Buyers in new construction condominiums get so caught up with the hype of the new building that they forget to read the condominium documents and budget and expect maintenance fees to remain at the same level that the developer provides during the onset. This can lead to a crisis for the individual unit owner. Maintenance fees can quickly soar to the level of rent pay for a sizable apartment. In some cases $900 and up per month on top of your mortgage payment. Almost every new construction project has their operational budget drafted by a management company or consultant well in advance of the building being topped off. This means that the budget might not reflect operational circumstances during occupancy.
The operational budget determines what the unit owner will pay in monthly maintenance. If the operational budget allocates $1,500 for electricity per month but the bill is actually coming in at $2,400 per month, then you can expect for there to be an amendment to the budget and increase in your maintenance. These increases can be substantial and come with little warning. There have been several instances where developers have had such poorly drafted budgets that they end up in a budget deficit when the project is completed. The resulting calamity leads to all the unit owners being required to pay for the budget deficit by special assessment. A special assessment is an unplanned maintenance payment aside from your regular maintenance assessment. In cases like this, a unit owner should request that an audit of the developer controlled association be completed prior to paying.
With foreclosures at record highs, many buyers with tight personal finances are planning on flipping or renting their unit. The problem is that if there is a special assessment or if maintenance fees get hiked, the buyer still has to pay and there will be no payment plan except what the Association determines. An unprepared buyer can quickly find themselves in a tight spot with their property at risk. Keep in mind, not paying maintenance means the Association can foreclose on your property, so having contingency funds set aside for probable maintenance increases and special assessments is the best way to protect yourself and home from loss. The Daily Business Review has an incredible article that further illustrates the problem with unpredictable maintenance costs.