In Cleveland condo sales contracts, the bank review stage is taking longer than before. While the buyer's documents may be fine, additional financial documents from the building itself are often requested. To summarize the items to check, the key point is not just the management fees, but how much of that fee is being accumulated in reserves.

Cleveland is considered a city with high condo management fees within Ohio. The average management fee based on 33 reports from actual residents is $622 per month, the highest level in the state (hoacosts.com). Considering that the median condo management fee in Ohio is $368 per month, Cleveland's fees are significantly higher. Typical condos or townhouses range from $200 to $400 per month, while higher-end buildings with more amenities can exceed $500.

Management fees generally include three main components. First is the maintenance of the building's exterior and master insurance; second is common services like landscaping, snow removal, and trash collection; and third is the contribution to reserves. In areas like Cleveland, where winter snow removal and heating costs are included in the management fees, the importance of the third item, the reserve contribution, increases as the facilities age.

Ohio changed its condo reserve regulations through Senate Bill 61 in 2022. Previously, at least 10 percent of the budget had to be allocated to reserves, but this fixed percentage requirement has been removed, allowing the board to determine an appropriate level to reflect in the budget. If a majority of residents agree in writing, they can also waive the reserve contributions (williams-strohm.com). If this aspect is not checked, a building may appear to have stable management fees on the surface, but in reality, it could have very little in reserves.

The criteria that banks look at during reviews are stricter. Fannie Mae has required that at least 10 percent of management fee income be allocated to reserves for condo loans to be approved, and starting January 4, 2027, this requirement will increase to 15 percent (governingdocs.dev). In contrast to Ohio's relaxed regulations, the loan review standards are becoming more stringent. Buildings that do not meet the criteria may be classified as non-warrantable condos, leading to loan denials or unfavorable conditions.

Nationally, HOA management fees average between $200 and $400, with buildings that have more amenities ranging from $500 to over $1,000 (nar.realtor, realtor.com). There are also areas in Cleveland where Korean families prefer to live, and in regions with higher school district ratings, management fees tend to be higher as well.

Families moving to Cleveland from other states may budget based on property taxes or management fees from their previous residences, potentially overlooking the management fee structure that includes winter snow removal costs. School district boundaries change frequently, so it's advisable to verify the specific address before purchasing. For investors looking for rental income, checking the rental restrictions under CC&Rs is also important, as some buildings limit the percentage of units that can be rented, which should be clarified before signing a contract.

To summarize the items to check in order:

• Recent board budget reserve percentage
• Whether a reserve study has been conducted
• Whether there is a resolution for reserve contribution exemption
• Percentage of delinquent units and litigation history
• History of non-warrantable determinations by lending institutions

Even if a Cleveland condo has high management fees, if that money is not being properly accumulated in reserves, it could hinder the loan approval process. Conversely, if the management fees are somewhat high but the reserves are solid and there have been no recent special assessments, it may be a more stable long-term choice. Taxes and loan conditions can vary by building and financial institution, so it's important to verify based on individual listings. This article does not constitute investment or legal advice, and consulting a professional before any actual contracts is recommended.