Adding heat and water to monthly assessments
Q. I am looking at purchasing a condominium where among the "usual" homeowner association fees (building maintenance, snow removal, garbage pickup) the monthly assessments include heat and water for the unit. What are the pros and cons of having one's heat and water included in the monthly fee? It sounds really good, but I am wondering if there is a downside to that.
A. In a condominium, an owner's share of the common expenses is allocated to a unit based on the unit's percentage of ownership in the common elements. So, if utilities, like heat and water for the units, are included in the monthly assessment, the unit's share of those expenses will not be based on actual consumption, but will be based on the unit's percentage of ownership.
The amount of those utility expenses allocated to the unit, and included in the monthly assessment, may therefore be higher or lower than what that expense would be to the owner if separately metered to the unit. This would depend on the unit's percentage of ownership and actual the consumption of those utilities by the unit. If unit utilities are included in the monthly assessment, some owners will pay more than what they would if separately metered to the unit; some will pay less. Such is a fact of life of the condominium form of ownership. But there may also be something to be said about predictable monthly expenses.
Q. My husband and I just turned 60 and are planning to downsize as we enter our retirement years. We are considering purchasing a condominium for our next home. Not being familiar with the Condominium Property Act and not having previous condominium association experience, what would you suggest be our best steps with investigating a condominium or townhouse ownership? What are the big things you suggest we become aware of or make sure we ask before purchasing?
A. First and foremost, understand you will be giving up some "freedoms" when moving into a condominium, or any property administered by a homeowner's association. So take a look at the association's declaration and rules to see if the restrictions match your expectations and lifestyle. And if you have a dog, you want to make sure it is permitted.
An important issue to investigate is the financial health of the association. People in their retirement years are typically living on less income than in their working years and don't want too many financial surprises. So you will want to investigate if the reserve fund is reasonably funded, and if there are any anticipated capital expenditures and as to how they will be funded. Check if there any large assessment increases or special assessments looming.
Some of this information can be gleaned by reviewing minutes of the association for the past year or so, or in the disclosures required to be provided, upon request to purchasers, by the association, The minutes should also give you a sense of the issues facing the association. Hopefully, they are boring and mundane.
Look into the amenities of the association. A swimming pool and tennis court could save you the expense of a health club, but will increase your expenses even if you do not use them. Look at the demographic of the association. While many retirees don't want to be in a building of elderly owners, many don't want to be in an association of all twentysomethings who are partying it up every night.
Find a real estate agent who is familiar with the properties in the area you are looking at. He or she should have some good insight on well-managed properties, and the "reputation" of the associations you are considering. Many board members are surprised that their properties have a reputation in the community - you do!
• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.