A condo management fee covers the cost of services that a professional management company provides to an HOA or condo association. Board members must understand the ins and outs of management fees, including the kinds of services typically included, how much it is on average, and any potential hidden fees. In doing so, they can get the best deal and protect the association.
What is a Condo Management Fee?
A condo management fee is the amount that a professional management company charges in exchange for its services. It is also referred to as an HOA management fee or property management fee.
Many condo associations struggle to self-manage, especially with mounting responsibilities and demands outside of the community. To ensure that tasks are completed on time and effectively, condo boards usually hire a professional company or manager to pick up the slack.
What Does the Condo Management Fee Cover?
The services included in a condo management fee can vary depending on the agreement between the company and the association. In general, a condo management fee covers the following services:
1. Financial Management
The condo management company will handle collecting the monthly dues and special assessments. It will also process vendor invoices and ensure bills are paid on time to avoid service interruptions.
On top of that, the company maintains financial records and prepares financial reports. Some companies also help the board file tax returns and plan the reserves. In Illinois, condo associations are required to fund reserves (765 ILCS 605/9).
2. Maintenance and Repairs
The condo management company fee also covers routine maintenance tasks. When the task is too great for the management company, they may solicit bids for maintenance services, coordinate repairs with contractors, and oversee major renovation projects.
Managers will also come up with a maintenance schedule. This schedule helps ensure that the association won’t miss out on any preventive maintenance tasks or critical repair work.
3. Communication and Administration
Communication is a big part of a condo association’s responsibilities. In exchange for a condo association management fee, a professional company can also take over this task. Duties include communicating with owners and board members, responding to requests, and managing association documents.
4. Vendor Management
The management company should manage relationships with vendors, negotiate contracts, and ensure that vendors are licensed and insured. Moreover, the company should also monitor the performance and deliverables of the vendors. This ensures that vendors remain in compliance with their contracts.
5. Rule Enforcement
Board members are generally in charge of enforcing the rules and regulations of the community. Due to time constraints, a management company can assume this role as well.
The management company can conduct routine compliance inspections, send violation notices, arrange disciplinary hearings, and follow up on penalties. Of course, a management fee for condominium services is necessary.
6. Legal Compliance
Remaining in compliance with all federal, state, and local laws is a must for condo associations. An experienced condo management company can help associations do just that.
Additionally, condominiums must also comply with their governing documents. A professional manager can interpret the CC&Rs and bylaws, make sure the association doesn’t breach any provisions, and ensure amendments or resolutions don’t conflict with existing laws or restrictions.
7. Emergency Services
Many management companies offer 24/7 services to handle emergencies, such as fire, flood, or severe weather. A professional manager can help develop and execute an emergency plan, file insurance claims, and assist in recovery efforts.
Types of Service Levels
One of the most crucial factors that can determine the condo management fee is the service level the association chooses to secure. More services obviously lead to higher fees. While companies can differ, most offer five general tiers:
- Full Service. This service level includes all the bells and whistles, with an on-site manager and a dedicated support staff.
- Remote Management. If a condo doesn’t need on-site support, it can opt for remote management, which is still complete except without an in-person manager.
- Financial Only. Some communities struggle with financial management but can handle the rest of the responsibilities. For them, a financial-only package is ideal.
- Consultations. Associations can keep a company on retainer for a lower fee. This gives them access to consulting services.
- Per Service. If an association only needs select services, some companies offer their solutions on an ala carte basis.
How Much are Average Condo Management Fees?
The cost of condo management company services can vary depending on several factors. These include the scope of service, the size of the community, the extent of amenities, the location, and the number of units. That said, the cost is typically calculated per door (per unit) or as a percentage of the total budget.
Large communities or luxury buildings can expect to pay somewhere between $25 and $75 per door. That equates to $2,500 to $7,000 for 100 units. Mid-size condominiums, on the other hand, can expect to pay somewhere between $10 and $25 per door. That equates to $400 to $1,000 for 40 units.
Finally, small complexes are usually charged a flat rate minimum. The base rate sits somewhere between $300 and $600. Small condo associations are those with 20 units or less.
Watch Out for Hidden HOA Management Fees
Board members must review the proposed management contract before signing. This contract must clearly define the scope of work and the fee structure. It must state all the fees that the association is or may be obligated to pay.
The management fee is the most obvious, but there are other potential charges to consider:
- Initiation Fee. This is the one-time cost of setting up a new account every time a new owner moves into the community. It may also cover welcome packages, copies of certain documents, and keys or access cards.
- Exit Fee. When a condominium switches management companies, they must usually pay an exit fee. This covers the cost of transition services, including the transfer of documents, access, and other admin work.
- Early Termination Fee. This is essentially a penalty charge that an association pays if it chooses to cancel the contract before it expires. Contract durations can range anywhere from one year to five years.
Favorable Terms
Self-managed communities that are looking into transitioning to professional management should budget for the condo management fee. Services don’t come free, and charges can vary greatly depending on several factors. Beyond anything else, boards should have a lawyer review the contract before signing to ensure the condo is getting a good deal.
First Community Management provides expert HOA, condo, and co-op management services to communities in Chicago. Call us today at (312) 829 8900 or contact us online to learn more!
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