A newlywed couple looking for a condo in Pasadena had a question while considering two listings. They wanted to know which option was safer: one with a $300 fee or another with a $500 fee. While it might seem like a simple choice to pick the lower number, the answer actually depends on how much reserve fund is accumulated within that fee.

The median condo HOA fee in Los Angeles County, including Pasadena, is around $413 per month. Looking at individual complexes, Mountain Park Villas charges $368 per month, Bradford Place is $550, and Mentor Farms is $275, showing a wide range. Typical buildings have fees ranging from $300 to $500, while luxury complexes with amenities like pools, gyms, concierge services, and secure parking can charge $600 to over $1,000 per month. Fees cover building maintenance, master insurance, common area management, landscaping, trash collection, and reserve fund contributions.

The Pasadena condo market includes buildings converted from apartments built between the 1920s and 1930s, as well as new constructions that have emerged near Old Town in recent years. Converted buildings often have plumbing or electrical systems originally designed for rental use, so it's crucial to check whether the reserve fund adequately accounts for the replacement of these aging systems.

During Fannie Mae condo project reviews, they check the HOA budget, audit reports, the balance compared to reserve fund goals, and the percentage of units that are more than 60 days delinquent. In cases where there are many aging systems, some buildings may fail to meet these review criteria and be classified as non-warrantable condos, so it's wise to verify the year of construction and the conversion date when selecting a property.

When looking at older converted buildings, it's helpful to check whether the reserve fund has been increasing in recent years or if it has stagnated. If the contributions are steadily rising, the likelihood of special assessments in the future is relatively low; conversely, if it has stagnated, caution is warranted even if the fees appear low. Especially if considering a converted building, it's beneficial to ask the responsible agent about the year of construction and any recent major repair history.

Ultimately, the couple chose the property with the relatively higher fee. Upon reviewing the reserve study for the property, they found that the reserve fund accumulation was close to the recommended standard, while the property with the lower fee had a shortfall in the reserve fund, indicating that special assessments were being discussed, as confirmed by the financial statements. This illustrates that a lower fee does not necessarily mean a better deal.

According to California Civil Code Section 5550, HOAs are required to conduct a reserve study at least every three years and review it annually. Additionally, following the Surfside condo collapse in 2021, SB 326 mandates that buildings with three or more stories must inspect exterior elevated elements like balconies and decks every nine years, with the first inspection deadline set for January 1, 2025. The results of these inspections must also be reflected in the reserve fund plan.

Before signing a contract, it's advisable to check the recent reserve study and financial statements, the percentage of delinquent units, and any ongoing litigation, rather than just focusing on the fee numbers. Lenders also review this financial health according to Fannie Mae standards, so an HOA with a deficient reserve fund can impact loan terms. If you're deliberating between two properties, it's much more helpful to not only jot down the fee numbers side by side but also to obtain summaries of each property's reserve study for comparison. This article does not constitute investment or legal advice, and consulting a professional before making any agreements is recommended.