Can the homeowners association raise prices at all. I'm looking at a condo but want to know what the process would be if they needed to raise the price from 200$ to a higher price?
They can and they do. I've owned a condo unit for 8 years and the dues have been raised 3 times. It's almost doubled since I purchased it.
Is there laws on how much they can raise it by?
I know of no laws limiting the amount of condo fee increases, but there may be localities where there is some law like rent control.
Besides condo fees they also have the ability for "special assessments". This happens when there is some large expense that the association can't cover out of their funds so they assess all the owners to pay the large bill. For me it has happened for new roofs, new siding, repaving the parking lot and for extraordinary high snow removal costs (think Buffalo on smaller scale.) They assessment are not so special and have cost me thousands of dollars. Some times condos purposely keep the monthly fees low to attract buyers, then make up the difference with special assessments.
Ask for a copy of the bylaws and see if it's written there. Ask the community manager or HOA President for a 5 year (or even 10 year) history of HOA dues and assessments. This will give you an idea of how many times the dues have been raised and by what percentage over that time period. Some HOAs cover expenses by raising the dues, some by special assessments, and some do both.
Also ask for the financial statements of the HOA to see how healthy the books are. I was interested in a condo and wondered why the HOA didn't fix the rotten facia boards on the back of the building. I asked for the financial statements and they only had $4,000 on the books...and the HOA dues were $150/month. I sensed a special assessment or HOA increase forthcoming, and walked away.
I know my sister had a condo - one of the workers ran off with all the association money- so all the condo owners had to pony up again
@Eric Bergey there is some good advice given here, especially watching out for financially unhealthy HOAs and the resulting assessments. I have one that is well managed. They hve never (knock on wood) had a special assessment and the dues have funded parking lots, roofs and other capex. Not surprising, dues go up every year and are up 40% from when I bought 7 yrs ago. Aside from the dues and assessments, you answer to a board who tells you what you can and cant do with your property. My experience: they are quick to send you a letter and threaten a fine because your tenant did not clean up after their dog. People on power trips. Mine has gone well, but i would never buy another.
And some condos don't allow rentals or have a limit. 2 associations where the rental limit was 10%, so 90% had to be owner occupied. In both of those condos, they had already reached their rental quota, so no more rentals, and they had a waiting list for in the unlikely event that somebody gave up their rental slot.
And some condos prohibit or limit pets. One where I had a condo permitted maximum 1 pet who had to weigh less than 40 lbs. And they did enforce it by actually weighing your pet, and it was either go on a pet diet or leave.
Read through the bylaws for any limits on how much dues can increase, and the process for levying special assessments. And if you buy it, please attend your board meetings, vote, and participate. I get so frustrated when everyone calls the HOA "they", you as an owner are the HOA. I know there are some crazy HOA's out there (fortunately none of mine are) so when buying, always get as many meeting minutes as you can - this will tell you what kind of issues are on the table, and how long they take to get resolved. And if there is a meeting coming up, ask if you can attend as a potential new owner. I've only ever had one HOA say no to that, and I took it as a sign to run away.
Also, your lender will review the financials, but if you're purchasing cash or want a 3rd party opinion there are HOA experts who can review all the docs and finances for a fee.
Originally posted by @Eric Bergey :
Can the homeowners association
As a condo owner YOU are part of the homeowners association.
Best thing to do is to stay in the loop with what's going on with the association. Talk to the property manger. Talk to the board members, or even better, be a part of the board. By staying involved, you have more control over the actions of the HOA and will understand the motivations for increasing HOA dues.
Thank you everyone. Ive been out of the loop for a bit but there are some helpful things to think about here. i was just looking at one last week but walked away due to how much HOA was. but i will keep all this in mind now.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.