Did you know that, as of the third quarter of 2022, the homeownership rate in the United States sat at 66%? That’s an increase of 0.6% from the first quarter of the same year.
While most U.S. homeowners live in and own a single-family house, others opt for condominiums. Indeed, about 28% of the U.S. population now reside in community associations. This includes condominiums and homeowner’s associations (HOAs).
The rise in condo ownership is primarily due to affordability. Condos are often more affordable than single-family houses, even with condo association fees.
So, what exactly are those fees for? Are they even worth paying?
Below, we’ll take a closer look at condominium association fees and where they go, so read on.
Condo Maintenance and Repair of Common Areas
A condominium is a type of common interest development (CID). CIDs are real estate property developments with stringent Covenants, Conditions & Restrictions (CC&Rs).
CC&Rs help keep the values of individual units and the entire complex high. They do so by outlining what unit owners can and cannot do. They also give condo associations the right to collect fees for common areas.
Common areas comprise most of a condo building’s premises, except the individual units. So everything apart from the owned units (and their interiors) are common areas. Some examples include:
- The condominium building and the lot it sits on
- Parking lots (except those purchased by homeowners)
- Electrical and plumbing systems outside a condo unit
- Elevators, stairways, and hallways
- Landscaping, swimming pools, and fitness centers
- Roofs and windows
- Utility lines serving the common areas
If anything in those areas breaks, the condo’s Board of Directors (BOD) must pay to have it fixed. Likewise, the BOD must have funds for the property maintenance of the common areas. These funds come from condo association fees.
So, fees for upkeep and repairs are worth it as they help keep most of the condo building in excellent condition. They also help retain or improve the complex’s property value.
Maintenance also helps keep common areas safe from events like fires. For example, faulty electrical systems are the third leading cause of house fires. Condo associations can prevent this by investing in regular electrical system maintenance.
Another example is a burst plumbing pipe that can cause an indoor flood. This is often preventable with proper maintenance and pipe insulation. Thus, it’s also a necessary expense partly covered by condo association fees.
Condo Association Insurance
Condo association insurance covers the common areas and amenities in a condo building. It’s also called a master condo or HOA master insurance policy.
This insurance policy covers accidental damages to common areas. For example, suppose your condo building has a swimming pool, and part of it got destroyed by a storm. The master condo policy helps pay for its restoration or repairs.
Condo association insurance also provides coverage against liability costs. These can arise from someone getting injured on the common areas’ premises.
An example is if a tenant or guest sustained an injury after tripping and falling in the lobby. If that person decides to sue, the master condo policy helps pay for the legal costs.
Condo association insurance differs from individual condo insurance. The former is only for the common areas and shared amenities of the condominium. The latter is a policy each unit owner can buy for themselves.
Individual condo insurance is much like a homeowner’s insurance policy. It covers the condo unit owner, the interior of the owned unit, and the unit’s contents.
Garbage Collection and Recycling Services
In the U.S., city and municipal governments require all residents to pay for garbage services. So, whether you own a single-family house or a condo unit, you’re responsible for this expense.
The chief difference is that homeowners pay dues directly to their service provider. This could be the city government or an authorized private garbage collection service.
Many condominiums rely on municipal garbage removal services. They do so to ensure prompt and regular trash collection and proper recycling. However, these aren’t free, so a condo’s BOD uses part of the condo association fees to pay for them.
Water and Sewage Services
Part of your condo fees goes toward water supply services used by the condo’s common areas. This includes the water used for landscaping, restrooms, and building cleaning. Note that this is different from your individual condo unit’s water bills.
Condo fees also help cover wastewater and sewage service bills. Most condominium buildings use public sewer systems for this. After all, municipal facilities often cost less than a private septic system.
If your condo building has a private septic system, part of your fees help operate and maintain it. However, your dues may be higher than those of unit owners in condos using public sewers. After all, owning, using, and maintaining private septic systems often cost more.
Energy Use in Common Areas
Common areas in a condo consume energy to power lights, heaters, and air conditioners. Elevators and security systems also use electricity to run. All condo unit owners chip in to pay for these systems’ operation.
Pest Control for Common Areas
According to federal data from 2021, 14.8 million U.S. households saw rodents in their homes. It also noted that 14 million residents reported encounters with roaches.
Fortunately, most condo complexes implement regular pest control for common areas. The money used to pay for these services comes from the condo association fees paid by unit owners.
Just remember that condo fees only cover pest control for common areas. Unit owners must pay for their unit’s pest control out of pocket.
Still, pest mitigation of common areas is crucial since pests come from the outdoors. The exterior of a condominium building, in turn, is a common area.
Landscaping and Lawn Care
Speaking of pests, were you aware that pest insects account for only about 1% to 3% of all insect species? While that may seem small, remember that there are at least a million known insect species.
Some of the most common pestiferous insects are beetles, ants, moths, and wasps. Most feed on plant tissue, destroying lawns and killing trees if uncontrolled.
Since most condominiums take pride in their impressive lawns, they don’t want a non-pro to take care of it. So instead, they hire professional landscapers for lawn care, maintenance, and pest control. And because the lawn is a common area, each unit owner has to chip in, through condo fees, to keep it healthy and pretty.
Maintenance of Amenities in Common Areas
One of the most attractive features of condo living is that it gives access to a long list of amenities. These include playgrounds, sports courts, clubhouses, pools, and fitness centers, to name some.
Since most, if not all, unit owners can use those facilities; then they also must help pay for their upkeep. They usually do so by paying their condo association fees.
Reserve Funds
At this point, you may have already noticed that most condo fees are for regular maintenance. However, some well-managed associations set aside part of the fees for reserve funds.
Reserve funds give associations the financial ability to cover non-routine maintenance projects. For instance, they may go toward fixing or renovating lobbies or hallways. They may also be for balcony, terrace, or parking garage renovations or repairs.
Community Association Management
The BOD of a condo association generally consists of unit owners themselves. Other homeowners elect them to oversee the condo’s overall management and maintenance. Board members, in turn, voluntarily take up their positions.
Since condo associations are often non-profits, their BOD members don’t get paid. On the contrary, BOD members also pay condo association fees themselves.
While BOD members hold positions, it doesn’t mean they specialize in condo maintenance. Instead, they may be experts in their fields that don’t have anything to do with building upkeep.
For that reason, most condo associations need to hire management professionals. These employees make up the condominium’s property management department. This team handles most of the condo’s operations, from maintenance to repairs.
The property management team’s salaries come from condo association fees.
Property managers hire other employees to help keep unit owners safe and secure. These include security personnel, utility workers, electricians, plumbers, HVAC technicians, and maintenance staff. Some of your condo fees go toward paying for their wages or salaries.
That’s What Condo Association Fees Are For
As you can see, condo association fees cover many expenses, from repairs to insurance. However, remember that they generally only cover common areas and shared facilities. So, they’re expenses on top of your other dues, such as your unit’s utility bills, insurance, and upkeep.
Condo fees may be annoying to many unit owners, but they’re worth it for the most part. Be careful, though, as some condominiums charge hefty fees of up to $1,000 monthly.
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