Condo Maintenance Liabilities

For many, part of the attractiveness of owning a condominium is the lure of no maintenance responsibilities.

And with promotional statements like, "A modest, monthly condominium fee assures that all maintenance will be taken care of for you!", the temptation grows. For the first time condo buyer, little thought is given to exactly how the process works, who actually does the maintenance or who ultimately makes the decisions about what maintenance gets done.

In truth, from our experience with many condominium owners associations, maintenance is hardly something that "is taken care of for you"!

First, there is the question of who is responsible for what. While the exact definition of ownership will vary from one condominium to another (if you haven't, you should carefully read your condominium declaration and by-laws!), typically the individual owner is responsible for repairs necessary within his or her unit, including the inside surface of the outside walls, floors and ceilings. Conversely, the owners association is responsible for all exterior surfaces and common area facilities (swimming pools, landscaping, paving, etc.).

As with any agreement, there are always some "gray" areas. For example, chimney cleaning may be the responsibility of the individual owner while chimney repairs belong to the association.

Skylights tend to be another "gray" area. Most association rules make windows the responsibility of the owner and roofs the responsibility of the association. Thus, skylights become the subject of some debate. A practical resolution may be to split any cost for skylight maintenance or repairs between owner and association. This sometimes meets resistance among owners if only a few units have skylights. "Why should I pay for their skylight!"

Many of the rough edges of defining responsibility for maintenace have been worked out with more recent condominium documents. Thus, the older the association, the higher the probability of encountering difficulties in defining responsibility.

So, condo ownership is hardly maintenance free. At a minimum, you can expect to take care of your own, "inner" space. But there's more!

Let's use a small (fifteen units) condo complex as an example. How is the condominium fee spent? A typical annual budget might look like this:

$ 2,000.00-Landscaping

$ 4,000.00-Lawn Mowing

$ 6,000.00-Snow Plowing

$ 2,000.00-Painting

$ 6,000.00-Insurance

$ 2,000.00-Swimming Pool

$ 3,000.00-Common Area Utilities

$ 25,000.00-TOTAL

Thus, the fifteen owners must share a $25,000.00 annual operating expense. This means a monthly fee for each owner of about $140.00. Please note that this is a hypothetical example. These costs will vary widely from one complex to another. Costs not noted but possible in some facilities include rubbish removal, security, sewage and others.

So far, it seems simple enough. But there are a few other things to consider.

First, unless one of the owners is willing to take responsiblity for handling the bookkeeping and financial affairs of the association, there will be an addional expense to hire someone for that task.

And even more importantly, a reserve fund must be established.

You see it is the association's responsibility under most condominium by-laws to establish a reserve fund to provide for future, major maintenance such as resurfacing roofs, relining pools, repaving parking areas or any other major repairs that may be required. This is typically a legal requirement of the association, not just a nice idea. Further, without an established, ADEQUATE reserve fund, new owners may find it difficult to mortgage their purchase. Increasingly, banks are checking to see that an adequate reserve exists. Without it, a new owner buying into a ten year old condominium may be faced with an unexpected assessment for major repairs. Ten years down the road that can get very expensive.

The exact amount appropriate for a reserve fund is often difficult to establish.

When we prepare maintenance plans for condominium associations, we project the cost of repairs that should be expected in the next ten to twenty years. This can serve as a basis for determining the annual amount necessary.

It can get expensive! If a reserve fund was not started when the project was first compeleted, the annual funds required could equal or exceed the annual maintenance costs. In other words, the condo fee could double!

And then there's the question of who makes the decisions? Remember our opening comment, "for a modest, monthly condominium fee, maintenance is taken care of for you"? Well, by who? Have you guessed by now? Yes! It's you! You, as an owner, must make the decisions.

In our example of a fifteen unit complex, all the owners will typically meet to make these decisions. In a larger complex, there may be a paid manager and an executive committe or board of directors. No matter what the organization, the owners (that's YOU) make the decisions.

In our work with condominium owners associations, it is interesting to note how many owners refer to "they" when discussing the management of their condominium complex. Unlike an apartment complex or other rental environment, there is no "they", there's only "us", the owners.

So a dilemma often arises.

In your own home, not a condo, you can make unilateral decisions about maintenance, you can do what you want and you can ignore what you want. Not so in a condominium! First, decisions are the result of meetings and agreement (or disagreement!) among the owners.

Second, maintenance cannot be ignored. Procrastination cannot be tolerated. Spending the reserve money on an exotic vacation cannot even be considered. Proper management of the facility becomes a formal, legal process. As a director, you can be liable for your actions; other owners may hate you (or worse, sue you!).

Even more frustrating is the need to collectively make decisions about things you may not understand.

Exactly when should the roof be resurfaced? How often should the driveways be resealed? Who should we choose to handle the lawn maintenance? There are many questions that must be handled by a condo association which will go beyond the knowledge of the well-intended owner who has volunteered to serve as a director or officer.

A condominium complex is like a small community; within established bounds, it governs itself. Thus, there are advantages and disadvantages. Since our society is often inclined to find someone else to blame when things go wrong, the absense of a "they" (landlord, builder, boss, etc.) leaves a condominium owner with little choice but to take responsibility for his or her (and the association's!) own actions. For some that is an opportunity, for others it is an enormous frustration.

Condominiums have many advantages; common facilities often not affordable for an individual owner, a community of friends, attractive locations and many, many more. From our experience they also have the disadvantage of forcing cooperative action for maintenance and management, something with which not everyone is comfortable.