CONDO BUDGET ALLOCATED INTEREST

Do all condo associations that charge dues based on allocated interest (square footage) do so for all the line items in their budget even though several items are flat rate expenses; tax preparation, bank fees, legal fees, office/misc. supplies? A new owner in our association is questioning the fairness of dividing these particular costs according to allocated interest when they have nothing to do with the size of any unit. She certainly agrees, however, that costs such as insurance, maintenance, and repair, should be divided according to that formula. Are there alternative solutions for this when preparing the budget?

Catherine,

Let me take a guess. The person raising the questions owns a larger-than-average unit.

Your declaration should state how expenses are to be allocated. If it is strictly on a square-footage basis, there is not much room to implement some other system without amending the covenants.

My HOA property is a 40-acre parcel in a rural area made up of 1600 other parcels, ranging in size from 36 to 200 acres. We base our assessments on acreage and our primary purpose is to maintain about 300 miles of dirt roads. From time to time, someone complains that he should pay less because he does not drive as far as others, or that the does not live there full time, or that he never visits his property at all, or that he travels only on a bicycle. I see this as just a variation on the old argument that I should not have to pay school taxes because I have no kids in school.

The fact is that every association has expenses and those expenses must somehow be divided among the owners. It is seldom fair to each and every owner, but it is the system you have. Those owners who find it grossly unfair always have the option of finding some other place that is, in their minds, fair.

My guess is that if you try to implement a system of allocating some fees across the board and others by square footage that in the end your association will gain very little and the complaining owner will see only an insignificant reduction in their assessments while other owners will see a slight rise in theirs.

If this person persists, ask them to prepare a budget based on their vision of what is fair. Let them show you how much this will effect each owner's assessment. Since it is their proposal, put the burden on them to show what the results would be. That sounds fair to me.

Carol

Larry said:

My guess is that if you try to implement a system of allocating some fees across the board and others by square footage that in the end your association will gain very little and the complaining owner will see only an insignificant reduction in their assessments while other owners will see a slight rise in theirs.

If this person persists, ask them to prepare a budget based on their vision of what is fair. Let them show you how much this will effect each owner's assessment. Since it is their proposal, put the burden on them to show what the results would be. That sounds fair to me.

I agree. Candidly I doubt she will find any significant difference but place the burden to show/prove such on her.

Yes, John46, I agree with you & Larry. My first reply also suggests that the change might be very small. Our "sq. ft. variance" was established by our developer.

I like the idea of putting the ball in the new owner's court, but the board must be certain of exactly what the governing documents say. Our CC&Rs, for instance, state that the sq. ft. variation exists, but they only are named in other documents filed with the state that most owners don't have unless they requested them. In our case, the line items that vary due to sq. ft. are specified in our Dept. of Real Estate Budgets. And I have no idea how anyone can change those. Since reference is made in our CC&Rs, I'm guessing they'd have to be revised if the board agrees that gross inequities exist.

I think the new owner has way to much time on her hands.

This was a CC payment schedule you agreed to when you purchased your property and now you wish to have a volunteer Board give more of their time to break down the specifc usage costs for each owner? Just hwere does that ever end?

We have a pool I don't use the pool therefore I am owed money. Now my neighbor has three kids who all use the pool plus their Father and on occasion when the wife has her boyfriend over that would make six how do we charge for that usage? Certainly, I am paying way to much for this service.

I live alone, my neighbor has three kids the water and sewer is paid through the CCs now I take one shower per week while the neighbors all shower twice a day certainly I should be getting some money back. And if so I might start showering once per month or suggest I get to pay per shower!

And as Board members you get to have these discussions and be asked to do some MORE work in this regard for nothing!

And if and when you don't then the Board is not doing their job!

Carol

Based on what you say, the apportionment was in the docs from the get go, so the BOD does not have to defend it. They are simply applying what "all" had agreed to.

Docs can be changed but one has to understand (the new complainer) what is involved. Does the complainer think those whose dues might go up, will agree to change?

Some of us think that if a financial breakdown is done on each line item that the differences will not be significant. I base that on the line items mentioned are far from the major portion of the budget. As an example what the accountant charges for doing the income tax (say divided by 100 units) compared to say insurance apportionately divided by the 100 units.

As a reference point, what is the higest and lowest dues amounts? Also if not an issue, could you break it down like A pay B, C pay D, E pay F, etc.

Thanks.

CatherineS3,

Since a “new” Owner is questioning, perhaps this is the first time they have lived in, or owned a Condominium Unit.

If so, simply tell the new Owner that you believe that your budget figures, line items, and expenses are presented correctly. (I assume the Budget and Annual Expenses are arrived at basically as BruceF1 posted).

Refer the Owner to your Declaration and/or CC&Rs, and ask where in the Declaration and/or CC&R’s it states differently. Have the new Owner research those Documents to find out what they say about “common expense liability”.

In your association, those percentages may be based on Square Footage, but that can vary from Association to Association.

For example, what about a Condo Association that bases percentage of ownership on “the view” – those with “a view” own a larger percentage, and those with “no view” own less, even though the square footage of all the Condo Units may be the same.

As others have posted, what a particular owner’s idea is, of fair, may not agree with what your Condominium Documents state.