Page 8 - New England Condominium July 2019
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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

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