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	Fees take big jump at condos Crain's Chicago Business 09/30/2002 Condominium owners may have to dig a little deeper into their pockets to cover monthly assessments that have risen as much as 20% over the last year because of increased insurance costs and recently mandated building inspections. Added security measures introduced after 9/11 and big heating bills have boosted costs too, according to building managers, who predict even bigger assessments next year. At the same time, home buyers are re-evaluating whether they would rather live in an amenity-rich building with big expenses, or a scaled down property with low operating costs. "Buyers are concerned about assessments," says Mary Jaeger, broker at the Irving Park office of Coldwell Banker Residential Brokerage. "Buyers think about whether they can afford the monthly upkeep on a building, especially if it is one where assessments have been increasing rapidly." Generally, monthly assessments finance the upkeep of a building. Funds from assessments are used to pay for common area maintenance and utilities. Assessments also cover insurance and staff, including janitors and security guards. Assessments vary from only $100 to as much as several thousand dollars a month. The more services and amenities a building offers, usually the higher the assessments, real estate agents say. An older building with big maintenance issues may have higher assessments than a new building. Also, since an assessment is based on a home-owner's fair share of monthly expenses, residents with big places pay bigger assessments than owners with small places. For example, a three-bedroom unit currently for sale at Water Tower Place has a monthly assessment of $1,885. "Assessments are all over the map," says James P. Kinney, president at Rubloff Residential Properties Inc., Chicago. Most buildings have seen expenses rise lately. High insurance premiums are the big culprit. "Insurance rates have gone through the roof," says Steven Levy, president at Sudler Property Management, LLC, a Chicago-based firm that manages 120 condominium and co-op buildings. Mr. Levy figures insurance rates have increased 40%-100% in the past year mainly because of the risks associated with potential terrorist attacks. Of course, highrise buildings have had the biggest jump in insurance premiums. One high-profile highrise saw its insurance bill jump from $150,000 to more than $1 million, a property manager says. Other circumstances can lead to higher insurance bills. A North Side building that had been paying $40,000 for insurance recently got a bill for $350,000 because an arsonist was preying on the neighborhood. Added security measures have boosted assessments at some buildings. New security systems and additional guards increase operating expenses. Security cameras and new keyless entry systems are usually a one-time expense that may not be noticed much by an individual unit owner. But hiring security personnel is costly. A 24-hour doorman, for instance, costs about $140,000 a year. "Most condominium associations today are looking for security," says Mr. Levy at Sudler. "If you want security, you are talking about labor and that is one of the most expensive items in the budget." A little discussed but growing expense is the city-mandated facade inspection. Buildings are now require to have a professional inspection of the exterior every four years. Buildings also must conduct periodic visual inspections. "It's very expensive for buildings to comply with this city ordinance," says Bob Levin, president at Wolin-Levin Inc., a Chicago-based property management firm. "Every square inch of the building has to be inspected by a structural engineer." A facade inspection costs condominium owners as much as $500 each, Mr. Levin figures. In an effort to reduce costs for condos, the Chicago City Council modified the facade inspection ordinance on Sept. 4. Deadlines for initial inspections were extended and a few changes of inspection procedures were made. As expenses rise, home buyers are taking a close look at assessments. Gary Mills, along with his wife, Jo, recently purchased a 2,500-square-foot townhome near Chicago's Roscoe Village neighborhood. The couple had considered buying a condominium in a vintage building. But when they saw the difference in monthly assessments they opted to purchase the townhome that had a monthly tab of about $75. The vintage condo had a monthly assessment of about $250. "The assessment figured into our purchase decision a lot," says Mr. Mills, owner of Webster Fitness Club, a North Side health club. "We thought it was better to put the money toward the house, instead of the assessments." Mortgage lenders look at assessments too. A home buyer might qualify for a $500,000 property without assessments, but not qualify for the same property when assessments are factored in. "The mortgage lender has to know what the assessment is," says Ms. Jaeger at Coldwell Banker. "A high assessment will limit the kind of property you can buy." High assessments can hurt condominium sales too. "Assessments are never beneficial and are always a deterrent," says developer Ron Shipka, Sr., principal at the Enterprise Companies, Chicago. He cautions home buyers to have realistic expectations, however. More services and added security will translate into higher assessments. Mr. Shipka thinks home buyers who want a well-maintained building should expect to pay an assessment of about $0.30 a foot-about $300 a month on a 1,000-square-foot place. Mr. Shipka's company is re-developing a building at the old Montgomery Wards complex on the Chicago River. About 90% of the 240 units have been sold at the building, One River Place, where assessments are about $0.24 a foot. "Assessments are not a profit center," says Mr. Shipka, who plans to manage the building for two years to get the owner's association "up and running." Still, developers may lowball assessments on new buildings in order to lure buyers. "If a developer quotes an assessment, you should triple it for the first year," says Mr. Levy at Sudler. "I haven't yet seen (numbers) that have been accurate from a developer." Assessments usually rise when the condominium association takes over management of the building from the developer. The increase can be as much as 50%-75%, according to Mr. Levin at property manager Wolin-Levin. Developer Thomas Roszak tries not to lowball assessments. "I think we look better when we turn the building over to the condominium board if our numbers are right on," says Mr. Roszak, president of Roszak/ADC, LLC, Evanston. Still, he admits budgets are guess-work. He uses his experience with past buildings to estimate expenses on new projects. At Mr. Roszak's Evanston project, Chicago Avenue Place, assessments are about $500 for a three-bedroom unit. He considers this relatively high because the building has a number of extras such as a swimming pool and an exercise room. What Mr. Roszak didn't expect, though, was the recent 25% jump in the property's insurance prices. "It was a bit of a surprise," he says. At that point, Mr. Roszak, who also operates a property management firm, had to go back to the condominium board and ask for an assessment increase. For home buyers, it can be difficult to predict the course of assessments. New buildings generally have fewer repair issues than old buildings - a fact that can keep assessments at new buildings relatively stable for 5-10 years. Established condominiums have expense records that should be checked before a property purchase, real estate agents say. These records will show the history of assessment increases, budgets and capital reserves. Minutes from association meetings can also give buyers an idea of what big capital expenses are on the horizon. But condominium buyers shouldn't expect to escape expense increases altogether. Says Mr. Kinney at real estate firm Rubloff: "If you are smiling because you think you have found a condo with a cheap assessment, that only means you will probably get nailed later." Roszak/ADC 1415 Sherman Avenue Suite 101 Evanston, IL 60201 Main  847-425-7555 Sales  847-328-8200 Fax  847-425-7540 email inquiries: info@roszakadc.com copyright© 2003 Roszak/ADC. All rights reserved.