Q. I am a first time buyer of a 50 unit condominium, and am having trouble understanding how to calculate the condominium fee I am supposed to pay on a monthly basis. Can you assist me in figuring this out?

A: You will need a couple of documents in order to determine what your condominium fee is. You will need a copy of your legal documents (called the “Declaration” and the “Bylaws”), and you will need a copy of the current operating budget for this year. You should have received this material shortly after you signed a contract to purchase your unit, and definitely before you went to settlement.

But first, let me explain how the budget is determined. Your association is controlled by a Board of Directors. The number of Board members is spelled out in the Bylaws. Most boards consist of three to seven members; they are all elected by the entire membership (all of the condominium owners) at an annual meeting of the association.

The Board is charged with determining the budget for each year. In order to do this, most Boards will be assisted by the property manager. The board will determine what the estimated income will be for the coming year, based on previous condominium payment histories. Some associations get their income solely from the condo fees paid by the owners, but some will also obtain revenues for other sources, such as laundry rooms, rental income on units owned by the Association, or leasing of roof tops for communication antennas.

= Then, - the Board will try to assess what the expenses will be for the coming year. Obviously, this is not an easy task. Some expenses are fixed and known in advance-- such as the management fee, salaries of staff, and the accountant’s fee. But many expenses can only be estimated. No one can predict, a year in advance, how much snow will fall which will require snow removal charges; the uncertainty of war may drastically increase utility costs. However, your Board has to make an educated guess, and hope that they will not have to impose a special assessment to raise additional funds during the year. Also, the Board must, in my opinion, program income for reserves – the equivalent of a savings account – just in case there are emergencies -- such as the need to repair an elevator, or replace the roof.

Once the proposed budget has been developed, some legal documents require a majority of the owners to approve each year’s budget; however, most documents give the Board the authority to enact a budget on their own. In either case, the board must circulate the adopted budget in advance to all owners, so that they will be able to project their monthly fees for the next year as soon as possible. Now, let’s get back to your question: how to determine your individual fee?

At the end of your Declaration, you will find a list of percentage interests for every unit in the condominium complex. (Some documents include this list at the end of the Bylaws) Find your unit; it will have a percentage interest next to your unit number.

You should understand that every owner owns a percentage interest in the condominium. Oversimplified, a condominium association owns nothing; the owners -- each member -- has an undivided interest in the condominium. Let’s take this simple example: the operating budget for this year indicates that the total amount of the expenses will be $150,000. Your percentage interest in the complex is 1.25 percent.

Thus, if you multiply $150,000 times 1.25%, the dollar figure is $1,875. This is the total amount of your yearly assessment. Although there are some associations which require owners to pay their assessments on a quarterly basis, most associations have a monthly payment requirement. Accordingly, your monthly condominium fee will be $156.25 ($1875 divided by 12).

As you can see, for every $1,000 dollars that the expense budget increases, your yearly condo fee will increase by $12.50. This sounds like a small sum, but condominium history has shown that budgets will only increase over the years. Thus, it is critical that each condominium owner carefully review the projected budget -- each and every year -- and challenge increases which he/she believe to be unnecessary or even frivolous. Some Boards often get it in their head to move forward on a pet project -- regardless of the cost. You -- and the other owners -- are (or should be) the watchdogs, the guardians of your expenses.

It’s your money. Watch it carefully.

Published: March 17, 2003

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Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of Kass, Mitek & Kass, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts. Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.