To test the market, I looked at average price and three demand indicators (days on market, purchase price to asking price ratio, and number of sales) broken out by zip code, building age, and price range.
I am very excited to share with the readers that the Hyde Park Condominium at 4141 N. Henderson Rd, just a few blocks south of the Ballston Metro, successfully voted to change the by-laws to ban smoking in units and on balconies, as well as the already established ban in common areas!
In July 2016, I wrote an article about banning smoking in condos and the reaction from readers both in the comment section and in email exchanges afterwards clearly showed how many condo owners wanted to ban smoking in their buildings.
It is a challenge that only a few Boards have taken on and none have been successful in the way Hyde Park has.
I’d like to congratulate the Hyde Park Board and its residents on a job well done and hopefully paving the way for many more buildings to ban smoking inside and outside of private units in the near future. I firmly believe that this type of ban in condos will increase property values both near and long term.
I’d like to thank Greg Hunter Esq, a local attorney and the Hyde Park Covenants Chair who led the ban, for agreeing to write a column explaining how they accomplished the ban, lessons learned, and other experiences over the last few years.
Below is what Greg wanted to share with the ARLnow readers. It is not intended to be an official statement from Hyde Park.
Hyde Park Smoking Ban, Greg Hunter Esq.
The owners of the Hyde Park Condominium recently passed a bylaw amendment to ban smoking in every part of the property, including private units and balconies.
With over 300 residential units and several ground-level commercial suites, Hyde Park is the first condominium in Arlington to successfully amend their bylaws to go smoke-free.
With the new bylaw, smoking is now banned in every part of Hyde Park, including outdoor areas, private homes and on balconies. There is a limited and non-transferable right for current unit owners to continue to smoke in their own units (grandfather clause), but not on their balconies.
Why A Bylaw Amendment?
Passing a bylaw amendment was not our original goal.
In an ideal world, everyone could live as they wish; any one of us could, if we so desired, smoke cigarettes or rehearse with our metal band or keep peacocks on the balcony and it wouldn’t bother anyone else.
At Hyde Park however, and I suspect every other condominium in the world, one person’s right to enjoy herself does not allow her to annoy her neighbors. We tried a lot of things to solve the problem without a bylaw amendment, including banning smoking in common areas and improving the ventilation systems, but in the end the only effective option we had was a bylaw amendment.
How Did Hyde Park Get There?
After hearing complaints about smoking for years we took a poll in 2014, asking all residents — owners and renters — to answer a few questions about their attitudes toward smoking.
We put a short poll card in every mail box and got a tremendous response, with over 80% of our residents responding. Our results were interesting — an overwhelming majority of residents reported that they really didn’t like second hand smoke and only a few residents reported having one or more smokers living in their unit, but the only thing a majority would support was a new rule to ban smoking in all common areas; only about 20% of residents supported passing a bylaw at the time.
Since smoking had long since been banned in all of the indoor common areas, we passed a new rule in 2015 to ban smoking in all of the outdoor common areas. “No Smoking” signs went up in the garage and around the property.
At the same time, our engineer and maintenance staff made improvements and repairs to the HVAC system and used a lot of sealants to try and keep air from passing from one unit to another, with little success preventing smoke from traveling between units.
The most important development from those early efforts was educational — nearly everyone at Hyde Park was against having second-hand smoke waft into their unit, but very few of us understood just how many of our neighbors felt the same way until we saw the poll results.
After about a year with the new rule, more and more residents asked about passing a bylaw at each monthly board meeting, so we took another poll in 2016. Knowing that we would need an affirmative vote from more than 66.67% of the total ownership, we only polled unit owners, the people who could actually vote.
Once again we got a tremendous response, with about 60% of resident and non-resident owners returning a poll card; about 80% of the resident owners and 75% of the non-resident owners expressed support for a bylaw. With strong grass-roots support, and little success from anything else we tried, we held several meetings and drafted a bylaw amendment proposal.
Over the winter and spring of 2017, we held public meetings, answered every question we heard and edited our draft amendment to reflect what a majority of the ownership wanted. Our draft amendment went to the Association’s counsel, back to us for review, back to counsel and finally to the Board.
They voted to approve the text of the proposed bylaw amendment and set a voting schedule for later in the year. A package was prepared for every unit owner with a letter from the President of the Association, a copy of the proposed amendment (a “consent form”), and answers to nearly every question we got in our three years of meetings.
The Board gave us 90 days to get the vote in and we managed to get over 68% of the ownership – about 220 units – to sign their forms before New Year’s Eve. From there, the consent forms went to our counsel for review, and within a few days our President was able to file the bylaw amendment with the Arlington County Circuit Court.
Questions And Advice?
Polling is important. Without the poll results many unit owners will not be comfortable with the idea of voting for a bylaw amendment, and without strong support there is no reason to take on all of the work.
It’s not a vote in the traditional sense. The law requires that at least 66.67% of the total ownership sign documents that show their consent to the amendment, and the votes are weighted by each owner’s percentage of the total ownership – this is a property record your neighbors are going to be able to see.
While you have to do what you can to preserve owners’ privacy, there’s no hiding from the results. Eventually any unit owner can know how anyone else voted, pro or con.
It’s also not an election in the traditional sense. There’s no question that smokers are a small minority in Arlington, especially in expensive condominiums.
We live in a county where smoking is illegal in every shop, office, store, restaurant, bar, classroom, theater, museum, bus station, airport, subway train, taxicab and outdoor parks, with little complaint. A strong majority of your ownership is going to support this, and very few people will be against it. T
he real question is whether you can get more than 2/3 of the ownership to sign the paper. It’s really more of a bookkeeping exercise. It’s also important to note that a an abstention or non-vote has the same effect as a “no” vote. 2/3 of the ownership must actually vote “yes” for the bylaw amendment to pass.
To some people, it will look like you’re piling on. To get the votes we needed, we tried everything we could think of. Small groups of supporters set up a table in the lobby several times to try and get a few votes, individual unit owners recruited and cajoled friends and neighbors around the building, personal notes were sent to every unit owner who hadn’t yet voted and more than a few nerves were frayed.
Having done this once it’s clear to all of us at Hyde Park just how burdensome the 66.67% requirement is; if you’re serious about this you’re going to have to do everything you can to get votes in, and some people are going to be perturbed.
There is a generational difference in how people view smoking. We have younger smokers who voted in favor of the amendment because they understand how offensive and toxic second-hand smoke is and they don’t want to impose on their neighbors or deal with anyone else’s smoke.
At the same time, we have older residents who don’t smoke (and non-resident owners who don’t allow their renters to smoke) who grew up in a world where smoking was allowed nearly everywhere and thought the bylaw amendment was a terrible idea.
One of our residents did some research that was very helpful in our efforts. The 2010 Census reflects that the number of Americans who smoke continues to decline and that Arlingtonians smoke at a much lower rate than the national average.
All of the Realtors we spoke with agreed that non-smokers outnumber smokers in the condominium market by an even larger margin, maybe as high as 19 to 1. At the same time, even as the number of rental buildings and condominium communities goes up each year, the number of rental apartments and condominiums where smoking is allowed actually shrinks.
There were approximately 32,000 rental units in Arlington County when we started this process, with about 8,000 of those units in condominiums. As commercial landlords like JBG Smith and Equity continue to ban smoking in their properties the smokers looking for apartments have to rent in condominiums.
And as new condominium communities are either LEED-certified or start out with smoke-free covenants, both renters and condominium buyers who smoke have to look to existing condominium communities rather than new buildings. Smokers may be less than 10% of the people looking to buy or rent a condo in Arlington, but if they can’t rent in commercial properties or buy in new buildings the existing condominiums are going to have more smokers looking to move in.
Hyde Park was the first condominium community in Arlington to ban smoking with a bylaw, but we’re not going to be the last.
Greg, thank you very much for such an informative write-up on the smoking ban. If anybody would like to follow-up with Greg to learn more about his experience over the last 3+ years leading this effort, please reach out to me at Eli@EliResidential.com, and I’d be happy to make an introduction.
I would also encourage other condo owners and Board members to use the comments section to share how smoking bans have been discussed within your communities and whether Hyde Park’s success may help your Board move forward with a similar effort.
Question: Is it true that two-bedroom condos are a better investment than one-bedroom condos?
Answer: If you’re asking this question strictly as an investor, the answer is purely based on the numbers. If you’re buying for yourself, you’ll want to consider appreciation as well as what makes the most sense for your lifestyle. For example, do not spend an extra $150,000 because a two-bedroom will appreciate faster, if you’ll end up using the second room for storage and an occasional guest.
Two-Bedroom Condos Appreciate More than One-Bedrooms Condos
Below is a graph showing appreciation of one and two bedroom condos in Arlington since 2010. To maintain consistency, the data set uses condos built from 2000-2008 limited to one bedroom units with 600-800 sq. ft. and two-bedroom units with 900-1,400 sq. ft.
The average one-bedroom sold for $364,000 in 2010 and is selling for $409,000 in 2017 while the average two-bedroom sold for $529,000 in 2010 and is selling for $638,000 today. If you bought the average one-bedroom in January 2010 with 20% down, you’d have approximately $172,000 in equity today. If you bought the average two-bedroom in January 2010 with 20% down, you’d have approximately $294,000 in equity today by putting an extra ~$33,000 down in 2010.
If You’re An Investor
If you’re an investor, you’re looking at rental income, in addition to appreciation. As I wrote this spring, rental rates have been pretty flat in Arlington, especially along the Rosslyn-Ballston corridor, due to a lot of new rental buildings being built the last 5-10 years.
Based on the average 2010 purchase prices, rental income and a 25% down payment (most common % down for an investor), the average investor along the Rosslyn-Ballston corridor has no cash flow from their investment. The table below does not include maintenance or property management fees and assumes average condo fees, taxes and insurance.
So Why Invest?
Considering that the above monthly cash flow summary does not include maintenance costs, property management fees or vacancy periods where is the value in owning an investment property?
- Equity Build-Up: For a one-bedroom, your tenants would have contributed an average of $460/mon over the last 8 years ($44,000) to your equity balance and for a two-bedroom, your tenants contributed an average of $680/mon over the last 8 years ($65,000)
- Tax Benefits: Another major benefit of investing are the tax benefits. Being able to deduct expenses like condo fees, tax payments and repairs. As well as depreciate the value of the condo and provide a huge annual financial benefit to off-set the weak monthly cash flow. A one-bedroom investor may be able to deduct about $20,000 per year and a two-bedroom investor about $30,000. Of course, you’ll want to discuss any deductions with your tax professional first.
If you’ve invested in property in other areas of the country, you may be shocked by how little monthly cash flow a condo along the Rosslyn-Ballston corridor produces. A major reason for the lower ROI is the lower risk that comes with investing in Arlington condos. Your downside risk during an economic dip is much lower and the rental market is consistently strong with a large pool of well-qualified renters. It follows the basic economic tenets of risk and return.
If you’re considering buying an investment property, feel free to send me an email at Eli@EliResidential.com to set-up a meeting to go through your investment goals and options.
Question: Do you have any details on the new condo building on Columbia Pike?
Answer: The development of Columbia Pike continues westward with the introduction of a very affordable, brand new condo building by Pillars Development Group. The success of recent residential projects, Columbia Place (condos and some townhouses) and Carver Place (townhouses), along the eastern half of Columbia Pike, signal that this will be a successful project for Pillars, who has developed other local condos like The Berkley in Ballston, The Henry in Alexandria and The Paramount in Reston.
What I’m Tracking
The developers decided to make 25% of the units Jr 1BRs, with just under 500 sq. ft., which hasn’t been a very common product in newer construction so I’m looking forward to seeing how these sell. I think it will be a great secondary residence for buyers who live 90+ minutes away and work nearby, as well as the modern value-based buyer looking for affordability and less space.
Unlike most small studio spaces, they have a separate room to sleep (functional bedroom that doesn’t meet legal bedroom requirements) which makes them much more desirable than studios with one large living/sleeping space. The asking price of these units will range from $250k-$300k with monthly condo fees just under $200.
For reference, only 32 condos have sold in Arlington over the last two years for less than $300,000 and monthly fees under $250. The average construction date of those units was 1964, with none being built in the last ten years.
Affordability and value are the selling points for Trafalgar Flats (ease of pronouncing the name is not) with 700+ sq. ft. 1BR units selling from the mid to upper $300s and 2BR/2BA units starting in the mid 400s.
The monthly condo fees are also a selling point, coming in about 10-15% lower than the average fee/sq. ft. of other Arlington condos, while still including a gym, lobby, outdoor terrace and bike storage. Above average condo fees were a problem for a lot of potential buyers of Rosslyn’s recent Key & Nash project, which is about 50% sold and about three months from completion.
For reference purposes, there have been 308 2BR/2BA condos sold in Arlington over the last two years for less than $500k and fees under $450/mo., but only three were built in the last 10 years. Bottom line… it’s rare to find value like this in Arlington.
There aren’t too many places left inside and around the beltway where you can expect above-market appreciation, but Columbia Pike is one of them, especially the western half now that the eastern section has already seen substantial growth.
At the current pricing and being in the early stages of western Pike development, savvy buyers and investors should pay attention. The property sits just two blocks from the site of the under-development Columbia Pike Village Center, anchored by a Harris Teeter (replacing Food Star), slated to open in 2019. Expect strong ROI from all three options — Jr 1BR, 1BR and 2BR.
From the builder, “We chose to build in this location due to the community’s close proximity to DC and the Pentagon. Arlington County is committed to the revitalization of the Columbia Pike Corridor. We are proud to be amongst the first to offer the opportunity to purchase a new luxury condo in this changing, urban environment.”
The building will have 78 total units with 25% Jr 1BR (under 500 sq. ft.), 25% 2BR/2BA (~1,000 sq. ft.), and 50% 1BR/1BA (over 700 sq. ft.) with prices ranging from mid $200s to mid $500s. Monthly fees will start at $192 for the smallest units and top out at $421 for the largest 2BRs. One of the best parts of buying pre-construction is being able to choose your finishes including cabinets, counters, flooring and tiling. All units come with one underground assigned garage parking space.
If you’d like to discuss Trafalgar Flats as a primary residence, secondary residence or investment please reach out to me at Eli@EliResidential.com or at (703) 539-2529.
Question: I’m the Treasurer at [redacted Condo Association] and we’re working on the 2018 budget. What’s a good way for us to save money in the budget without compromising the health and maintenance of the building?
Answer: As a former Condo Board Treasurer, I feel the pain that this time of year brings, so I’m happy to offer some advice that helped me finding savings while I oversaw the budget and has helped other Associations do the same… review your Master Insurance Policy. I know, it’s not the most exciting answer, but your insurance policy is likely a top three expense on your balance sheet every year and if you haven’t reviewed it lately, there’s a good chance you can cut the cost by 5% or more and probably improve your coverage at the same time.
I’m not an expert in insurance so, I asked Andrew Schlaffer, Vice President at USI Insurance Service’s Community Association Practice (www.USI.com) to provide some details on what Board’s should look for when they do a review of their Master Policy. If you’d like to discuss a review with Andrew directly, you can reach him at 703.205.8764 or Andrew.firstname.lastname@example.org. Take it away Andrew…
Pillars Of Insurance Reviews
Condo insurance reviews require a holistic approach, so it’s important to break the cost into a few distinct categories: insurance premium, deductible expense and out-of-pocket costs. To effectively accomplish long-term savings, all three of these categories need to be considered and addressed with a qualified insurance professional.
Adjust Coverage Responsibly To Save On Premium
Premium is certainly a factor to consider during the insurance selection process; however, available insurance products differ significantly. Coverages and services should be very carefully analyzed and compared. While omitting various coverages will save premium dollars, it might also result in substantially increased costs to the Association for out-of-pocket expenses related to uncovered claims.
It is critical to work with a professional who understands local insurance needs and can adjust your insurance program in a way that maximizes premium savings while maintaining adequate insurance coverage. Some coverages may be required by statute and/or Association documents, so cutting required coverage exposes the board to unwanted risk.
Deductibles Based On Loss History
Associations with strong financials often choose to increase their property deductibles which can provide immediate savings of 2-5%. Deductibles range from $2,500 to $25,000+. When considering deductibles, it is important for the Association to review their loss history and the loss history of comparable buildings in an effort to obtain an accurate estimate for deductible expenses.
The most common strategy employed by Associations seeking lower insurance costs is to shop their carrier. An Association can accomplish this in several ways but generally their appointed broker can offer alternative carriers in an effort to obtain the most competitive rates possible. Make sure your broker has access to all of the competitive markets in order to maximize the likelihood of finding savings.
Secondly, and more importantly, if savings is found, your broker should verify that all required coverages are included to secure the Association’s long-term financial security and lender approval. Additional savings can be realized by a thorough coverage analysis to verify the Association is not being over-insured by paying for coverage it won’t use. We are in a relatively soft insurance market, so an Association can expect savings of 2-5% from a simple review, depending on the number of claims that have occurred during the previous policy period.
To insure cost savings and long-term health of your property, make sure your insurance broker specializes in Condominium or Homeowners Associations. To maximize your savings, the Association, insurance broker and insurance carrier need to work in harmony in an effort to identify and reduce threats to the financial health of the community.
Help Reducing Claims
One of the best ways to keep insurance costs down is to avoid claims altogether. Some examples of how insurance brokers can help reduce claims and the impact claims have on your future premium costs include coverage reviews/benchmarking, claims management services, site inspections, building upgrade recommendations, life safety planning, vendor contract reviews, discrimination/harassment training and hiring/firing best practices.
Andrew, thank you very much for providing your insight. I know from experience how much of an impact an insurance review can have on a condo budget, but also how important the right coverage can be when there’s an unexpected claim. One thing Board’s often overlook when they’re solely focused on price is the quality and speed of service when a claim in filed.
For example, if a pipe bursts and floods the gym and lobby, a Board should be confident that the work orders will be executed quickly so the building can be back on its feet without delay or headache. Unfortunately, most Boards don’t think about this until they’re dealing with it, and it’s too late. I encourage any Board/Treasurer to reach out to Andrew to review their policy. He does fantastic work and USI is a leader in Condo/HOA insurance policies in Northern Virginia. His contact info is:
Question: What’s being built across the street from Turnberry Tower in Rosslyn?
Answer: We don’t see many new condo projects these days in Arlington, developers are going with apartments due to low interest rates and surging rents, so the new Key & Nash condo and townhome project in Rosslyn is a welcome addition to the neighborhood. Over the last five years, we’ve had an underwhelming number of condo deliveries.
Along the Rosslyn-Ballston corridor, the only new condo sales have been Arc 3409 in Virginia Square (converted from a hotel in 2014) and Gaslight Square in Rosslyn (luxury condos).
On Thursday evening, the Key & Nash team hosted an unveiling party on the 23rd floor of 1812 N. Moore (the Monday Properties/Goldman Sachs building that has sat empty the last few years) to release details of the project and start sales for a late-2017 delivery. Leading up to the project, I expected that NVHomes’ new Urban Division would look to successful nearby luxury projects like Gaslight Square, The Wooster, Rosslyn Key, and Rhodes Hill Square for their design and pricing with an emphasis on Gaslight Square considering its most recent success with Phase 3 (final build-out).
Instead of delivering a fully custom luxury product, NVHomes is sticking with their bread and butter formula of delivering a more moderate project that fits surprisingly well between Rosslyn’s mid-market options like The Atrium, The Belvedere, 1800 Wilson and its luxury options like Turnberry Tower, Waterview, and those mentioned above. It makes sense for NVHomes, avoids over-saturating the Rosslyn luxury market, and satisfies demand.
With just over sixty units including 1BR + den, 2BR, 2BR + den, and 3BR flats ranging from about 850sqft to just over 1,500 sq ft, plus five 3BR townhomes at nearly 2,000 sq ft there are a surprising number of options for buyers. Starting in the low $600s and clearing the $1M mark for some of the larger flats and townhomes, it’s an attractive $/sq ft for a new building just a block from the metro and likely to benefit from the massive redevelopment of downtown Rosslyn. For market-average condo fees, residents will get a high-end gym, 7-day/week concierge, roof deck, large common terrace w/ grills, and underground parking.
I’m looking forward to seeing how the larger 2BR + den/3BR flats do compared to the townhomes. I think the challenge for the townhomes will be the fact that the master bedroom is the entire top floor, with the 2nd and 3rd bedrooms on the 2nd floor (main level is kitchen and living space), making it a difficult layout for buyers with a young child (prefer to sleep on the same level) and a lot of steps for regular trips between living space and master bedroom. However, with only five townhomes being delivered, they’ll probably be the first to sell-out.
Personally, I think the best value purchases are the 1BR + den and smaller 2BR/2BA because they’ll make great rental properties with the dens/2nd bedrooms being on opposite sides of the apartment from the master bedroom (ideal for roommates). If you’re planning to live there for a while and can afford the premium, there are two 2BRs with 500 sq ft private terraces and a handful of 1BR + den and 2BRs in the back with larger Limited Common Element terraces (only accessible to your unit, but technically common space) that offer hard-to-find “useable” outdoor space.
While there wasn’t anybody camping out for the sales office to open, the line to sign-up for a sales meeting on Thursday night reached 50+ people at some points and there were probably a few hundred people at the event. The R-B corridor and Arlington market is hungry for new condos and this delivers at a price range that meets a lot of budgets and designed to accommodate a range of buyer types, so I expect sales to move fairly quickly, even though people won’t get to step foot into a unit until the end of the year.
Feel free to reach out to me at Eli@RealtyDCMetro.com if you have any specific questions about the floor plans, pricing, location, sales process, etc or if you’re considering a purchase in the building. I’d be happy to discuss details and my thoughts on the investment potential of purchasing in Rosslyn.
Question: I live in a building with above average condo fees and am wondering what impact the condo fees will have when I decide to sell?
The average condo fee for a one bedroom apartment in Arlington is $397/month and $530/month for a two bedroom unit. On average, owners pay 50 cents per square foot they own. Looking at my favorite sales indicators, days on market and sold price to original ask ratio, there is a direct correlation between higher condo fees and the number of days on market, as well as between higher condo fees and greater buyer discounts from the original asking price (see first and second data tables below).
Pricing Around Fees
When pricing your condo, you must factor in the monthly fees compared to condos in similar communities. Since buyers manage their total monthly payment, along with the total sale price, consider that on a 30 year mortgage with a 4 percent interest rate, increasing the mortgage by $21,000 increasing the monthly payment by $100. Thus, as a simple rule of thumb, for every $100/month difference in condo fees on a comparable unit, there should be an adjustment of about $20,000 in market value.
There’s a lot of important information hidden behind data on condo fees like building services/amenities and the inclusion or exclusion of utilities and/or cable and internet, but the data on condo fees in Arlington is valuable nonetheless.
The following data summary represents apartment-style condo sales in Arlington over the last four years, broken down by condo fee ranges. Of note is that as the fee and fee per square foot increases, so does the time it takes to sell and percentage discount buyers negotiate of the asking price.
Note that of the $1,000+ fee sales, one third are from Turnberry Tower, Arlington’s premier luxury building, and another 15 percent are from Crystal Gateway, a building with expansive floor plans and the largest amenity package of any community in Arlington.
The following table is a cross section of the above data set, limited to sales that closed from $250,000 to $500,000, thus presenting the data within a more comparable sub-market.
How much does a building’s age impact the condo fees?
Most people would say that older buildings have higher condo fees because they have higher maintenance and replacement costs. Let’s take a look at the data for one and two bedrooms sales, by the decade it the community was built.
Of note is that the buildings from the 1950s and earlier have the most limited (or non-existent) amenities and there seems to be a jump in fees per square foot in buildings as they reach the 20 year mark, but leveling off after that, in-line with my expectations because most major systems require expensive repairs or replacement around the 20-30 year mark.
In order to truly understand the impact of condo fees on your condo, it’s necessary to drill down a few more levels within your specific sub-market(s). If you’re interested in exploring condo fee data for your unit, feel free to email me at Eli@EliResidential.comand I’d be happy to provide you with a more customized data summary.
Question: My condominium association is treating me unfairly, what should I do?
Answer: I receive this question in many forms and will attempt to provide a general road map to deal with association-related conflicts. I enlisted the advice of Tiffany Releford, Esq., of Whiteford Taylor Preston, who’s an expert in condominium law in Virginia, Washington, D.C., and Maryland. I’m also a board member of my association and use my prospective from that side as well.
Hopefully you used the mandatory three-day association document review period before you purchased to read the bylaws, rules and regs, meeting minutes, and other required documents and aren’t taken by surprise. These documents are considered a contract that you are entering with your association so you should make sure you understand what they say. Locate all relevant documents and read them thoroughly, you’d be surprised how many small details are defined in your condo docs. Many bylaws even have dispute resolution policies that you’ll need to follow.
Raise your concern with the property management company first. If the management company can’t resolve your issues, find out when the next board meeting is (usually monthly) and ask to be added to the agenda. As a member of my board, I suggest emailing the board members with a summary of your concerns ahead of the meeting.
Try to keep all relevant communication contained to email so you have documentation and ask to see a draft of the meeting minutes if you present your case there. Anything else you can do to document your concerns is helpful, such as getting a decibel reader for noise complaints and documenting times when it exceeds the allowable level (Arlington County or association).
Before seeking legal recourse, you may want to check with Virginia’s Office of Common Interest Community Ombudsman, which “offers assistance and information to association members regarding the rights and processes available to them through their associations.” I’m not aware of any Arlington-specific advocacy groups or government offices, but would love to hear from the readers if one does exist.
Before paying an attorney to take your case, you may want to pay an attorney like Tiffany to review your bylaws and rules and regs to see if there’s anything you missed or if they interpret anything differently. A good condo attorney will also be intimately familiar with the local laws to provide an early opinion.
If you decide to go to court, be sure you understand what your bylaws say about financial responsibility for attorney fees and costs, as well as court costs. Most cases will be heard in the General District Court (small claims court) and it’s a little easier to represent yourself at a lower cost. If it’s a larger issue such as an injunction for right of quiet enjoyment/use of your unit, you’ll likely end up in Circuit Court which takes much longer and attorney fees on both sides are much higher because of the preparation required.
Remember that when you buy into an association, specifically condominiums and cooperatives, you’re turning over a lot of power to the board. I always recommend that my clients who become condo owners take part in monthly meetings, join committees or join the board.
I’m love to hear from the readers who have useful strategies for resolving condo disputes.
Question: Why do Association fees vary so much?
There are three common categories of Association fees – Home Owners Association/Property Owners Association (HOA/POA) fees, Condominium (condo) fees, and Cooperative (coop) fees. Generally, condo and coop fees are due monthly, but HOA fees often vary between monthly, quarterly, and yearly payments.
(Generally) Coop Fees > Condo Fees > HOA/POA Fees
- All three fees cover common community elements like landscaping, pools, snow removal and master insurance policies.
- Some HOAs/POAs have very few common elements and have a relatively lower fee.
- Condo owners are only responsible for what’s inside the walls of their home and the association is responsible for everything else like the front door, windows, façade, balcony, roof, and all shared plumbing and electrical (e.g. you’re responsible for a backed up toilet or bad outlet). In order to cover the maintenance and replacement costs for these items, condo associations require much higher payments.
- Coops have higher fees than comparable condo buildings because they include utilities (some condos do too), property tax, and payments on a underlying mortgage for the building, if one exists. Coop ownership is much less common in Arlington than Washington DC. Outside of River Place in Rosslyn, there are very few options. In fact, all 21 active coop listings are at River Place. In comparison, DC has 94 active coop listings across numerous buildings, mostly located in Northwest DC.
The rule of thumb is that if it’s a building, it’s a condo or coop and if it’s a townhome or single family, it’s an HOA/POA (or isn’t part of an association at all). The most common exception to that rule is the townhome-style condo associations in Shirlington and Fairlington.
What Influences Fees the Most?
- Services/Amenities: Perks like a 24-hour front desk, pool, and seasonal landscaping add up and increase fees. Condos/coops usually have large management contracts compared to HOAs/POAs, which are often self-managed.
- Age: As buildings age, major replacement projects come due that can cost upwards of $1M. Some of the larger buildings take on projects in the $5-10M range. Financial mismanagement (improper Reserve savings) can force fees to skyrocket, special assessments, or both. I recommend that all of my clients get involved with their Board to help ensure sound management.
- Size: Whether it’s a large high-rise condo building or a sprawling community with lots of trees and landscape features, larger communities demand more resources to maintain and manage. Of course, larger communities tend to have more residents to share in the cost, but over time you’ll see higher relative fees in larger communities due to high maintenance and replacement costs. Elevators have more floors to travel, there’s more brick to re-point, and more pipes to replace.
- Master Insurance Policy: All Associations carry a master insurance policy to cover common space (liability and property) and these premiums are included in the fees. Generally the common property ownership and liability are much higher in condos/coops than HOAs/POAs and therefore premiums paid by owners are higher as well. On the other hand, the homeowner’s policy is much higher in HOAs/POAs than in condos/coops.
I highly recommend you and your agent review financial statements and Reserve studies/balances when purchasing in a condo, coop, or HOA/POA. Virginia law requires that these documents be provided prior to settlement and allows for a three-day window in which the Buyer can void the contract, without risking the Earnest Money Deposit, from the receipt of these documents.
One of the main financial benefits of condo/coop ownership is that your monthly/annual maintenance costs are more stable and predictable because there are very few big-ticket items to fix or replace. For example, if you’re in am HOA/POA or no association at all, you bear the full responsibility of fixing your roof after a storm, replacing windows, and dealing with expensive plumbing issues. In a condo/coop, your most expensive items to fix/replace are usually a refrigerator, HVAC system, or stove/range and won’t run much more than a few thousand dollars.
Question: Will new FHA owner occupancy ratios change the way condo associations view rental caps?
Owner Occupancy Ratio Requirement Likely to Decrease from 50% to 35%
Last month I wrote about rental caps in condo buildings, noting that oftentimes condo boards decide to implement a rental cap in order to meet the FHA loan requirement that the percentage of owners living in the building vs renting their unit must be 51% or more.
This month we got news that this burdensome ratio is likely to be reduced to 35%, making affordable condo ownership more accessible for buyers and giving owners more control over their investments. In a 427-0 vote, the House passed the Housing Opportunity Through Modernization Act to reduce FHA restrictions, which includes a clause to reduce the owner occupancy ratio from 51% to 35%. Although the bill still has to pass the Senate and be signed by the President, the landslide vote bodes well for this change.
Condo Boards Should Reconsider How They Determine Rental Cap Rates
Most people agree that quality of life and building conditions deteriorate as the percentage of renters increase and many condo boards will choose to maintain current cap rates for this reason. However, cap rates are often set around 45-50%, using FHA requirements as a guideline.
If the bill passes and 35% becomes the new FHA requirement, condo boards should reconsider the reasons behind their rental cap rates. Without data available that shows when rental caps have a positive effect, it’s guesswork. What if the biggest dip in quality of life/building condition occurs when 30% of the building is rented and there’s not much change after that? In that case, Boards using a standard 45-50% cap rate are restricting owners without the well-intentioned benefits. What if the decrease in quality of life/building condition is linear? In that case, one could make the same argument for a 1% rental cap as a 70% rental cap.
My point isn’t that rental caps are a bad idea (in theory) or that Boards are complicit in implementing them, but that the FHA owner occupancy ratio is really the only empirical reference point being used. If the bill does pass and the ratio decreases to 35%, Boards should strongly consider adjusting their caps accordingly.
On a related note, if your condo is not approved for FHA loans (check here), many property management companies charge $500 to $1,000 to file and process an application, but some local lenders offer it as a free service. I know that Jake Ryon of First Home Mortgage (email@example.com) offers it. There’s little required by the Board and it can be completed in just a couple of months.