2007 Budget Advice?

Hello and thanks in advance...

I am the treasurer for our association which is entering our second year, and we're just getting around to approving our 2007 budget. All of us on the board are relatively new to condo ownership, and our primary concern is proactively maintaining the integrity of the physical building.

A couple of notes about the building...
-33 units
-Brick exterior
-Brand new roof and heater
-Average price on unit is 300-400k
-VERY healthy operating account and almost 20k in reserves
-Average assessment is $180-$200

A few questions:

1.) Does it make sense to adjust the assessments each year up to match average inflation? (3% or so). And, if yes, is it better to do a one-time assessment to meet that 3% or does it look better to just increase the monthly assessments? We view these as investments, so if anyone has perspective there, we'd be grateful for some advice.

2.) As for preventative maintanance, are there any ideas on things we should be doing this year? We'd like to plan for these in the budget.

Thanks again!

Hi Delfin:

The best budgeting would be to check on how much costs are rising this year. For example, if the HOA pays for water for irrigation, call the water district and check to see how much rates are going up. If the condo also pays for water, check on that rate, too; and be sure with each water bill that the Association pays, to check on the classification of the water usage. The same goes for electricity (some companies charge a different rate for stretlighting than for other use) and every other bill that the HOA pays. That way, you get an accurate estimate of what the actual costs are going to be. Some items may go up 3%, some more, and some less.

Preventitive maintenance should include such things (as applicable) as:
roof and/or gutter cleaning
treatment for moss/algae on roof as needed/recommended
maintenance as recommended by either manufacturer or installation contractor for any components that the HOA maintains (see your documents, and write for information as needed).
Dryer vent cleaning (should be done at least once per year)
Chimney cleaning if you have wood fireplaces
etc...depending on the components present and the obligation for HOA to maintain.

I would recommend (if the developer didn't get one) to have a professional reserve study done. It helps you to plan out the long-term maintenance of your buildings & grounds so that you won't need a special assessment when the roof or asphalt needs repair/replacement. If you have one, you may want to get an off-site update to it, since costs may have varied and for sure, interest rates have.

It's best to set the budget and then raise the assessment to pay for the costs. If the budget year starts in January and it's now March, you'll want to collect an increased amount the first month to make up for the increases you didn't get paid yet, but the rest of the year, divide by 12 for the assessment amount. Just let the owners know ahead of time so that they can save a bit extra to cover the cost.

By the way, there is no way we can tell if your assessments and reserves are too high or too low without an onsite visit and a review of your documents; it's like comparing apples to oranges, since every HOA is different.

Best of luck!

J. Patrick Moore, CMCA