You have purchased a condominium, and in the closing you received a credit for condominium dues owed. But, what do the condominium dues cover?

Condominium dues are created as part of the creation of the condominium association, and are assessed based on the percentage of ownership that each unit within the condo holds. Dues are typically assessed either monthly, quarterly, or annually, dependent upon what services are provided as part of the dues.

Dues are assessed for the purpose of providing funding for common area expenses, and are set (at a minimum) on a monthly basis by the Board of Directors. At a minimum, common area expenses should include funding a reserve fund for a future roof replacement, and in a larger condo association, can be extremely complex financial planning documents.

In a small condo association, the dues are generally a fixed amount, since there are few shared expenses. In a larger condo, involving hundreds of units, the budgeting process is detailed and complex, and fees can be assessed based on projected annual expenses, with variable amounts for such items as common area utilities.

Items usually included in condo dues are:
1. Reserve funds for large items. Basically a savings account, set to provide for the future replacement of major components such as roofs, driveways, boilers, and air conditioning systems.
2. Fixed annual expenses. Items such as common area real estate taxes, maintenance contracts, and planned improvements such as painting, lawn care, and payroll costs are generally included in this category. These amounts are generally fixed annually.
3. Variable costs. Many condo associations have opted out of charging a flat rate for utilities for the common areas for items such as heating and lighting, and instead charge these expenses on a monthly basis to the owners, based on the current billing. Other variable costs can include things such as valet services, parking fees, and other services provided specifically to that condo owner.

Items not usually included in condo dues are maintenance to your individual condo unless the item being serviced could have a deleterious affect on other condo owners. Larger condo buildings generally share plumbing and ventilation systems, so if you have a plugged drain, it could eventually affect everyone who shares that line with you. Pest control in a larger building may or may not be included as a shared expense, since an infestation treated in one apartment is likely just to move the problem to someone else.

To truly understand what is included in the condo dues you are expected to pay, the answer is to obtain a copy of the annual budget from the Board or its manager. Failure to pay the dues can lead to foreclosure either by your lender or the condominium association.

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