Condo owners or potential owners should understand the differences between condo fees and assessments. In addition to the costs of buying the condo, owners generally pay fees and may pay assessments from time to time. Both of these charges can create substantial costs for the condo owner. By understanding the purpose of these costs of condo ownership, a buyer can take steps to reduce her risk from these fees.
Condo fees are a normal part of living in a condo. Condo associations collect fees to fund maintenance and repairs of the condo’s common areas. Fees may pay for a variety of things, including yard work, housekeeping of hallways and utilities in the common areas. In some condominiums, fees may pay for some or all of the owner’s utilities as well. Condo associations also use money from fees to pay for the building’s insurance, which covers damage to the exterior or structure of the building. Owners pay condo fees on a set schedule, such as monthly or quarterly.
Condo associations use assessments to cover major repairs or other costs. For example, if the building’s roof needs replacement, the association may place an assessment on the owners in the building. Basically, each owner must pay a share of the cost of replacing the roof. Another assessment may arise from the condo losing a lawsuit. If a visitor falls and suffers an injury with the medical costs required for care surpassing what the condo’s insurance covers, the condo association may place an assessment to cover these costs. Owners pay assessments on an as-needed basis. Years may pass without an assessment, but at other times owners may receive multiple assessments in one year.
Avoiding Assessments and Fees
To help avoid assessments, potential buyers should avoid buying into a dilapidated building. Though buyers may not readily see all a building’s problems, a poorly maintained or old building may be more likely to have impending assessments. Once he has bought into a condo, the owner should participate in association meetings to be part of the process that determines the need for increased fees or assessments. If an owner notices potential liability issues, he should report the problem before an injury occurs.
Loss Assessment Insurance
Condo insurance policies work like traditional homeowners policies, covering financial risks to the condo owner. One type of coverage that a condo owner may consider is loss assessment coverage. This coverage pays a portion of an assessment’s costs due to damage to the building or liability issues. Loss assessment coverage generally does not cover assessments for property improvements. Standard condo insurance policies may include this coverage, or the buyer may add the coverage at an additional cost.
- SFGate.com; Condominium Homeowners Face Rising Condo Fees And Special Assessments; Carol Lloyd; August 2007
- Bankrate.com; Condo Or Co-op? What's the Difference?; Wayne Grover; July 2003
- Insurance Services Office, Inc. "Homeowners 6 – Unit-owners Form." Page 18. Accessed Jan. 30, 2020
- International Risk Management Institute. "Loss Assessment." Accessed Jan. 30, 2020
- Nationwide. "Loss Assessment Coverage." Accessed Jan. 30, 2020
- Chubb. "Condos and Co-Ops Coverage Highlights." Accessed Jan. 30, 2020
- Insurance Services Office, Inc. "Homeowners 6 – Unit-owners Form." Page 6. Accessed Jan. 30, 2020
- International Risk Management Institute. "10 Steps to a Well Designed HO-6 Policy." Accessed Jan. 30, 2020
- Massachusetts Association of Insurance Agents. "The Master Policy Deductible v. Personal Condominium Insurance ... Who Does What to Whom 2015?." Accessed Jan. 20, 2020
- Insurance Services Office, Inc. "Homeowners 3 Special Form." Page 3-4. Accessed Jan 30, 2020.
Jay Motes is a writer who sold his first article in 1998. Motes has written for numerous print and online publications including "The Dollar Stretcher" and "WV Sportsman." He holds a Bachelor of Arts with a double major in history and political science form Fairmont State College in Fairmont, W.V.