The average HOA fee for Los Angeles condos ranges from $340 to $388 per month. This range serves as a baseline for typical condos and planned development communities, while full-service high-rise buildings can charge between $700 and $1,200 per month. A question raised by an inquirer encountering these numbers for the first time was whether they might suddenly face a situation where they have to pay several thousand dollars at once, which was a concern about special assessments.

This concern is valid. HOA fees cover building exterior maintenance, master insurance, common area management, landscaping, trash collection, and reserve fund contributions. If the reserve fund is not sufficiently built up and major repairs are needed, such as for the roof, plumbing, or elevators, the shortfall can be charged to residents as a special assessment. It's important to note that buildings with seemingly low monthly fees may actually have insufficient reserve funds, increasing the risk of such assessments.

The Los Angeles condo market shows significant variation even within the same city. Some areas, like Koreatown or near Wilshire, have many mid-rise buildings constructed between the 1970s and 1980s, while others, like Downtown or West Hollywood, are home to newer full-service high-rises. Older buildings may appear to have low fees, but they can also have insufficient reserve funds, making it difficult to assess the building's condition based solely on fee numbers. Instead of feeling reassured by low fees, it is more practical to consider when the building was constructed and the recent trends in reserve fund contributions.

During Fannie Mae assessments, the HOA budget, accounting audit reports, actual reserve fund balances compared to target amounts, and the percentage of units more than 60 days delinquent are all reviewed. If any of these criteria are exceeded, the entire condo project may be classified as non-warrantable, which can limit loan options for buyers regardless of their credit scores. Requesting and reviewing HOA financial documents from the initial stages of property evaluation can help streamline subsequent processes.

California's Civil Code Section 5550 mandates that HOAs conduct a reserve study at least every three years and review it annually. Additionally, following the 2021 Surfside condo collapse, SB 326 requires that buildings with three or more units inspect exterior elevated elements like balconies and decks every nine years, with the first inspection deadline set for January 1, 2025. In areas like Los Angeles, where buildings of various ages are concentrated, the results of these inspections may directly impact future reserve fund planning and the likelihood of special assessments.

From the lender's perspective, this financial status is a crucial assessment factor. According to Fannie Mae's condo project guidelines, if delinquency rates, reserve fund ratios, ongoing litigation, or commercial space ratios exceed the criteria, the condo may be classified as non-warrantable, leading to loan denials or unfavorable conditions. It's easy to overlook this aspect when only comparing property prices and fee numbers.

Before signing a contract, please check the HOA financial statements and reserve studies from the past 2-3 years, the delinquency rates, the status of any ongoing litigation, and compliance with SB 326 inspections. Looking at the financial structure behind the fee numbers rather than just the numbers themselves seems to be a realistic way to gauge the risk of special assessments. This article is not investment or legal advice, and it is recommended to consult with real estate and accounting professionals before finalizing any contracts.