The boards of some co-op and condo buildings pride themselves on not raising their monthly maintenance fees for years at a time. At first glance, this might seem like a good thing—after all, low fees are appreciated by residents and can be attractive to potential buyers.
Keeping fees artificially low can lead to problems down the road, however. Stubbornly maintaining low fees can deplete a building’s capital reserve fund, leaving little cash on hand when a major maintenance need arises. And should such a need arise, a building may have no choice but to vote for a much larger fee increase, or worse, charge a special assessment that could be devastating to residents’ finances.
With smart budgeting though, a building’s board can plan for future projects by maintaining an appropriate monthly fee, and increasing it when needed. Boards and managers should adopt a reasonable, structured approach to raising fees. Such an approach can be devised with the help of financial consultants, who will guide a board in considering all of the relevant factors before increasing fees.
Why the Fee?
A building doesn’t run on the goodwill of its inhabitants, but on the fees that they pay to keep the place functional and well maintained. Depending on the size of the building, the skills of a handful of folks—or more than a handful—may be required to run it. The cost of employing those people is just one of the factors that determine a resident’s monthly maintenance fee.
Generally, a board devises a budget for their building based on the building’s normal operating expenses; major capital improvements; contingencies, such as unusual expenses due to foul weather conditions; and occasional extraordinary costs, such as back taxes that are owed by the building.