December 5, 2007
Why do some condo fees at Condos in Gulf Shores, Orange Beach condos and Fort Morgan Beach condos seem so high?
I had a wonderful conversation the other day with a lady, (Hi Kathy!), that owns a unit in Orange Beach condos called Regency Isle. It occurred to me after our conversation, that I have had countless similar conversations with prospective buyers, as well as sellers of condos in Gulf Shores, Orange Beach condos and Fort Morgan beach condos, about condo fees (Homeowner’s Association Dues) and what they cover.
I think of Homeowner’s Associations as small businesses, because basically that is what they are. They have income (from the property owners) and they have operating expenses just like any business. These associations have a Board of Directors and a President of the Board, which are comprised of property owners. The President and the Board are charged with collecting the dues and making the decisions about the day to day operation of the business, and how best to spend its money.
What do the dues cover?
As businesses differ, so do Homeowner Associations of condos in Gulf Shores, Orange Beach condos and Fort Morgan Beach condos, but here are some items that most associations pay from the HOA dues.
- Custodial Services
- Reserve Funds
- Water, Sewer and Trash Services
- Basic Cable TV
- Pest Control
- Common Area Property Taxes
- Common Area Maintenance – this would include elevator and swimming pool maintenance if applicable
Telephone and electrical service is usually something that the property owner pays separately, but there are cases in which some of the larger complexes and rental companies have switchboards and phone service as part of the dues.
Some of the larger and/or upscale condominium complexes have full or part time security officers. This can be quite expensive as you might imagine, and must be added into homeowner’s dues.
Now here’s the kicker! Insurance. The world of insurance for condominium associations changed with a certain “tropical occurrence” (you know, we don’t use the “H” word anymore), as of September of 2004.
Before 2004, insurance was normally covered by the condo fees. Prices, however, increased dramatically as complex policies came up for renewal and most associations did not have the reserve funds to pay the increased premiums. So what did they do? They assessed the homeowners for the difference. Some made the decision to continue to assess for insurance, while others felt it more prudent to increase the HOA dues to cover it.
It’s pretty much a foregone conclusion that insurance rates will never be back to 2004 levels, but since we have been through a couple of seasons with very little activity, premiums have begun to decrease. I believe we will see most associations begin to fold the insurance premiums back into the association dues as rates level off.
What do you think about future insurance rates? I’d love to hear from you. Post your comment and let me know.
Are you thinking of buying or selling condos in Gulf Shores, Orange Beach condos, or Fort Morgan Beach condos? Give me a call at 251-978-7118 or email me at John@CondosinGulfShores.com. I’m always happy to answer any questions you might have.
John Ricks
RE/MAX of Gulf Shores
Gulf Shores, Alabama
www.CondosinGulfShores.com
John@CondosinGulfShores.com
251-978-7118