The Surprising Truth about Maintenance Fees and Homeowners Dues

Where the heck does all the money go? Your fees or dues seem high, the whole community sends their payment each month to the Management Company, someone MUST be making a lot of money!

I was recently speaking with a customer and he said, “…we pay you guys a lot of money!” I replied, “Sir, I believe our piece of the pie is very small compared to other vendors.” Well you can bet as soon as I was off the phone, I ran a pie chart of this particular association’s monthly budget to assure myself I had had not misspoken and also so that I could have a factual and visual instrument that I could send this customer.

Here is what the pie chart reflected (in part due to limited space):

These three items alone represent 55.08% of the overall budget each month. Insurance represented another 10% of the budget. As an aside, management fees represented only 3.92%.

As an association member, it’s important for you to know where your dues go each month. The community’s budget is sent out each year to every homeowner. Look at it. Review and consider it. Know where the money is going. In most cases these days, utilities, employee costs and insurance top the list. Does that mean we should get rid of employees and cut back insurance coverage? Absolutely not. In the case above, should we cut back on repairs and maintenance? NOT a good choice. What it does mean is that these items are important and expensive parts of running a business.

Know this. The board of directors at your community NEVER enjoys approving fee increases. They don’t usually receive pats on the back when fees are raised. They are, however, OBLIGATED to do so when necessary to counter increasing expenses, meet reserve requirements and act as prudent businessmen and women. It is the Board’s duty to review the expenses to see if there are any areas that need re-assessing and investigating, such as: Is the irrigation water used properly and efficiently? Are there timers on the exterior lighting and are they set properly? Would it be appropriate to do a water conservation study on the landscape irrigation system and other common water uses? Is the pool and spa kept too warm? Most of these investigative tasks are delegated to the onsite manager by way of a directive. The onsite manager then reports back to the Board on the findings. Many of these items are investigated during the year, not just at budget time. When all the expenses are reviewed and totaled, the income needed to support these expenses is then established. The income is then divided among the owners according to the method set forth in the governing documents.

Some Boards and owners would like to see this process reversed. For example, the board instructs the manager to set the monthly fees at $250 per owner (because that’s what the members want) and figure out how to pay all the bills. Unfortunately, this theory doesn’t work in business or personal financing. In most cases, some bills are going to go unpaid because there will not be enough money to go around. When this happens, the management company has to delay payment until more funds are received. Vendors aren’t very happy, the association incurs late fees, the credit score of the association is at risk, and most of the time reserve funds are tapped to make up the deficit. Not good. Not good at all.

Pay attention. Be sure your community is budgeting properly. Be sure your board members are being fiscally responsible not just trying to win a popularity contest. Attend the board meetings whenever possible. Seek answers to your questions from the management company. There is nothing to hide and everything to gain from obtaining the facts about your community.

Susan Gregg, CMCA®, PCAM®
Sr. Regional Vice-President of Hawaii
Certified Management, Inc.
Kailua-Kona Hawaii District Office
Kona, HI