Deciphering Condo Dues. Why Some Cost More than Others.

During the past couple of weeks, I’ve had two clients looking to purchase a home under $250,000. One important factor, other than the number of bedrooms/bathrooms/size of the garage/age and location, is the amount of the condo dues versus none that are required for a single family attached or detached home. Condo dues made a difference in my buyer’s qualifying for either a $230,000 single family home or a $200,000 condo because unlike the costs of operating and maintaining a single family home, condo dues are factored into a buyer’s mortgage qualifications.

Reason would have it that all condo dues should be about the same but, in reality, they can vary widely. In this price point, I found dues ranging from $125 to over $300 per month. Condo dues consist primarily of two categories. The first category is the monthly operating costs which would include shared expenses among all the condo owners for water, sewer, refuse, snow plowing, insurance and property management fees. These costs are fairly consist among all condo associations as water and sewer rates are uniformly established by the Regulatory Commission of Alaska. However, even within a condo association, dues may vary for water and sewer based upon pro-rata usage determined by the size of the unit. In a well-run association, a two bedroom unit should pay less for water and sewer than a three bedroom. The extension for water and sewer from the main line in the street to the building, is called a ‘pigtail’. There is only one pigtail each per building for water and sewer so if your neighbor is a big user, you’re contributing to the operating costs for his Jacuzzi and extra loads of laundry.

The second category is reserves and this is where costs, and thus, dues can vary dramatically. If your condominium is built on a publicly dedicated street, the Municipality of Anchorage assumes the responsibility for its maintenance, repair and replacement. The same is true for your water and sewer main line extensions. Even though a condo development’s streets, water and sewer are built to MOA standards, if they are considered private, reserves must be established for their ultimate replacement. This ‘private’ category most generally occurs when all the condominiums are built on one tract of land vs. several individual lots.

Most of us now understand the difference between a full service condo and a site condo. About ten years ago, some innovative developers and lawyers found loopholes in the Horizontal Regime Act which allowed developers/builders to envelope a townhouse style condo within an airspace, making the owner responsible for all exterior maintenance and replacement, including siding, roofing, driveways and landscaping. Thus, we had a plethora of duplex condos built which in reality perform like single attached or detached family homes. Their dues run about $125 per month vs. the full service condo rate of approximately $250 per month.

In Alaska, snow plowing and landscaping are big expenses. If the condo developer has not allocated space on his site for snow storage, it will have to be hauled away, thus, raising the monthly dues. A condo developer might spend extra dollars initially to make his development attractive to buyers but if adequate reserves for replacement and maintenance are not in the budget, moose eaten trees will not get replaced and the vision the developer had for a lushly landscaped development has just been eaten away.

So the bottom line is you get what you pay for. A well-maintained development will bring you more opportunity for future appreciation than one where landscaping is not properly watered and roof repairs are left up to your neighbor who can’t afford to make them because he wasn’t required to save for its replacement.