Why are the HOA dues, also known as condominium monthly assessments high in one building but not in another? There are many reasons why monthly assessments may be high such as increased amenities, higher overhead for door staff, etc. However, what is most perplexing for some buyers is understanding why assessments vary so much between virtually identical buildings! Here is a brief explanation!
Newer Buildings: Newer buildings will typically have lower assessments because they built highly efficient. From the heating & cooling systems to the glass windows the overall building has greater efficiency if it was built in 2005 versus if it was built in 1970. Newer buildings also have very little, if any, work to be done (at least if the developer had a good head on his or her shoulders). Therefore, overall monthly maintenance costs are low and planning for future projects is minimal.
Older Buildings: Older buildings will always have higher assessments (almost always) than newer buildings because there are greater inefficiencies such as older heating & cooling systems, older windows, older elevators, etc. Older buildings also will have future projects that are being planned for and saved for. These projects increase assessments.
Now you’re probably thinking “I knew all that!” “What I want to know is why two buildings that are around the same age, that have the same amenities, can vary so much in assessment price!
There can be many different answers to this question as each situation is different but here is the most common items to look for:
What is actually Included in the assessment: This can be important if you’re comparing buildings built in the 70’s and 80’s as a good handful in chicago have electric heat. If they have electric heat/cooling this means that your heat and a/c will NOT be included in your assessment. This can be a reason why your assessment is lower in an electric building (where you pay your own heat and a/c). Also check to see if any cable tv or internet is included in your assessment or not included as this can alter numbers between $40 and $100/mo.
Poor Initial Build Quality: Sometimes one building was built better than another. While the buildings may be similar, if different materials were used from heating and cooling systems to facade or elevator banks; one building can have much higher yearly maintenance costs than another building even if they were built in the same year. What is important here is understanding if the assessments are high because maintenance costs are inherently high due to poor quality or if they are high due to poor management by the condo board. Sometimes these answers can be subjective but ask a Realtor who does a lot of business in the building and you can USUALLY get a straight forward answer.
Not every building has the same priorities: Some buildings may have higher assessments because they have a very strict board. A strict board for the condo association may be building up reserves and planning for every single thing imaginable. While a board that is not very involved in building management may just care to keep assessments as low as possible. While we all want to pay the lease amount possible we may not always want low assessments. In the long run it is better for the health of a building to have higher assessments but NEVER a “Special Assessment” versus a building with low assessments but a special assessment every 5 to 7 years! What is a “Special Assessment?” A special assessment is an assessment levied on all the units in a building to pay for a large project; typically a much needed repair such as new roof, new windows, new heating/cooling system, etc. These “special assessments” are levied in situations when reserve amounts (savings account for the association) is inadequate to cover the repairs that NEED to be made.
Paul Blackburn is an Illinois Licensed Realtor & Associate Broker with @ Properties in Chicago. He can always be reached via e-mail at Paul@PKBlackburn.com You can also learn more about condo associations or buying in general at WWW.BuyingInChicago.COM