I need to raise Common Charges Again - When do I tell People?

[Anonymous]

I am Treasurer of my Beach condo of 30 units. We do have a managing agent, we also have published financials done by CPA sent out every year. So people do know what goes on day to day and financials as of 12-31-2024.

However, I just found out once again Flood Insurance premiumn is rising and all the insurances are rising. Flood Insurance has to be paid lump sum. They dont do installments. The rest you can put a deposit down to be binded, then pay rest on an installment plan with interest or lump sum.

Soon as I pay bill we will have ZERO in reserves. But the bigger issue is actually insurance is not a one time bill. I have to pay it again next year and will be higher. I have to raise common charges to cover that PLUS I need at least 100K more to build up reserve funds.

Right now it is $475. We also have one unit on market. Which that person will have heart attack. These are all two bedroom, 1 and half bath, 1,200 sf condos with patios and parking. So they all pay the same as around same size.

I raised common charges from $350 to $475 last year even though I though $500 to $550 made more sense to build reserves. I got over ruled as some people felt jumping from $350 to $500 optically felt too much. But now I am thinking I got to do $575 at least, $650 might even be better to build up quick.

What is best way to do this? We were at $350 for a few years but that was too low. We only raised it to $475 Feb of this year. My bad. But to be honest they all wanted to kick can down the road. Building is in good shape as from 2013-2019 did a lot of updates pre prices shooting up for construction work. But in next few years as things need updates again it will be very expensives as costs have doubled over last 6-7 year.

Would you want a meeting, a note. When we did it in Feb I had auditor rush out the 2024 financials and mailed it to owners along with letter of increase. Zero complaints as they had fresh financials and pretty obvisous.

[Anonymous]

that is a crazy high increase. People will not be happy.

[Anonymous]

Anonymous wrote:that is a crazy high increase. People will not be happy.

I know. But there is zero Fraud going on. The condo is on a barrier island between bay and beach. FEMA Risk 2.0 is causing subsidized rates to move up 18 percent each year and my other insuance is up 100 percent in last five years. The running building is only $150 a month per unit. The insurance is like now $350 per month per unit.

It is hard to explain to people that say all I get is lawn mowing, snow removal, gutter cleaning, sprinklers, outside lights, blacktopping driveways, powerwasking fences and painting railings etc for $550 a month when I raise it. When in reality they are getting all of that for $150 a month. It is the insurance that is killing us.

We can see the Ocean and Bay from our sidewalk at same time. No insurance really wants us unless a lot of money .

[Anonymous]

This makes no sense. What state is this condo building located? Most states require an independent reserve study every five years or so. And how do you have no reserves to fund annual insurance without a projected increase percentage?

[Anonymous]

Call other insurance companies for cheaper rates. It’s too much, you’l drive away the customer and sell the property to a developer in 5 years.

[Anonymous]

You could do a one time assessment to help build the reserves / keep common charges down another year. Effectively the same as raising common charges but sometimes feels better psychologically…..

[Anonymous]

You don’t have the money but you need a reserve study. And then you raise the rates by whatever they tell you you need to save every month for reserve.

You may need a special assessment to get 200k in your reserve. But depending on the state by law you may be able to raise the monthly fee any amount you need to meet the reserve study.

As an example, Md law dictates that you not only need a reserve study every 5 years. You must raise your rates to meet that study at the next renewal. And the law states you can go over any cap in increases in your bylaws.

Do a budget, pass it by board vote and raise your rates Jan 1. You probably need to contribute $500 a month to your reserve.

That’s going to slowly have you build it up.

Add $3000 to the budget for the reserve study and get one done asap. You may need to raise fees again in 2026 to meet the reserve funding by study.

You’re basically screwed.

[Anonymous]

If I were op, then I would list my condo unit for sale. Flood insurance on a barrier island is going to get much worse/higher cost very quickly. Many barrier islands ought never have been built upon.

[Anonymous]

Anonymous wrote:You could do a one time assessment to help build the reserves / keep common charges down another year. Effectively the same as raising common charges but sometimes feels better psychologically…..

Do a meeting, be super transparent about the new costs, explain that you wish you upped the rates, and ask them if they want a special assessment or raised rates.

I've lived in a townhouse condo for 21 years. We had good reserves until recent construction inflation increased the price of a 25 year roof replacement. We are going to have an $8,500 special assessment payable as a lump or in 24 month installments.

If you don't have reserves that should also spook buyers.

The person who is selling may prefer to lump sum and pay as the sale goes through. Or give a price discount to the buyer.

[Anonymous]

Anonymous wrote:that is a crazy high increase. People will not be happy.

Insurance in ultra high risk areas is so expensive now (for good reason…the risk and cost of recovery is super high).

If residents balk at the jump in HOA dues, well then they can go find a more affordable insurance policy (they won’t) and report back to the board with a quote in hand.

[Anonymous]

I have a relative who was in a similar position as you (treasurer on a condo board with increasing fixed expenses and unfunded reserves) and he... decided to sell his place and move. He didn't want to deal with the years-long increase in expenses and special assessments and ongoing related battles among the owners.

OP, what does the rest of the condo board think? It's reasonable for you to present a recommendation to them but the board should collectively own the decision to raise fees.

[Anonymous]

OP my beach condo is in NY where there are no reserve study requirements buildings two stores or less. However in NY a SIR called a Structural Integrity Review required for three stories or higher by law. So slightly different name than reserve study.

SIR will included costs for issues to fix buildings can reserve for. Back to my condo the managing agent works smaller condos two stores or less with condo boards as they do walkthroughs etc. so they keep board up to date upcoming repairs and estimated costs. So I dont need a reserve study nor am I required to have a separate reserve find by law.

Just telling you how NY different from DMV condos. I guess I need to do maybe a pie chart explaining where funds go. Other issue I live in DMV so although in charge of that can’t go to an in person meeting to explain

[Anonymous]

Anonymous wrote:

Anonymous wrote:You could do a one time assessment to help build the reserves / keep common charges down another year. Effectively the same as raising common charges but sometimes feels better psychologically…..

Do a meeting, be super transparent about the new costs, explain that you wish you upped the rates, and ask them if they want a special assessment or raised rates.

I've lived in a townhouse condo for 21 years. We had good reserves until recent construction inflation increased the price of a 25 year roof replacement. We are going to have an $8,500 special assessment payable as a lump or in 24 month installments.

If you don't have reserves that should also spook buyers.

The person who is selling may prefer to lump sum and pay as the sale goes through. Or give a price discount to the buyer.

Person selling has zero clue of this, I think they went to a nursing home. Just guessing me doing this in middle of sale might be a headache for them.

The board used to be very robust with 7-8 people back in 2013 after Hurricane Sandy as we had major damage and issues. However Board members died or sold, new owners did not want yo join. Now we have two active Board members. So pretty much my call with other person agreeing or disagreeing. Then I can discuss managing agent how to share info and get their thoughts. To add to apathy our last official Board meeting was pre-Sandy. We did have a “meet and greet” drop in meeting a year ago by building next to condo to meet managing agent, had CPA at it, the other Board member but was not a true meeting as maybe 5-6 people stopped by. Nowhere close to quorum, back in 2013/2014 room was packed but building since I say 2017 has been running smoothly with low common charges.

I was told people only show up to complain and if no complaints don’t show up at meetings, I am worried I will give them a reason to show up.

[Anonymous]

I think you've got to get yourself some cover and present this to whatever the board looks like now. This can't be all you.

Why are there no reserves? bad management - no increases for too long?

Quite honestly I agree with what 20:56 is saying. This does not seem like a tenable situation. You have the clearest view of it, and I think you should consider getting out while you can.

[Anonymous]

You can run the meeting by Zoom.

People get mad about spending money. But in a condo a lot of planning work is done by others for free.

As long as you're being ethical, let people rage. The money has to be paid. You have to plan ahead for the increased costs.

I view this the same as if I bought a single family house and had an unexpected expense like the furnace quitting.

I also think it's better to put the charges on longer-term residents who have benefitted from artificially low dues. If they know people with single family homes they know those people have faced a lot of inflation.