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Luxury, With a Price
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| Kerry Gawne will move into the Roosevelt Lofts when they open later this year. On top of her mortgage, sheÕll pay $525 a month in HOA fees. "The dues at the Roosevelt are lower than other places around Downtown," she said. Photo by Gary Leonard. |
New Condo Owners Find Sticker Shock Extends to HOA Fees, Which Can Exceed $1,000 a Month
by Kathleen Nye Flynn
Kerry Gawne knows that she is going to spend a pretty penny on her new Downtown loft. She wants a building that has it all: a pool, a lounge, a gigantic gym and, perhaps, a hydrotherapy room.
But Gawne realizes that in addition to the price of her new condominium in the soon-to-open Roosevelt Lofts, there is an extra cost: Her homeowners fees, about $525 a month, will help pay for the frills and maintain the building's public spaces.
"The place I live at now is a luxury apartment building, and I didn't want to give up any of the luxuries that I have there," Gawne said. "Surprisingly, the dues at the Roosevelt are lower than other places around Downtown."
The opening of expensive condominium complexes, the popularity of luxury amenities and the ever-rising costs of utilities and insurance rates have skyrocketed homeowners fees to eye-popping levels - they range from $300 to more than $1,000 a month in Downtown.
For some, the charges might be worth it; after all, how many single-family homes come with a 20-seat screening room and sauna, like the one in the new Market Lofts. For others, however, the cost on top of the mortgage can be the deciding factor in where, or if, a buyer chooses to live in Downtown.
Meanwhile, current Downtown residents, many of whom are young and first-time condo buyers, are getting schooled in the process of community living, or, more specifically, in homeowners associations, and their dues and politics.
"You're stuck with this burden that you have to pay each month that's not tax deductible," said Dennis Hunter, who owns a unit in the Bartlett Lofts. "You just have to hope to God that the HOA board is handling it the right way."
Money, Money
Homeowners associations are nothing new. But in Downtown Los Angeles, with the onset of luxury residential buildings that boast such services as tanning salons, wine cellars, dog runs, on-call staff and screening theaters, some HOA fees are skyrocketing.
"The dues are definitely affecting people's choices about where to live," said Bill Cooper, a realtor with the Loft Expert Group. "Especially when you think that you can buy a place for $550,000 and pay $300 a month in dues, and end up with the same monthly payment as buying a place for $500,000 with $600 a month in HOA dues."
The dues, called assessments, often cover water and gas, insurance on the building, and a variety of other items, though individual owners are still responsible for property taxes and private home insurance. Fees are generally determined by the square footage in the unit.
The assessments also go toward the maintenance of the building, from daily tasks such as trash pickup and keeping common areas clean, to expensive repair jobs on roofs and elevators. Some HOAs hire property management companies to oversee the finances and run the building's staff, such as a concierge or housekeeping.
At the Eastern Columbia, where residents are just moving in, a 1,200-square-foot unit requires $525 in dues. In the Roosevelt, assessments will average about 50 cents a square foot. Over at South Group's Elleven, assessments range from $600 to $850 for units that start at about 800 square feet.
For prospective residents, buying can come down to a mathematical equation that factors in mortgage rates, property taxes and tax breaks, along with lifestyle priorities: Will there be a pool? Security? A parking space?
Buyers might be stuck with limited choices on amenities and HOA fees depending on where they want to live in Downtown. For instance, buildings in the Historic Core and the Arts District tend to have lower HOA fees, around $300 a month, because they often include fewer amenities.
Rates are steeper in South Park, which has several new luxury loft complexes, and on Bunker Hill, where older high-end buildings can require hefty HOA fees to cover repairs and expansive grounds.
Doing the Math
Some of the HOA fees go toward the building's reserve, a fund of cash for emergency repairs or problems. Some reserves are in the millions of dollars. Developers are required to put funding toward the reserve, but often that is based on a budget created long before the building opened. Experts warn that the reserve may need bulking up, especially after the project debuts and the budget is reassessed.
"I always tell my buyers to look at the reserve fund," said Jim Perabo, a realtor with CondoSource. "Any reserve fund that is under 70% funded you should be wary of because at some point if a major thing goes wrong, you may not have the money to fix it."
When that happens, Perabo said, homeowners are asked to pay a one-time special assessment, sometimes thousands of dollars, in addition to their monthly fees.
Some observers said they suspect certain developers have low-balled initial budgets for buildings to draw in buyers. They urge residents to be aware that the fees could quickly rise.
"The developer may offer low HOAs to attract buyers, but once they're in, they say, 'Geez, we didn't know how much security costs, and we need to start paying for it,'" said Pat Springer, the former HOA president at Promenade West on Bunker Hill. "There's nothing to say that within five years the dues won't double or triple, and there's nothing you can do about it."
The process of deciding a building's initial budget is complex, said Jeff Lee, a principal at Lee Homes, which has several projects in Downtown Los Angeles. First, various aspects of the structure - from generators to wrought-iron railings to roofing material - are assessed for how often they will need to be replaced and at what cost. Attorneys do the math, based on Department of Real Estate guidelines.
The total is divided by the number of units in the building, which determines the initial HOA assessment for each resident. Lee said if the budget is too low and the dues increase as soon as residents move in, it is usually because of inexperienced developers.
"As we learn more and as we build more complicated buildings, we are paranoid and we are proud that we do things right and protect our buyers," Lee said. "Otherwise, word would get out and we would screw ourselves over."
Additional amenities or services, such as valet parking, 24-hour security or earthquake insurance can add hundreds of dollars to HOA fees. But, say some, that's what buyers expect from luxury high-rise living.
"Living in a high-rise condominium building and complaining about HOA fees," said Hamid Behdad, the president of Central City Development Group and the city's former director of adaptive reuse, "is like owning a Lamborghini and complaining about the price of gas."
Education and Politics
At 1100 Wilshire, an adaptive reuse high-rise in City West, property manager Sam Blum is trying to teach new residents about the building in hopes that they will understand why it is so expensive to maintain. She takes homeowners on tours of 1100's inner workings, such as the filtering room where 540 giant fans cycle air through the structure.
"With any new association, it's about getting homeowners over the initial shock of the cost and understanding the maintenance of the building," said Blum, adding that residents at 1100 were surprised that the homeowners fees, now ranging from $500 to $1,200 a month, are increasing. "We have to get homeowners to understand that this building isn't brand new and to understand the cost it takes to maintain such a monster. She consumes dollar after dollar in no time."
Another difficulty, some HOA board members and property managers say, is making residents understand that the fees are mandatory even when a homeowner doesn't take advantage of all the amenities. If someone refuses to pay, the HOA can take out a lien against the unit, which can eventually lead to foreclosure.
Properties including 1100 Wilshire and the Bartlett Lofts are offsetting their HOA dues with profits from renting their space to film productions or business conferences. The money usually goes into the reserve.
Buying a condo can also be a lesson in politics. The HOAs are mini-democracies, where the residents elect the board members. The rules are set by state law and based on covenants listed by the developer, although there is little oversight.
"When you buy into a building, make sure you have a board with financial experience, and that you immediately do a reserve study and adjust your dues accordingly - and expect that this is going to happen," said Hunter, the Bartlett Lofts resident.
While horror stories abound of HOA boards misusing funds, either maliciously or neglectfully, and of residents not participating in the voting process, there are benefits to living among a community and making group decisions, Hunter said.
"I have seen people rise to the occasion to the point where I have made friends I could die on the sword for," Hunter said. "We have come together to get a problem solved. When you see that kind of commitment, it's like, 'Yeah, I'm in the right place.' This is what a home should feel like."
Contact Kathleen Nye Flynn at kathleen@downtownnews.com.
page 1, 6/11/2007
© Los Angeles Downtown News. Reprinting items retrieved from the archives are for personal use only. They may not be reproduced or retransmitted without permission of the Los Angeles Downtown News. If you would like to re-distribute anything from the Los Angeles Downtown News Archives, please call our permissions department at (213) 481-1448.
But Gawne realizes that in addition to the price of her new condominium in the soon-to-open Roosevelt Lofts, there is an extra cost: Her homeowners fees, about $525 a month, will help pay for the frills and maintain the building's public spaces.
"The place I live at now is a luxury apartment building, and I didn't want to give up any of the luxuries that I have there," Gawne said. "Surprisingly, the dues at the Roosevelt are lower than other places around Downtown."
The opening of expensive condominium complexes, the popularity of luxury amenities and the ever-rising costs of utilities and insurance rates have skyrocketed homeowners fees to eye-popping levels - they range from $300 to more than $1,000 a month in Downtown.
For some, the charges might be worth it; after all, how many single-family homes come with a 20-seat screening room and sauna, like the one in the new Market Lofts. For others, however, the cost on top of the mortgage can be the deciding factor in where, or if, a buyer chooses to live in Downtown.
Meanwhile, current Downtown residents, many of whom are young and first-time condo buyers, are getting schooled in the process of community living, or, more specifically, in homeowners associations, and their dues and politics.
"You're stuck with this burden that you have to pay each month that's not tax deductible," said Dennis Hunter, who owns a unit in the Bartlett Lofts. "You just have to hope to God that the HOA board is handling it the right way."
Homeowners associations are nothing new. But in Downtown Los Angeles, with the onset of luxury residential buildings that boast such services as tanning salons, wine cellars, dog runs, on-call staff and screening theaters, some HOA fees are skyrocketing.
"The dues are definitely affecting people's choices about where to live," said Bill Cooper, a realtor with the Loft Expert Group. "Especially when you think that you can buy a place for $550,000 and pay $300 a month in dues, and end up with the same monthly payment as buying a place for $500,000 with $600 a month in HOA dues."
The dues, called assessments, often cover water and gas, insurance on the building, and a variety of other items, though individual owners are still responsible for property taxes and private home insurance. Fees are generally determined by the square footage in the unit.
The assessments also go toward the maintenance of the building, from daily tasks such as trash pickup and keeping common areas clean, to expensive repair jobs on roofs and elevators. Some HOAs hire property management companies to oversee the finances and run the building's staff, such as a concierge or housekeeping.
At the Eastern Columbia, where residents are just moving in, a 1,200-square-foot unit requires $525 in dues. In the Roosevelt, assessments will average about 50 cents a square foot. Over at South Group's Elleven, assessments range from $600 to $850 for units that start at about 800 square feet.
For prospective residents, buying can come down to a mathematical equation that factors in mortgage rates, property taxes and tax breaks, along with lifestyle priorities: Will there be a pool? Security? A parking space?
Buyers might be stuck with limited choices on amenities and HOA fees depending on where they want to live in Downtown. For instance, buildings in the Historic Core and the Arts District tend to have lower HOA fees, around $300 a month, because they often include fewer amenities.
Rates are steeper in South Park, which has several new luxury loft complexes, and on Bunker Hill, where older high-end buildings can require hefty HOA fees to cover repairs and expansive grounds.
Some of the HOA fees go toward the building's reserve, a fund of cash for emergency repairs or problems. Some reserves are in the millions of dollars. Developers are required to put funding toward the reserve, but often that is based on a budget created long before the building opened. Experts warn that the reserve may need bulking up, especially after the project debuts and the budget is reassessed.
"I always tell my buyers to look at the reserve fund," said Jim Perabo, a realtor with CondoSource. "Any reserve fund that is under 70% funded you should be wary of because at some point if a major thing goes wrong, you may not have the money to fix it."
When that happens, Perabo said, homeowners are asked to pay a one-time special assessment, sometimes thousands of dollars, in addition to their monthly fees.
Some observers said they suspect certain developers have low-balled initial budgets for buildings to draw in buyers. They urge residents to be aware that the fees could quickly rise.
"The developer may offer low HOAs to attract buyers, but once they're in, they say, 'Geez, we didn't know how much security costs, and we need to start paying for it,'" said Pat Springer, the former HOA president at Promenade West on Bunker Hill. "There's nothing to say that within five years the dues won't double or triple, and there's nothing you can do about it."
The process of deciding a building's initial budget is complex, said Jeff Lee, a principal at Lee Homes, which has several projects in Downtown Los Angeles. First, various aspects of the structure - from generators to wrought-iron railings to roofing material - are assessed for how often they will need to be replaced and at what cost. Attorneys do the math, based on Department of Real Estate guidelines.
The total is divided by the number of units in the building, which determines the initial HOA assessment for each resident. Lee said if the budget is too low and the dues increase as soon as residents move in, it is usually because of inexperienced developers.
"As we learn more and as we build more complicated buildings, we are paranoid and we are proud that we do things right and protect our buyers," Lee said. "Otherwise, word would get out and we would screw ourselves over."
Additional amenities or services, such as valet parking, 24-hour security or earthquake insurance can add hundreds of dollars to HOA fees. But, say some, that's what buyers expect from luxury high-rise living.
"Living in a high-rise condominium building and complaining about HOA fees," said Hamid Behdad, the president of Central City Development Group and the city's former director of adaptive reuse, "is like owning a Lamborghini and complaining about the price of gas."
At 1100 Wilshire, an adaptive reuse high-rise in City West, property manager Sam Blum is trying to teach new residents about the building in hopes that they will understand why it is so expensive to maintain. She takes homeowners on tours of 1100's inner workings, such as the filtering room where 540 giant fans cycle air through the structure.
"With any new association, it's about getting homeowners over the initial shock of the cost and understanding the maintenance of the building," said Blum, adding that residents at 1100 were surprised that the homeowners fees, now ranging from $500 to $1,200 a month, are increasing. "We have to get homeowners to understand that this building isn't brand new and to understand the cost it takes to maintain such a monster. She consumes dollar after dollar in no time."
Another difficulty, some HOA board members and property managers say, is making residents understand that the fees are mandatory even when a homeowner doesn't take advantage of all the amenities. If someone refuses to pay, the HOA can take out a lien against the unit, which can eventually lead to foreclosure.
Properties including 1100 Wilshire and the Bartlett Lofts are offsetting their HOA dues with profits from renting their space to film productions or business conferences. The money usually goes into the reserve.
Buying a condo can also be a lesson in politics. The HOAs are mini-democracies, where the residents elect the board members. The rules are set by state law and based on covenants listed by the developer, although there is little oversight.
"When you buy into a building, make sure you have a board with financial experience, and that you immediately do a reserve study and adjust your dues accordingly - and expect that this is going to happen," said Hunter, the Bartlett Lofts resident.
While horror stories abound of HOA boards misusing funds, either maliciously or neglectfully, and of residents not participating in the voting process, there are benefits to living among a community and making group decisions, Hunter said.
"I have seen people rise to the occasion to the point where I have made friends I could die on the sword for," Hunter said. "We have come together to get a problem solved. When you see that kind of commitment, it's like, 'Yeah, I'm in the right place.' This is what a home should feel like."
Contact Kathleen Nye Flynn at kathleen@downtownnews.com.
page 1, 6/11/2007
© Los Angeles Downtown News. Reprinting items retrieved from the archives are for personal use only. They may not be reproduced or retransmitted without permission of the Los Angeles Downtown News. If you would like to re-distribute anything from the Los Angeles Downtown News Archives, please call our permissions department at (213) 481-1448.
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