Page 8 - New England Condominium July 2019

8 NEW ENGLAND CONDOMINIUM -JULY 2019 NEWENGLANDCONDO.COM T here are few things upon which most people agree, but a general dislike for paying more today for something that cost less yesterday is pret- ty universal. This goes for taxes, consum- er goods, healthcare, and of course for monthly maintenance or carrying charg- es to a co-op, condo or HOA. But like it or not, the reality is that major building systems wear down, natural disasters happen, and the environment around a property changes over time. All of these will eventually mean an increase in what each individual shareholder or owner must pay in order to keep his or her com- munity solvent and well-maintained. That said, it’s important for boards, management and residents alike to un- derstand why and at what intervals fees should be increased. An open and hon- est board committed to transparency in its processes will have a much easier job conveying the necessity of a cost hike than one acting arbitrarily or in a clan- destine manner. Similarly, residents who know the whys and wherefores of an in- crease are far less likely to grumble or re- sent their board for implementing it. Broadly Speaking While every association is unique, there are certain commonalities related to why a maintenance fee increase could be necessary. “Maintenance charges are going to be driven by a few different things,” says Sean Jordan, Director of Property Man- agement at FirstService Residential in Canton, Massachusetts. “It could simply be that expenses are increasing, or that a short- or long-term plan is finally coming to fruition. For example, say that a piece of building equipment or machinery has become harder to maintain, and needs an increasing amount of service—or you’re increasingly repairing something be- cause the association has been using it more. There could also be a change to a local ordinance that requires some work at the property to make sure it’s in com- pliance.” Insurance can also be a factor. “Both general and liability rates could go up, as could utilities” says Jeanne Eberhardt, a property manager for Casagmo, a com- munity in Ridgefield, Connecticut. “And cost of living increases can impact land- scaping, snow removal, and trash remov- al.” More sprawling communities with enough land to expand onto can grow significantly from year to year – and this can also cause maintenance increases. “We make increases with inflation and as the community grows,” says Laurel Wolfe, Association Manager at Sleepy Hollow Lake in Athens, New York. “We have 800-plus homes with 400-plus building lots yet to be approved, and all pay the same dues. But as we get more residents, we require more maintenance to the common areas.” “Every association should have a nominal increase to common charges and maintenance on a yearly basis, just to keep up with the cost of living,” adds Mark Liberman, Founder of On the Mark Management in Milford, Connecticut. “I’m talking a point and a half to 3 per- cent annually.” A board might also increase monthly charges to build its reserve fund. “Most often you don’t want to allocate less mon- ey to your reserve fund than the previous year, if operating expenses increase,” says Michelle Stark, a property manager with Realty Performance Group in Rochester, New York. “When working with boards on their budgets, it’s important to put together the operating expense portion first, then see what’s left to be allocated into the reserve. Although each associa- tion has distinct needs, most often I see a $5-$10 increase in maintenance charges every other year.” Selling the Plan Maintenance increases cannot be af- fected unilaterally. A board/management team must explain to the rest of an asso- ciation why paying more money is neces- sary. This is best done with honesty and transparency. “I remind everyone that the people driving these decisions are also home- owners and are subject to the same in- creases; so these choices are not made lightly,” says Jordan. “If we’ve decided to increase maintenance charges, you can guarantee that we’d taken a look at the re- serve schedule, at actual reserve balanc- es, at what the necessities for the commu- nity are, etc., before we’d decide that this needs to happen. The reasons these in- creases come in is either operation costs or the community’s costs are higher than what we’d have on hand in free cash flow.” Ideally, this won’t be management’s first time at the rodeo, and it will be able to convey why fees need to be raised in clear and concise terms. “The property manager brings an expertise in the op- eration of a community that a board and residents should be able to ascertain,” says Liberman. “The manager should be able to explain what something will cost, why it’s a worthy expenditure, and how things will only be more expensive in the long term should you not act now. BUDGET & FINANCE ISTOCKPHOTO.COM Maintenance Charge Increases When, Why, and How to Raise Monthly Fees BY MIKE ODENTHAL