In a condominium, the fees fund two categories: operating expense and reserve funds. The operating expenses are the monthly costs required for trash, grounds maintenance, and snow removal, administration and condo management.

The reserve funds represent the anticipated cost of replacing and repairing common elements of the property like roofs, sidewalks, and elevators. The amount of money needed in the reserve fund is determined by a study which by law, is undertaken at least every 5 years for the purpose of determining how much money is needed to repair, replace and restore the capital components of the property. Every year condominiums (in Virginia) are required to review their study results and confirm that they are reserving enough money to repair, replace and maintain the property.

Before you choose this form own ownership consider:

• Condo life involves a lot of governance
• Well-run condos always include an active membership
• Some leadership decisions might be unpopular, but ultimately protect the membership from unplanned assessments by insuring that reserves are adequate to meet the expected and unexpected repairs

When looking at condominium ownership, you will have a chance to review a  Resale Package that will include the condominium bylaws, rules and regulations, current financial reports, and audited financial reports. Review these carefully looking for potential problems.Questions to ask should include:

• What do the audited financial statements say about the reserve funds? Are they adequate?
• What major projects/repairs are anticipated for the upcoming year?
• What projects were completed in the prior year?

The other thing to consider is what type of condo environment are you looking at? Is there a Doorman, a Concierge? The cost of people always go up, so if you are looking at a condo with these types of amenities you should expect a slow steady rise in condo fees.

Next week: Are you condo fees too low?

While helping a couple narrow down the focus of their Reston home search recently, the husband made a statement that he would never own a condominium because the fees were in his opinion “a total rip-off.”

The fees at this Reston Condo cover spectacular community amenities including: Concierge, Dining Rooms, Hot tub, Party Room, Pool, and Spa

As a condo dweller active on my condo’s Board of Directors for years, I’ve heard this sentiment on condo fees many times before. So I decided to take the opportunity to talk about the true cost of ownership.

When you own a townhouse or a single family home you understand that sooner or later you will have replace your water heater, roof, windows, siding, appliances. Hopefully you have a financial plan that allows you to save for the replacement of things as they wear out.

It is a “pay me now or pay me later” situation, but you are going to pay. Most people would prefer to save a little bit each month rather than face a large unplanned expense.  Condo management requires this forced savings.

Every year condominiums (in Virginia) are required to confirm that they are reserving enough money to repair, replace and maintain the property. If a condo has not adequately reserved (saved) the money needed to make repairs and has a sudden failure in a common element, it must make a special assessment in order to make whatever repairs are needed to maintain the property.

So, a rip-off? Not if your property is properly maintained. More on that next week.