News from Great North Property Management

I have often been challenged with "How can the condo fees go up so much - it is the management company's fault". This is not always a comfortable call for the property manager to take from an owner.

Many owners at condominium Associations are mystified with the process of creating the annual Association. They take it as a personal affront when the fee goes up. Some board members share this mystification. In actuality, if a common sense, organized approach is taken, it makes the budget process much easier for all.

Here is an approach that will help board members with the seemingly daunting task of tackling the budget:
●     Create a worksheet with the current years budget and a blank column for the coming years budget.
●     Insert into the new budget all the costs that are known (ie: existing contracts like landscape, snow plow, and management contracts - any and all contracts).
●     Have the property manager make a few calls to try to obtain any expected increases for some general accounts (electric, water, insurance, etc.), and insert the expected amounts into the new budget. Keep in mind that these are just estimates, but will usually be close to actual.
●     Steps 2 & 3 will usually obtain at least 80% of the line item amounts in determining a budget for the coming year. The last few items usually can be separated into three groups and usually require some board discussion. The first group of items are based on history and planning, but these amounts are relatively straightforward to arrive at: administrative, legal, maintenance (different types if the board separates them) are some of the items in the first group. These items occur every year, however the board will decide to adjust the amounts based on past history and plans for the coming year.
●     The second group are "specialty" items that may not appear in the budget annually, but the board needs to decide on whether the plans for the coming year will include them. Things like professional fees (are we planning to have a reserve study this year), pumping of septic systems (unless this is done every year - maybe on a rotating basis), significant road repairs, painting (unless the association has a paint fund) fall in this group.
●     The final group would be funding of the reserves, paint fund or similar type funds. This funding should be based on a multi-year plan for each of these association funds.
●     When all these amounts are known or filled in, add them up and apply the appropriate funding for each unit (are they equal, or is there a percentage formula to apply). The monthly condominium fee is determined. Sometimes, boards will feel that the fee is too high (or too low) and see where they can adjust the budget to meet the association's needs.
If the board tries to set the fee and back into the numbers that will support the fee the task becomes much more difficult. Now, lets go back to the challenge presented in the first sentence of this article: "How can the condo fees go up so much - it is the management companies fault" The straightforward response to this is: "The board worked very hard to develop the budget - let me please send you a copy. If you see a potential for saving money, please let me know, because I am sure that the board works extremely hard to identify ways to save money and would appreciate any help they can get".