A friend who recently purchased a condo in Riverside shared that they were a bit surprised when they received their first HOA bill. The amount charged was higher than what they were told during the purchase agreement, and upon checking, it turned out that the reserve fund contributions were significantly higher than expected. Since this isn't an uncommon situation, it might be helpful to review what to check before signing a contract.

The median HOA fee for condos in Riverside County is around $439 per month. This is relatively high compared to the overall average in California, which ranges from $300 to $400 per month. Typically, the fees cover building exterior maintenance, master insurance, management of common facilities like pools or gyms, landscaping, trash collection, and contributions to the reserve fund.

The Riverside condo market has seen a mix of new developments that have emerged over the past decade alongside older, smaller buildings near the city center. New developments often have lower initial fees, while older buildings may be approaching the time for major repairs, making the state of the reserve fund a crucial factor.

Lending institutions will check the HOA budget, accounting audit reports, the actual balance compared to the reserve fund target, and the percentage of units that are more than 60 days delinquent. If these criteria are not met, the property may be classified as a non-warrantable condo, which can lead to less favorable loan terms. Therefore, it's beneficial to request HOA financial documents when viewing properties.

As in my friend's case, when there is a discrepancy between the fees quoted at the time of the contract and the actual billed amount, it is often due to recent adjustments in the reserve fund contribution plan or coinciding with the start of a new fiscal year. Requesting the latest budget based on the current fiscal year before signing can help identify such differences in advance.

The first concern that comes to mind is why the fees are so different. The answer lies in the reserve fund. If an HOA has been operating with a low reserve fund and later raises the contribution rate, existing fees may suddenly increase, or if that is still insufficient, special assessments may be charged separately. This is why the state of the reserve fund is particularly important for high-cost items like roofs, plumbing, and elevators.

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 Surfside condo collapse in 2021, SB 326 requires that buildings with three or more stories inspect exterior elevated elements like balconies and decks every nine years, with the first inspection deadline set for January 1, 2025. As inspection results are incorporated, some complexes may adjust their fees or reserve fund plans accordingly.

Here are some items to check before signing a contract:

• Recent HOA financial statements and reserve study results
• Percentage of delinquent units and history of special assessments
• Compliance with SB 326 balcony inspection requirements
• Discrepancies between the fees stated in the contract and the actual billed amount

Just because the fees are higher than expected doesn't necessarily mean there is a problem with the complex. It could be an attempt to bring the reserve fund back on track, so it's more accurate to verify the reasons for the fee increase through the budget by fiscal year.

Rather than just feeling reassured by the number stated in the contract, it can be helpful to check what financial structure that number is based on to avoid surprises later. Especially as closing approaches, it's wise to request the most recent board meeting minutes to see if there are any ongoing discussions about spending plans. Meeting minutes often mention repair plans or discussions about special assessments that have not yet been reflected in the budget, allowing you to see trends that may not be visible through financial statements alone. This article is not investment or legal advice, and consulting a professional before signing a contract is recommended.