Re: allocation of reserve expenses
From: Sharon Villines (sharonsharonvillines.com)
Date: Thu, 1 Apr 2010 05:19:14 -0700 (PDT)
At Takoma Village we include reserve deposits in our annual budget so they are calculated on the same basis as our other costs. We do a 50/50 split between percentage interest and 1/43 for 43 units.

The percentage interest is supposed to include the variance for extra limited common space, etc. Some of us aren't sure it does. We do have a formula for the sq footage of basements -- their rate is 1/5th of the square footage charge of unit space. That was apparently researched and is standard practice for unfinished space that is used. If the homeowner finishes it, that is their expense and the basis for their fee doesn't rise.

The basis on which condo fees can be apportioned varies by state. Florida, for example, requires either equal division or by square footage -- they can't be combined. In my experience, square footage is standard and that is what the condo law in DC sets as the default. Other methods can be used if they are set in the Declaration. Communities where the houses or units are all the same size are more likely to use the equal division method.

Establishing a set formula and including all costs in the annual budget makes for smoother sailing. You won't have to face the agony of deciding every time an expense comes up. We have had some new people who want to charge individually for front doors to be painted, for example, because we all have one. It took months to determine which units were going to paint their own and then months to collect the money. Our management company was supposed to collect the fees but that took arrangements too. Then people had $50 balances and had no idea what it was for and it was two years down the road and the books weren't clear. At least one unit that was supposed to paint their own door, still hasn't.

If the fees for affordable units are capped, I would recommend deducting that amount before you do the percentage calculations on the rest. Or establish a percentage that is lower than the rest but becomes the standard for all fees.

After doing the percentage interest thing, and the "what is fair" thing, I understand why condo builders make them all the same size and materials. Down the road it makes apportioning costs MUCH easier. No argument about "that deck is bigger than mine so I should pay less." "I don't have any stairs so why do I have to pay for painting them?" Even in cohousing this is not constant but annual. Including all costs in the annual budget does blunt those arguments.

Sharon
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Sharon Villines
Takoma Village Cohousing, Washington DC
http://www.takomavillage.org





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