Striking a Balance Associations Weigh Revenue Increases Against Service Cuts

As they gaze across azure seas, past palm trees and swimming pools on a tropical coastline, prospective buyers on HGTV’s “House Hunters” show always ask about the fees. Unlike most would-be residents, though, they might not bat an eye at the price tag. Closer to home, savvy home shoppers watch the trends in condo pricing, and want to ascertain just what they’ll pay monthly, on top of the purchase price. If the bottom line is expensive to most lookers, then selling those units can become a challenge.

Boards facing increased costs know this, but they have few options when costs outweigh revenue: raise monthly fees, charge a special assessment, or cut expenses. And, while reductions may rein in costs, they’re also sure to annoy residents who have come to view amenities and services as guaranteed. The fees they pay go toward maintenance, landscaping, utilities for common areas and outdoor space needs; they may regard any service reduction as unacceptable.

Associations uncertain of their financial ground are likely to make poor decisions based on false economies; not knowing your true fiscal status is a good indicator that basic homework hasn’t been done. A clear spreadsheet tells the story—to both board members and residents—so it should be at hand if a board is about to change fees or services. David Abel of First Realty Management in Boston says staying current is essential if a board is to understand expenses and revenue needs. The budget should be new every year, he says. “Look at every line item to calculate what they’re going to be this year.”

Let’s Talk About It

Open communication is vital. Managers say straightforward informational channels between the association and residents is usually the best approach. Clarity, communication and cooperation with residents are key elements of any change.

Ron Brown, president of R. Brown Partners in Boston, which manages 40 Massachusetts condominium properties, from single up to 106 units, speaks of “the trap.” Making short-sighted decisions can lead a board down a dark uncertain path.

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