When considering a budget for moving into a condo, buyers should consider the unit’s maintenance fees as well as the amount due for the mortgage each month, as condo fees are a recurring expense for all condo owners.
Condo Fee Basics
While every condominium unit’s bylaws are different, most condo owners pay maintenance fees each month. They pay these fees to the condominium’s homeowner association or a private management firm, and the amount due should be budgeted as a fixed cost each month. Condominium units provide a large amount of communal property to their owners, including the building’s exterior, interior systems, grounds and other amenities like pools and club houses. Condominium fees cover the maintenance and repair of these community fixtures.
Low Fees vs. High Fees
The level of fees a condo owner can afford is often a matter of his personal finances, although condo units with low monthly fees may not necessarily be a better bargain than those with higher fees. Consider the extra amenities, such as the use of a pool or on-site workout facility and the costs of using those elsewhere. Additionally, units where fees are set too low may not generate enough income to maintain the property, a situation that may adversely affect the value of an investment in the condo.
In extreme circumstances, a condominium board’s may be forced to resort to mandatory special assessments – one-time fees in addition to monthly fees – to cover emergency expenses. This may happen in the event of an emergency that normal insurance doesn’t cover, such as flood damage, or because the association’s reserve funds aren’t sufficient to cover large maintenance issues. Before purchasing a condo, buyers should investigate reserve funds and management issues that may lead to additional costs down the road.
Condos vs. Co-ops
Although ownership issues differ significantly between condominium units and co-ops – condo owners own their unit, while members of a cooperative purchase a share of the company that owns the building – there’s little distinction in everyday life between the two. Co-ops also require monthly maintenance fees, and the size of the fees hinges on the facilities and the cooperative’s needs, much like the factors that shape a condo’s fee scale, rather than the method it organizes its ownership arrangements.
- Bankrate.com; Condo or Co-op? What's the Difference?; Wayne Grover; July 2003
- DJT Real Estate: HOA Association Fees
- National Council of State Housing Authorities. "FHA Issues New Review Requirements for Condominium Loans." Accessed May 11, 2020.
- First Heritage Mortgage. "What Is a Non-Warrantable Condo?" Accessed May 11, 2020.
- United States Government. "Code of Federal Regulations: Title 24, Housing and Urban Development. Part 234, Condominium Ownership Mortgage Insurance." Accessed May 11, 2020.
Wilhelm Schnotz has worked as a freelance writer since 1998, covering arts and entertainment, culture and financial stories for a variety of consumer publications. His work has appeared in dozens of print titles, including "TV Guide" and "The Dallas Observer." Schnotz holds a Bachelor of Arts in journalism from Colorado State University.