Why Do Some Condo Units Have Lower Fees?
If you’re in the market for an 800-square-foot, one-bedroom condo in Manhattan with an asking price of $399,000, you may be puzzled by the homeowners’ association fee of $1,941 per month, especially given that the unit requires extensive renovations.
Meanwhile, two other available units in the building, although priced higher at $620,000 and above, boast lower association fees of approximately $1,750 per month. These units have been updated, are on higher floors, and are similar in size. Why the difference in fees?
Understanding the Basis for Fees
For prospective buyers, it can be perplexing that association fees don’t align with the unit’s current state. However, each unit’s share of these costs was likely determined when the condominium was originally established, meaning renovation needs today aren’t reflected in the fees.
The real property law in New York outlines how the percentage of common interest is calculated for each unit in a building. These percentages, which dictate monthly fees, are detailed in a document known as Schedule A in the condominium’s offering plan and typically remain unchanged unless unit owners agree to alter them.
Setting the Percentage
Developers have some flexibility within legal limits when setting these percentages, according to Laura Mehl Sugarman, a partner in the real estate practice at Benesch. New York law provides four methods for determining this percentage, with unit size and floor level often playing a significant role.
However, other factors, like unique advantages of certain units, can also be considered. Alternatively, an equal percentage can be assigned to all units or to those within a specific category. The condominium’s documents should explain the method used.
If the building established these percentages during a condo conversion, renovations at that time might have warranted a higher percentage of common interest for certain units.
Before Making a Purchase
As a potential buyer, examine the Schedule A document to understand the common interest percentage for the unit you’re interested in and how it compares to others in the building. This will give you a clearer picture of what to expect regarding any potential future fee increases.
