By Kevin Manna and Allen Rothman
Editor’s note: Manna is the director at Pinnacle Condos in Killington and Rothman is the director at High Ridge.
So, you want to live in a condominium complex? Do you know what you are getting into? The recent surge in condominium sales has brought about a lot of “impulse” purchasers that don’t exactly know what community living is about. This is not single-family home living. Let’s cut to the chase: buying into community ownership is not about you. You are buying into the shared community amenities, current state of assets, and possible past mismanagement.
Many who buy into a community do so to have amenities that they may not normally be able to afford. Some may also buy-in to share ownership and maintenance costs of major infrastructure items. There are many benefits of owning a condominium, for example, they provide general exterior maintenance (painting, plowing and lawncare) and may allow sharing costs of major household systems (heating systems, wells, and septic systems). Further, security, socialization, lifestyle, and fitness amenities may also be a plus for you.
To complicate Killington condominium life is the fact that these condos are part of a resort and rental community. Most of these condos were built by or in conjunction with Sherburne Corporation as second home rental properties. At the time, nearly 100% were in the rental pool program. This creates a more transient community and brings us to some of the downsides of condo ownership. These include reduced privacy, rules and regulations, parking, noise, lack of storage, and fees.
Today, many new purchasers are not renting their units. This has caused a shortage of rental units in the Killington area, an altogether different discussion. Further, the Covid effect has many new owners moving here full time. If you decided on full-time condominium living in a rental resort community, you need to expect occasional noise, parking problems and crowds on busy weekends and holidays. If you don’t plan for these occasional disruptions, you will be disappointed. Condo living is not the peaceful single-family home ownership experience. And it never will be.
Things to consider
When you buy into a community, you agree to keep and maintain the amenities as noted in the declarations of the complex. Changing the declarations takes a super majority vote of owners and is almost impossible to do. Those buying into an association should have received declarations, bylaws and rules and regulations from their real estate agent. These documents are no joke. They are the legal documents of the association and on file with the town and/or the state.
The role of the volunteer board of directors is stated in the bylaws of the association. In Vermont, most bylaws model the VT Title 27A-Uniform Common Interest Ownership Act (“UCIOA”). These elected directors are legally bound and charged with maintaining the common areas of the complex. Further, directors may hire staff or management companies to do this work. The common areas include building structures (roofs, siding, stairs), grounds (lawn, parking, plowing), amenities (cable TV, internet, pool, tennis courts, hot tubs), necessary services (water, sewer, trash removal), and may even include individual unit doors and windows.
Directors are owners too. They work hard to balance and prioritize major repairs while keeping fees as reasonable as possible. This is not an easy task. Further, directors may be contending with past maintenance negligence due to previous owners and directors “kicking-the-can” down the road. Increases are inevitable. If you find an association that hasn’t increased fees in several years or has a history of zero percent increases, ask why. If the answer doesn’t sit right, stay clear of that place. Materials and labor costs are ever increasing, as are increases in insurance and other services.
A special assessment is a short-term dues increase that can be billed over a year or number of years to help offset the cost of a major repair that was not budgeted. Special assessments are inevitable if there have been no dues increases or are low capital reserves. If special assessments are the norm in your association, the association is not collecting enough in monthly or quarterly dues.
Further, the directors are owners and volunteers. The director’s sole legal obligation is maintaining the common areas of the association, regardless of your opinions or desires about such.
Buying into a community takes a different mindset. Directors are usually open to well-prepared and researched proposals for items that benefit the majority and/or add value to the property. They are not there to listen to you complain about your personal agenda.
At some point in time, most directors will hear statements such as these:
- I am on the first floor, why should I pay a roof assessment?
- When I sell, will I get a refund of my share of the capital reserve? [No, but the strength of the total reserve will be reflected in the sale price].
- The renters take up the parking out front of the building, and I have to park farther away.
- I don’t use the pool, so why should I pay for its replacement?
These statements do not reflect a sense of community, especially in a resort condominium community. Community living is not for you if you agree with any of these statements.
Associations should have an operations and maintenance manual and follow a plan for regular maintenance. Owners should have access to this plan. Items deemed for repair or maintenance are placed on a priority list. It may take a while to get to smaller less-important maintenance. Management companies will use something similar to the Covey 4-quadrant time management model to prioritize work. [Quadrant 1: Urgent and important. Quadrant 2: Not urgent but important. Quadrant 3: Urgent but not important. Quadrant 4: Not urgent and not important] Quadrant 1 – Urgent and important work (water leaks, sewage issues) get done first. While most other work falls into a schedule
Capital accounts
Many of the complexes in Killington were sold without regard to the long-term cost of replacing structural items. Low dues up front for the original owners was part of the sales pitch. A roof for a multi building complex can cost well over $1 million. Did the original owners contribute to the roof they used? Are the current owners paying for their roof? These are tough questions to answer.
Is there a balance in a capital reserve account? This account should have a minimum balance, for example, two-months operations budget.
The directors should try to always maintain the minimum unless an immediate assessment is planned to replenish it. For example, if your operations budget is $1.2 million, your low balance in capital reserve should not fall below $200,000. Obviously, a higher balance is preferred and there is no limit to the higher balance. Banks and mortgage companies will require a minimum contribution to reserves (usually 10%).
Further, every association should carry out a capital reserve study. This is a professional engineering study that identifies all common assets, determines the outstanding life of the assets and estimates the cost to repair or replace the assets.
Further, it recommends a contribution to the capital reserve account (or combination with special assessments) to pay for these future repairs and replacements. This is an invaluable study for long-term planning.
What do you really own?
Most condominium declarations define your property as “from the painted surfaces in.” You own your furniture, appliances, other fixtures and contents but not your deck, roof, or common hallways (and sometimes windows and doors). These are referred to as either common facilities (hallways between condominiums, roofs, etc.) or limited common facilities (like decks which only serve a single unit). The association’s insurance covers common and limited common facilities but not the contents of your unit. You need to insure those and ensure that you have sufficient liability insurance, especially if you rent. Often your rental manager will specify a minimum level of liability insurance, but more is usually better.
So, are the condo fees worth it?
If done right, absolutely. And if you can adjust to living a community lifestyle, it certainly is. One of the best parts of a community is to have amenities that you probably couldn’t afford on your own. Be a part of your community. Get involved on a committee or the board and be part of the solution. Enjoy the amenities and let others enjoy them regardless of whether you personally like or use them.
