1. Simple Budget: You need a budget. This is important to plan for the expenses of the condo and make sure funds are available. Pay as you go is a risky proposition. Just add the recurring expenses: master insurance, utilities, maintenance, etc., and divide by 12. This monthly condo fee should then be assessed on each unit based on the condominium documents. Some condos assess by percentage interest, while other condos pay equally. Whatever you do, follow the condo documents.
2. Condo Reserve: Condominium documents may vary, but underwriting guidelines at most lenders will require a 10% reserve. Every time a unit owner purchases with a mortgage or refinances their current loan, the bank will need the condo to keep up the reserve. This means 10% of the actual budget. Open a bank account in the name of the condominium for your reserve. Use this account to collect the monthly condo fee and payout expenses.
3. Sixty Days Late: When the monthly condo fee is due, an automatic lien on each unit arises in favor of the condo association. If the condo fees are not paid within sixty days, to the tremendous advantage of the condo association, this lien can take priority over the first mortgage on the unit. The association should involve an attorney every time a unit owner is sixty days late. The Unit Owner would be responsible for attorney’s fees and costs. All the condo fees and collection costs will be an enforceable lien on the unit and some of these fees and costs might enjoy priority of the first mortgage on the unit.
Whether your association has two units or six, follow these simple rules and you will take a major step toward a healthy condo.