When to lower condo regime fee?

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When to lower condo regime fee?

Postby qwerty11 » Thu May 09, 2013 9:16 pm

I'm current treasurer on the board of our condominium complex. Our finances consist of an operating budget (about 250k/year) and a reserve fund. Every three years we renew our reserve study to determine how well funded we are for future expenses. We are currently about 75-80% funded for the next 30 years worth of projected expenses. Of course the reserve is funded by a certain % of our monthly regime fees, approximately 25%.

My question is, when should a reduction in regimes be considered because reserve holdings are adequately funded? Is there an industry standard for reserve funding? Just keep going until it is 100% is funded, then stop all funding until holdings drop? The annual reserve contributions are actually dictated by the reserve study, and therefore change (gradually increase) annually. Not sure how to approach this "fortunate" situation and looking to pick some brains. Thanks!

To summarize, what is the proper indicator for a reduction in regime fees?
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Re: When to lower condo regime fee?

Postby psteinx » Thu May 09, 2013 11:00 pm

I'm not a condo owner, but wow!

75-80% funded for 30 years means roughly fully funded for 22-24 years. That seems VERY excessive, especially if those reserves are (as seems likely) earning minimal or no interest.
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Re: When to lower condo regime fee?

Postby adam1712 » Thu May 09, 2013 11:48 pm

One key thing to look into is the FHA guidelines for reserve fund requirements. If I recall correctly, it states 10% of dues must be allocated towards reserves. Resale and refinancing can be hurt if the guidelines aren't met.
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Re: When to lower condo regime fee?

Postby stan_the_man » Fri May 10, 2013 10:41 pm

I know this sounds more complicated, but I would keep the dues the same and try to rebate the excess dues on a regular basis (maybe once a year).

If you lower the dues, it may make people budget to that new lower amount and cause issues when you need to raise them again in the future.
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Re: When to lower condo regime fee?

Postby jeffyscott » Sat May 11, 2013 11:56 am

psteinx wrote:I'm not a condo owner, but wow!

75-80% funded for 30 years means roughly fully funded for 22-24 years. That seems VERY excessive, especially if those reserves are (as seems likely) earning minimal or no interest.


I'm not either and likely never will be, one big reason being these fees over which you have no real control. Maybe I am missing something, but if the association has accumulated this much in reserve, it would seem to me that they have been overcharging the condo owners.
press on, regardless - John C. Bogle
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