April 23, 2020| Lester Yat
The tug-of-war is all too familiar. On one side, a long list of inevitable projects; on the other, understandable desires to keep monthly fees low. And smack in the middle stands the association board, burdened with the knowledge of lurking repairs but sympathetic to the budgetary restraints of fellow owners.
Unfortunately, when many condominium developments first hit the market, a low monthly fee was an attractive element of the marketing strategy. Lured by the low fee and concept of “care-free living,” buyers settled into homes without thinking about the repairs and replacement projects that were sure to be needed someday. And for years, board members may have been unwilling to raise fees to realistic levels — recognizing that such a move would also raise the ire of their neighbors.
But like it or not, the day of reckoning eventually arrives, creating even greater angst and ill-will within a community when owners are faced with special assessments. So, what’s a board to do?
Fair is Fair
Clearly, the initial buyers in any development benefit from all those new elements: roof, siding, decks, roads and more. With a little luck, fees will remain low, and the building won’t wear out before the owner decides to move.
But wait! Hasn’t that owner “used” the roof shingles, deck railings, and parking lot for years? Think of the family that buys his unit — and six months later is hit with an assessment of several thousand dollars because the roofs throughout the community are leaking and need to be replaced.
And whether new or entrenched, owners may be unable to write a check for those huge assessments, or even take on the burden of a loan to cover the capital costs. The result can be just what the association needs the least: foreclosures that lead to vacant units and even less income for the community coffers.
If board members fear the wrath of owners faced with rising monthly fees, imagine the firestorm that will be unleashed when bills for thousands, or tens of thousands, of dollars arrive in the mail. Sadly, they’ll have no one but themselves to blame. After all, the board has a fiduciary duty to act in the best interest of the association as a whole — even when that duty makes them unpopular.
So how does the board, pulled in one direction by the inevitable repairs and in the other by budget-conscious owners, perform that legal duty?
A Dose of Reality
When given the opportunity — and a good lesson in associating budgeting — even the most recalcitrant owners are likely to see the wisdom of spreading capital costs over time and over the long-term pool of neighbors.
Fortunately, there are resources — such as organizations like the Community Associations Institute — available to boards that want to learn about budgeting and capital expenditures. These resources can also show owners the wisdom of creating and funding a solid reserve account and budgeting for anticipated and unanticipated costs. At a condo community, after all, “rainy days” can take the form of everything from storm damage to unexpected legal fees.
When a fee increase is needed, boards should not be afraid to lay out the community’s situation, alerting owners to impending capital expenses and plotting a realistic approach to dealing with them. Transparency is key; an open dialogue with owners about the community’s current situation and upcoming needs can avoid conflict down the road.
Information about the inadequacy of the developer’s fee schedule, the lifespan of various building elements and current costs for repairs and replacements can lay a good foundation for a discussion of fee increases.
Raising monthly fees is never easy, and rarely popular. But board members aren’t elected to be popular; they’re elected to make sound decisions that benefit the entire community. Even when those decisions mean hitting their neighbors in the wallet.