Assessments!

When we were conducting our review of the property, prior to purchase, we were given financial data on the association. We also conducted some informal interviews of people we saw on the grounds. After confirming that they were unit owners, we asked them some scripted questions. The only issue anyone had was the fact that the assessments had been increasing, and one person was a bit unhappy with the special assessment for the garage doors. These conversations were one of the triggers for a more in depth investigation on the part of my spouse and I.

In a condominium complex such as the one we live in, there are trade-offs. We own the streets, the pipes under them and the street lights above. So we control all access to the property. On the other hand, our assessments pay for snow plowing, street repairs, electricity for lighting, grounds keeping. We have a nice private community. We have to rely on our own resources for all grounds maintenance. There is a cost for that.

As the assessments increased, I decided to take the annual statements provided by the management company and determine exactly where our assessment payments were going. Using the year ended 12/31/2006 data, I constructed a spread sheet, which allocated my assessment into all of the categories. This gave me a better picture of how much of each month’s assessment was being spent which area. I sent a general letter to the management with my comments.

As I see it, I'm paying a price as a relatively "new" unit owner. If we eliminated all of the assessment funds allocated for reserves, I would be paying a monthly assessment of about $227.00. When I purchased a unit, the cash reserves were somewhere between $297 and $321 for each unit! So I have been paying an accelerated monthly assessment to make up for this shortfall accumulated over 25 years. Of course, that has created a problem for the board, as unit owners are used to lower assessments. Unfortunately the board still has to make up the shortfall or issue special assessments, which will penalize new owners. Can you imagine the problem for a new owner, who moves in and is then given a $5000 assessment for a new roof? And who had the benefit of the roof that wore out? Why it was the previous owner, of course. Based on the conversations at some of the annual meetings, some of my fellow unit owners don't see it that way. I suppose they are hoping to sell before the roof repairs are required.

These were the significant distribution categories:
Utilities = 6.15%
Maintenance and Repair = 4.36%
Common Area Maintenance = 21.2%
Waterfall/Creek Maintenance = 0.26%
Building Maintenance = 31.48%
Administrative Expense/Insurance = 17.39%
General Reserves = 27.4%

These were further distributed into the following sub-categories, and the monthly percentages and dollar amounts were:

Utilities
Electric = 4.55%, $11.03
Water = 1.41%, $3.41
Pest Control = 0.2%, $0.47

Maintenance and Repair
Janitorial Contract = 4.36%, $10.56

Common Area Maintenance
Grounds Contract = 9.44%, $22.90
Grounds Maintenance = 4.55%, $11.03
Tree Maintenance = 2.6%, $6.30
Sealcoating = 0.72%, $1.73
Snow Removal = 3.9%, $9.46

Waterfall/Creek Maintenance
Aerators/Lakes/Streams = 0.26%, $0.63

Building Maintenance
Maintenance Contract = 16.05%, $38.92
Panel/Trim Replacements = 1.41%, $3.41
Lighting = 1.3%, $3.15
Miscellaneous Repairs = 7.58%, $18.39
Outside Vendors = 0.07%, $0.16
Painting = 4.85%, $11.77
Roof Repairs and Maintenance = 0.22%, $0.53

Administrative Expense/Insurance
Petty Cash = 0.03%, $0.08
Postage = 0.26%, $0.63
Printing and Duplicating = 0.37%, $0.89
Management Fees = 5.80%, $14.05
Legal Collections = 0.13%, $0.32
Accounting = 0.31%, $0.76
Miscellaneous Administration = 0.09%, $0.21

General Reserves
Paving = 7.79%, $18.88
Lake Restoration = 1.56%, $3.78
Carpet = 0.52%, $1.26
Roof = 12.46%, $30.20
Concrete = 3.11%, $7.55
Masonry = 1.96%, $4.76