to $700 per month, although these fees can go much higher based on what amenities they cover. If the condo complex has high-end shared features such as a swimming pool, gym, and spa, condo fees can be several thousand per month.
Generally, condo fees pay for the maintenance of any amenities outside your personal living space that you share with your neighbors.
“Condo fees are your percentage share of the costs to run the building as a whole," explains Janice Pynn, president of Simerra Property Management. And in case you think your condo fees are too high, know this: No one pockets a cent of your checks or is getting rich off condo dues. “They are not a profit source for building management; in fact, each building is registered as a nonprofit corporation," Pynn points out. In other words, these fees go solely toward enhancing the value of your real estate, which is a good thing!
Here are the services and amenities you can expect your condo fees to cover:
Interior maintenance: Condo owners share the cost of maintaining common building areas like parking structures, storage rooms, laundry rooms, game rooms, fitness centers, saunas, and hallways, as well as mechanical systems like heating, cooling, electric, gas, plumbing, and elevator maintenance. If a crew comes regularly to clean the common spaces, its fees are also included.
Exterior maintenance: Condo owners also share the cost of exterior common areas like fences, walls, gates, pools, landscaping, and window cleaning, and seasonal expenses like snow removal, winterizing, and cleaning out rain gutters. If a gardening crew comes regularly to take care of the landscaping, its fees are also included.
Insurance: Most condo fees include a homeowners insurance policy that covers exteriors and shared common areas. Depending on where the condos are located, the insurance policies might also cover flood and/or earthquake damage. The nice thing here is that condo owners need only to purchase insurance policies that cover the interior of their home and their possessions.
Reserve fund: There are expenses that don’t come up on a monthly, or even an annual, basis that will need attending to, so a well-managed condo board will charge owners a certain amount per month that will go into a reserve fund. It would cover things like paving, reroofing, replacing water heaters, exterior painting, hallway and lobby flooring and redesign, and more.
What is an assessment?
In addition to your monthly condo fees, special assessments might arise. Every once in a while something big (e.g., a roof or an elevator) gives out, and there aren't enough reserve funds to cover it. In that case, the condo owners will have to pay an extra fee for these additional expenses, typically tacked on to the usual monthly condo fees in small amounts until the assessment is paid off.
At times like these, it’s best to remember that, as with any type of homeownership, unforeseen expenses arise, and making the necessary repairs is in your best interest. In other words, you get out what you put in.
In addition to collecting dues, a condo board also enforces rules and regulations that owners agree to abide by when they purchase their condominium. The board can regulate everything from the size and number of pets you’re allowed to the ages of the people living in your unit. Retirement condo communities, for example, can legally require that all long-term residents be over the age of 55.
So if you're looking into buying a condo, make sure to study up on the condominium association rules (called covenants, conditions, and restrictions, or CC&Rs) and fees.