June 30th, 2012 categories: Condo Knowledge
Condo association should have cash reserves in case the money is needed for repairs, new additions, refurbishing and emergencies. Many buyers overlook this issue . If a condo association does not have the funds for things that come up then they assess each owner for the money. Many times condo associations assess members for smaller things in order to keep the reserves in tact.
In each of your condo payments there is going to be money going into the fund for a rainy day. For those that do it, it is like living from pay check to pay check. If an association does not care care of updates and repairs all the members suffer as few new purchasers will want to live there.
All these decisions are make by the owners and a condo board selected by the owners. Many condo association have professional management to help them out. Some are much better than others. Best not to name them here but we know who they are in general. Its up to the members to shape the lifestyle of the association into a distinct personality of its own.
You should look at the annual budget to review the numbers to see what is being spent each month and how much is in the bank.
One good example example of how condos do spend funds when the need to and when they are making their home better. The Federal Fibre Mills in the New Orleans Warehouse District needed to refurbish the exterior windows after about 30 years since the last paint job. It was a large under taking that the members could see coming. At a cost of over $200,000 the job got done. They had to have an assessment to cover this large expense.
When the Federal Fibre Mills earlier decided to redo the lobby floors they had enough in the reserves to get it done. The members voted on spending money for the upgrade of lobby. It is still one of the premium lobbies in the world of condos.
One new item they voted on was to make any new owner contribute 2 months of condo dues to the reserves so it can be built up faster. The new owners have not contributed anything before so this is their chance. Most new developments require a two or three contribution to build up the reserves quicker.
The Metroview Condo in Metairie on the other hand is a newer conversion where everything is still newer. This does not mean things will not break but you have to be ready. They also collect for three months as they are still selling developers units. They put money each month into the reserve so they will have it when they are ready.
Lenders will also require each condo association to have a per centage of their annual expenses in a reserve so to take care of deductiables and future upgrades or repairs.
It does pay to do your homework to see how established your condo association is. I like to think of the better ones as a more mature person who understands that you need to save for a rainy day. Much unlike our Federal Government that can just print money…..