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The Top 8 Ways To Prevent A Condominium Corporation Common Element Fee Increase

As anyone who lives in a condominium corporation knows, common element fees are part of living in a managed community. Used to fund the condominium’s operations and maintain the community, common element fees are fees all condominium members are legally required to pay. Common element fees  are set by board of directors who, as homeowners, pay them too.

Whatever the reason, a board of directors may, at times, be faced with the difficult decision to raise common element fees. Nobody wants to see that happen, but raising common element fees is often inevitable. At other times, it may be something your board can avoid. Read on to learn the top eight ways to prevent condominium corporation common element fee increase.

1. Go through your supplier and service contracts with a closer eye.

Review your community’s service contracts and confirm your community is getting the services it needs and paying the correct price. Look for:

  • Renewal dates. Contracts with a CPI (Consumer Price Index) clause might result in higher costs.
  • Ineffective or unneeded line-item services
  • Promotions or referral specials
  • Pricing paid sufficiently accommodates services rendered

If you find any discrepancies or are unhappy with the services rendered, talk to your supplier or services provider to see if they can work with you. Also contact the utility companies and ask if they’ve set a price rate schedule for the upcoming year. You might be able to identify greater savings than you previously thought.

2. Optimize your reserve fund.

It’s imperative to check in on your corporation’s reserve fund each year. The reserve fund is money set aside by a condominium corporation for additions to major components the corporation is obligated to maintain and future replacements and repairs that don't occur annually.

A healthy reserve balance ensures you can take care of needed repair and replacement projects, but it can do much more. Because interest rates fluctuate, review your return on interest and connect with your reserves banking partner to inquire about any new higher reserve interest-bearing programs. While the return and interest rate offered will vary by bank and depend on account terms and conditions, this may ease some of your community’s financial burden.

3. Consider capital improvement funding.

If you don’t have adequate funds for projects and repairs, you might consider securing a loan or line of credit instead of increasing common element fees. For some, it might be better to borrow now to complete a looming project. By waiting, you allow things to deteriorate and run the risk of increased costs. A capital project funding option can lighten the financial impact on community members yet maintain the beauty and integrity of your community. Additionally, a loan allows:

  • Homeowners to pay their share over time to reduce the immediate impact on their personal finances instead of making one lump-sum payment.
  • Needed repairs or improvements to be completed quickly.
  • Property values to maintain stability by allowing structural problems to be addressed and repaired right away.
  • The cost of common area improvements to be spread over time and assigns the cost of those improvements to the people benefiting from them the most.

Follow your governing documents before moving forward with securing a condominium corporation loan, and consult your community’s attorney and CPA for legal and financial advice.