Living in a condo offers unparalleled convenience. With shared responsibilities and minimal maintenance, it’s no wonder so many people are drawn to this lifestyle. However, as the real estate landscape evolves, condo associations must keep up with these changes to avoid pitfalls that could hurt property values and homeowner satisfaction.
Over the past six months, we’ve identified several trends impacting condo associations. If you’re part of an association, now is the perfect time to take stock and make sure your building is set up for long-term success.
5 Key Areas Every Condo Association Should Focus On
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Homeowner Association Fees (HOAs): Keep Pace with Costs
Many associations underfund their reserves, a savings account for the building, by maintaining fees that don’t reflect current expenses. Traditionally, associations aimed for $1,000 to $2,000 per unit in reserves. With rising costs, however, $2,000 to $3,000 per unit is now the better benchmark.
Illinois allows HOAs to increase fees by up to 15% annually without requiring a full membership vote, but many associations either skip increases or limit them to just 3%. Regularly reviewing and adjusting fees is crucial to avoiding underfunded reserves and surprise special assessments.
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Shop Around for Operational Savings
Are you overpaying for services? Insurance premiums and vendor contracts have soared in recent years, yet many associations stick with the same providers out of convenience. One of our clients saved $4,000 in a year simply by renegotiating their trash service contract.
From insurance to maintenance vendors, shopping around and exploring competitive bids can lead to substantial savings without sacrificing quality. A little effort can make a big impact on your bottom line.
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Address Deferred Maintenance Proactively
Deferred maintenance is more than just an eyesore—it can directly impact your property values. After the tragic high-rise collapse in Miami in 2021, Fannie Mae and Freddie Mac tightened lending standards for buildings with significant structural issues or city violations. If buyers can’t secure loans for units in your building, property values will decline.
To protect your investment, make maintenance a priority. Stay ahead of repairs, plan for major projects, and ensure your building complies with all safety regulations. Proactive maintenance isn’t just responsible—it’s a financial safeguard.
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Ensure Compliance with the Corporate Transparency Act
If your association operates under an LLC (as many do), you may be subject to new federal reporting requirements. The Corporate Transparency Act requires LLCs to file ownership or officer details, and failure to comply could result in fines of up to $500 per day.
While this law is currently being debated in court, it’s better to err on the side of caution. Work with your accountant or attorney to ensure your association meets these requirements.
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Reassess Rental Caps and Restrictions
Outdated rental policies can hurt your building’s marketability. During the 2011 financial crisis, lending rules penalized buildings with over 25% rentals, leading many associations to impose strict caps. But those restrictions have since loosened, particularly for owner-occupied units.
Now, it’s time to revisit your policies. Consider allowing up to 45% rentals to strike a balance between marketability and financial stability. Additionally, rethink rules like “owner-occupied for one year” requirements, which may deter buyers. Flexibility in rental policies can make your building more attractive to potential homeowners.
The Bottom Line
Managing a condo association is no easy task, especially if it’s not your full-time job. Yet, with thoughtful planning, regular updates to policies, and proactive financial management, your association can thrive. These efforts not only enhance property values but also foster a stronger sense of community within the building.
Have questions about your association’s health or need guidance on getting it back on track? Reach out to me and the Chicago Lifestyle Team. We’re here to help you navigate the complexities of condo management and ensure your association is set up for long-term success.