Condominium Fees

As you are searching through real estate in Ocean City MD and the surrounding areas you likely have noticed the condo and/or HOA fees noted on the listing reports.  I get a lot of questions regarding these fees and thought it would be helpful to put together and article explaining them.  Condo and home owner association fees are the monthly maintenance costs associated with a particular building or community. Each respective building or community prepares a budget each year and these costs are then split amongst the properties that make up the community.  While they all have their subtle differences there are some commonalities among them, which are outlined below.  Condo fees are a bit more involved so we will examine them first and then review HOA fees at the end.  Keep in mind that anytime you buy into a condo or home owners association you are entitled to a review phase per MD law.  You will be given the opportunity to review and assess the respective community that you are buying into and in the event that you are not satisfied with it you have the option of being released from the contract.

Insurance

Most condo fees cover your fire, flood, hazard and general liability insurance through a master insurance policy for the building. In essence, if something happened to the building the master insurance policy that is paid for through your condo fee would rebuild the building to its original grade.  The only insurance your responsible for is contents insurance or an HO6 policy.  In the previous scenario your HO6 policy would replace your furnishings, personal belongings and any improvements you made to the property above the original building grade.

Utilities

The condo fee will cover your water usage and trash pick up. In most situations you will be responsible for your electric, sewer, gas and cable bills. Some condo associations include basic cable in the condo fee and in the event they do you will find it disclosed in the listing remarks or the resale package. 

Property Management

Most buildings utilize a management company to run the day to day affairs of the building.  They will handle the scheduling of maintenance projects, prepare resale packages, coordinate the finances, conduct board meetings, etc.  Some smaller buildings and associations will manage themselves to save on management costs and the owners in the community will perform the tasks mentioned previously.  Having a management company is a plus as this is what they specialize in and can ensure the property is run properly and anticipate future needs.

Common Area Maintenance 

When you buy a condo or town home you are essentially responsible for the interior of the unit and the association is responsible for all of the exterior elements.  The condo fee will cover maintenance and replacement of things like the roof, walkways, railings, parking areas and landscaping.  A well run building is planning on the future replacement of these items and allotting funds in the reserve account for them to avoid the potential for special assessments.

Reserve Fund Build-Up

In well run buildings a portion of the condo fee goes toward the reserve fund for future projects.  This is very important as without reserves there is the potential for special assessments.  Once you receive the resale package there will be financial statements included indicating how much money is currently in the reserve account and what portion of the condo fees are going toward its continued build up.

Amenity Usage and Upkeep

As a general rule, the more amenities that a building has the higher the condo fees are going to be.  The condo fee will cover the maintenance and upkeep of elevators, pools, fitness centers, etc.  Your condo fee will cover the usage of these amenities for you and any guests or renters that you may have.

Home Owners Associations

HOA fees are going to cover the basic infrastructure of a community.  Typically they will cover things such as common area maintenance and expense (entrance landscaping, community lighting, etc.), general liability insurance for the community and property management.  Large communities that offer more infrastructure, such as Ocean Pines, will include more items however they also have more homes to cover this expense.  Ocean Pines has a basic HOA fee that covers all of the basic infrastructure and you can then opt into the various amenities for an additional fee.  A community like Sunset Island or Glen Riddle has an HOA fee that covers the basic infrastructure, but also includes the full use of all the available amenities.  All of this information will be disclosed to you relative the respective community prior to your purchase and will then be confirmed and clarified in the resale package.

When analyzing condo and HOA fees you don't want one that is too low as all necessary items are likely not being covered, which can lead to a deteriorating property and special assessments down the road.  In addition you don't want one that is too high as you will likely be paying for someone's previous mismanagement.  The review phase is very beneficial as it will give you a detailed look into the respective association and give you the opportunity to ask any questions that you may have regarding specific items.  If you have any additional questions regards condo fees or anything else pertaining to real estate in Ocean City MD and the surrounding areas feel free to contact me anytime and I would be glad to help.


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