In my recent blog Changes in Plaza Resort & Spa - Daytona Beach Condo-Hotel I mentioned that Maintenance fee has been reduced by $100.02 a month. Form $528.24 to $428.22.
Wow!
I think The Plaza Resort & Spa in Daytona Beach is the only condo (and condo-hotel) in the area to reduce the monthly Association (aka Maintenance) fee. But before rejoicing, let us think about it.
Association fee is a function of the budget. The Association puts together their annual budget, and then divide it in a specified manner (by sq ft. or by unit) and establishes the amount per unit. The Plaza Resort & Spa uses unified maintenance fee per unit, so that every unit is assessed the same amount, whether small or large, and even whether a studio or a suite with more than one room.
So, for the reduction to happen, there should have been a change in the budget. And what could reduce the budget that dramatically? The officials say that the further we go from the Hurricanes of 2004, which caused a dramatic increase in the cost of insurance premiums, the less the premiums are. Maybe, but I would be hard pressed to believe that this alone could cause the reduction of practically 20%.
But this is the only optimistic scenario I could come up with. The other is more cynical.
The Developer of the Plaza Resort & Spa was in Chapter 11 bankruptcy reorganization, and now the money goes to the Lender, and then the Management is getting the money from the Lender to operate the property. And in this case this reduction could be the result of the arrangement that the money go to the Lender, so no reason to hike the fees any way.
I think that the decision to reduce the payments was not a good idea. I think the Plaza Resort & Spa could greatly benefit from putting this extra bucks into the reserves, and they may need it for repairs. I do not know whether the Lender would have had access to that money, and would take it away to compensate for the debt, accrued by the developer, but that maybe the reason they simply reduced the rate.
It is not always good to have small maintenance. Look at it this way. Ideally it is a balance. And low maintenance fee often means high Special Assessments in the future, which always comes faster than we anticipated.
So, should the Maintenance Fee be low or high? Neither. It should cover all budgeted items and provide needed reserves to alleviate the financial burden of the condo-owners when the time comes.
However, the first question I am always asked on the phone is about the maintenance fee. Not what is left (if anything) after the maintenance and taxes paid.
Just how much is the maintenance fee.
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