A family looking for a condo in Burbank initially thought of HOA fees as a fixed monthly expense like rent, only to discover important items like reserve funds after checking the financial statements before signing a contract. This is a common misunderstanding among first-time condo buyers. It's easy to think that HOA fees are only used for management labor or landscaping, but in reality, many more items are involved.

So, what exactly is included in HOA fees? They cover maintenance of common areas like building exteriors and roofs, master insurance, management of shared facilities like pools and gyms, landscaping and trash collection, some utilities depending on the situation, and contributions to a reserve fund for future major repairs. In Burbank, condo management fees generally range from $300 to $600 per month, with the median condo management fee in Los Angeles County, where Burbank is located, being $413 per month (according to JDJ Consulting). For example, in the Burbank Village Walk complex, management fees range from $550 to $626, indicating significant variation between complexes.

Why is the reserve fund so important? If the reserve fund is insufficient, special assessments may be suddenly imposed on residents when costly repairs are needed, such as for roofs, plumbing, or elevators. California law, under Civil Code Section 5550, requires HOAs to conduct a reserve study at least every three years and review it annually. Additionally, buildings with three or more units must have external structures like balconies and decks inspected by structural professionals under SB 326, making it even more crucial to examine reserve funds and inspection histories in states with such regulations.

The financial statement this family reviewed before signing the contract included changes in the reserve fund balance over the past five years and the expenditure details from the last fiscal year. The property with relatively low management fees had a reserve fund that fell short of recommended levels, and the board meeting minutes indicated discussions about needing plumbing replacements in the coming years. In contrast, a property with slightly higher management fees had recently completed roof work solely from the reserve fund and had no history of special assessments. Burbank's location near studios means that both new condos and older low-rise complexes are traded in the area, leading to significant differences in management fee structures and financial conditions based on the age of the buildings. Ultimately, this family placed more weight on the contents of the financial statements and meeting minutes than on the management fee numbers alone when making their decision.

What about financing? Mortgage lenders consider the HOA's delinquency rate, reserve fund ratio, ongoing lawsuits, and commercial space ratios when evaluating condos, and if these criteria are not met, the condo may be classified as a non-warrantable condo, leading to loan denial. If you're looking for a condo near school districts preferred by Korean families, it's advisable to check ratings from GreatSchools or Niche, but keep in mind that school district boundaries change frequently, so verify the assigned school for the address before purchasing. If you're moving from another state, judging based on property taxes or insurance rates from your previous location may overlook important factors, so recalculating your total monthly expenses, including HOA fees, seems to be a safer choice.

Afterward, this family developed a habit of requesting to review financial statements along with management fee numbers whenever they looked at condos. Initially, it felt unfamiliar and cumbersome, but after comparing a few, they could see that even with similar management fees, there were complexes with vastly different financial conditions. Ultimately, HOA fees are not just a fixed expense but also an indicator of the financial health of the complex. This article is not investment or legal advice, and it is recommended to consult with real estate professionals and, if necessary, accountants or lawyers before finalizing any contracts.