Condo fees, or HOA fees, are calculated based on various factors and are determined by the condo association’s board of directors. Below, the article discusses a few factors that influence how Chicago condo fees are calculated and what impacts the amount each unit owner is required to pay.
What are Condo Fees?
When buying a home in a condo community, owners are often faced with condo fees. These fees are not part of the mortgage on the unit. But what is a condo fee anyway?
Condo fees are regular fees that unit owners must pay to their association. These fees go into the maintenance and upkeep of the building, as well as other expenses, such as insurance, utilities, and management. Owners pay these fees on a monthly, quarterly, or annual basis.
Condo Fees vs HOA Fees
Both condominiums and single-family HOAs charge regular fees and special assessments to owners. But, generally, condo fees tend to be higher than HOA fees. This is because condo associations usually cover more shared responsibilities than their HOA counterparts.
In a condominium, the association often maintains the entire building structure. This includes roofs, exterior walls, hallways, elevators, plumbing systems, and sometimes even portions inside units. In contrast, in many HOAs, owners handle most of their own home maintenance.
Condos also rely more on building systems and services. Elevators, fire safety systems, HVAC for common areas, and secured entry points all require regular servicing. These add to the ongoing costs that traditional HOAs don’t really have.
Finally, reserve funding is usually higher in condos. Since there are more shared components to maintain, the condo needs more reserve funding. Boards collect contributions through condo fees.
How are Chicago Condo Fees Determined?
A condo association’s board of directors sets annual HOA fees based on the annual budget. The biggest factors the board uses to establish the following year’s budget are the association’s projected operating expenses and the amount it needs to maintain in its reserves. These two areas make up the largest portion of the annual budget.
Operating Expenses
Condominium fees are used to cover the day-to-day operating expenses of the association. This includes costs such as maintenance of common areas, landscaping, cleaning, security, utilities for common areas, and property management fees.
Reserve Fund Contributions
A portion of the condo HOA fees must also be allocated to a reserve fund. The reserve fund is used for major repairs, replacements, and unforeseen expenses such as roof repairs, elevator maintenance, or repaving the parking lot. The amount contributed to the reserve fund is based on a reserve study, which estimates the lifespan of common elements and their expected replacement or repair costs over time.
Additionally, things like the amenities the condo offers, the building’s location, its age, and other factors will all influence HOA fees. Fees and assessments help cover the cost of shared property and amenities, so the more amenities an HOA has to offer and the better its location, the higher the fees will be.
How are Condo Owner Fees Calculated?
To determine unit-owner contribution amounts, the board calculates the total annual projected expenses and the amount it needs to maintain in reserves. Then, it divides that total by the number of units in the association to determine the monthly fee for each unit owner. In some communities, fees are calculated on a percentage basis depending on the square footage of each unit.
It is worth noting that there is a limit to how much condo association fees can increase in Illinois, and that number is 15% (765 ILCS 605/18). If fees for the current year exceed 15% of the total fees from the previous year, owners may petition to call a meeting and challenge the fee. A majority vote is required to reject the increase. Otherwise, the increase stays.
Moreover, in addition to regular condo fees, there might be special assessments levied by the association to cover unexpected or extraordinary expenses. These assessments are similarly divided among unit owners and can increase the monthly fee temporarily.
Factors That Affect Condo Fees
Condo fees vary widely because each community has different needs and risks to manage. Here are the main factors that affect condo fees.
1. Size and Type of the Community
Larger communities can spread out costs over more owners, often resulting in lower fees. Smaller associations, on the other hand, may have higher fees because fewer owners share the same expenses.
Additionally, the type of property also factors into it. High-rise buildings usually cost more to operate in comparison to low-rise associations. Luxury communities also tend to have higher fees due to more extensive or high-maintenance amenities.
2. Amenities Offered
Amenities are one of the biggest factors that influence condo fees. Pools, gyms, elevators, concierge services, and security systems all require maintenance and staffing. The more amenities a community offers, the higher the ongoing costs.
3. Maintenance and Repairs
Routine maintenance keeps the property in good condition. This includes landscaping, cleaning, HVAC servicing, roofing, and common area upkeep. Depending on how much maintenance is necessary, a condo may experience higher costs.
Age also plays a role in maintenance. Older buildings often require more frequent repairs. This can increase costs and lead to higher fees over time.
4. Insurance Costs
Insurance premiums have become a major factor in many communities. If a community faces more risks, it could pay higher premiums for property damage, liability, and D&O insurance. This is also true for communities located in areas prone to natural disasters.
5. Utilities and Services
Some associations include utilities in the monthly fee. This may cover water, sewer, trash, electricity for common areas, or even cable and internet. Rising utility rates can directly increase condo fees.
6. Reserve Funding
Well-funded reserves are essential for long-term planning. Associations must set aside funds for major repairs and replacements in the future. If reserves are underfunded, the board may raise fees to catch up.
7. Vendor and Labor Costs
Associations rely on vendors for services like landscaping, maintenance, security, and management. Labor shortages and inflation can drive up these costs. When vendor contracts increase, condo fees often follow.
8. Management Fees
Professional management companies charge fees for handling operations, finances, and communication. Self-managed communities may have lower costs in this aspect, but there are other trade-offs.
9. Delinquencies
When owners fail to pay their dues, it can result in gaps in the budget. To compensate, the board may raise fees for paying owners, levy special assessments, or take out loans. All of these can result in higher fees.
How Much are Average Condo Association Fees in Chicago?
Again, fees can vary greatly depending on the community. Several factors, such as age, size, and amenities, can affect the cost of these fees. That said, on average, Chicago owners should expect to pay $300-$400 per month in condo fees.
Are There Condos Without HOA Fees?
There are almost never any condos that don’t charge HOA fees. Condominiums rely on shared ownership, and maintaining those shared elements requires funding. To source these funds, COAs must turn to the owners in the form of condo fees.
Without fees, a condominium would have no way of paying for maintenance, insurance, and other expenses. Soon enough, building elements will wear out, and systems will malfunction. This will result in lower property values.
The Board’s Job
Condo fees serve an essential purpose in the grand scheme of things. Boards must ensure that owners understand why these fees are important, how they are calculated, and why increases are normal, even necessary.
First Community Management helps condo associations prepare the budget, determine fees, and communicate increases with owners. Call us today at (312) 829 8900 or contact us online to learn more!