Where Does My Maintenance Fee Money Go?
This is a common question I’m asked when working with buyers searching for a new Hoboken condo, especially when they are first time home buyers. Almost every condo association has the right to and requires the unit owners to pay a monthy fee, the maintenance fee. These fees typically range from $100 to $250 for smaller units and can be as high as $300 to $600 or more for units that are larger, or in more luxurious condo buildings like the Shipyard or Maxwell Place. So what is the fee, what determines how large it should be and where does the money go? Here are the three main uses of these very necessary funds:
1. Maintenance of the common areas of the building & grounds
2. To build up a reserve fund for future capital account item repairs
3. To the management company that manages the condo.
Condo Lobbies Cannot Be Left in the Dark
You pay to heat and light your own unit but someone has to pay the utility bills for the common areas. The lobby and hallways of any condo building need lights and heat. Your condo maintenance fee pays the gas and electric bill. Some condo buildings in Hoboken even have a heated garage. Other regular maintenace items may include cleaning the hallways, taking out the trash and recycling, servicing the elevators, shoveling snow, landscaping, pool care, the doorman’s salary, and more. The fancier the building, like the Shipyard, the more it costs for things like pools, health clubs and elevators, security systems and doormen.
Every condo also needs insurance. Most Hoboken condos also need flood insurance. This is in addition to each unit owners homeowners insurance. Unfortunatly, Hoboken has had its share of floods and fires. What if your condo building were to be destroyed? Or the UPS guy trips and falls on the front steps of the building and sues the condo association? Insurance is important.
Roofs Cannot Leak and Bricks Cannot Fall
Beyond the day-to-day maintenance of the building (and grounds) there are certain big-ticket items in every building, especially in the Hoboken condos in 100+ year old buildings, that need to be repaired and replaced over time. Things like leaking roofs and crumbling brick facades. There are two ways to pay for this. The right way is to plan ahead and make a budget. The wrong way is by special assessment – the subject of another post.
Every capital item (roofs, furnaces, elevators) has a useful life. If you know your roof is going to last 10 years and you know about what it will cost to replace it you can figure out how much to put aside today so that the association will have money to install a new roof. This budgeting process should be done for each capital item. Add it all up and now you know how much has to go into the condo association reserve fund each year. There are rules about what can be done with the reserve money. It’s not supposed to be used for the day-to-day stuff. It’s for capital items only.
Who Has Time to Deal With This Condo Association Stuff?
Most of us are pretty busy and don’t want to deal with cleaning hallways, shoveling snow, figuring out useful lives and worse. Someone has to collect the maintenance fee from each unit owner, do the banking and pay the bills. For a fee, a condo association can hire a management company to handle these tasks. Of course the management company has to be paid from the condo maintenance fees, too. Some smaller condo buildings do choose to ‘self-manage’ but it can be a time consuming and thankless job. There are management companies that will, for a very reasonable fee, manage a smaller condo. When it comes to sell your condo in Hoboken, having a unit in a professionally managed condo building may be very attractive to potential buyers.