Like any major urban city, Chicago has its fair share of condominiums with Homeowners Associations (HOAs). In hot neighborhoods like River North, Old Town, Lincoln Park, Gold Coast, and the West Loop, HOAs are the standard while single-family properties fall into luxury range.
Chicago condo HOA bills range anywhere from less than $100 to thousands per month. The exact amount you owe to the Homeowners Association depends on a few factors, including the property’s value, building age, amenities and included utilities. Residents of older high-rises with pools typically pay more than residents of a three-story walk-up without such comforts, for instance.
To help you wholly anticipate the costs of homeownership, first understand how HOAs work and what your monthly bill includes.
What is a homeowner’s association (HOA)?
Simply put, HOAs – or Homeowners Associations – are organizations within condominiums, subdivisions, retirement or gated communities that enforce regulations to preserve and maintain shared spaces and/or structures. Examples of shared spaces in a condo complex include green space, gyms, rooftop decks, garages, lobbies, and hallways. Beyond communal amenities, the condo association is also responsible for shared structural components such as the building’s façade roof, windows, plumbing, electric and more. As a condo owner, you are responsible for paying part of the total cost of general upkeep since you own a fractional interest of all common spaces onsite.
HOA dues also cover the building’s insurance fees, although every unit owner still needs a personal homeowner’s insurance plan to cover their respective dwellings.
The amount you regularly owe is determined by the building’s board association, a nominated group of residents who help oversee the budget and vote on necessary repairs or upgrades that help boost property value. Most HOAs in Chicago bill on a monthly schedule, but special assessments may be enforced in case of emergency or outstanding debts. When special assessments are involved, the total bill is divvied up depending on your interest in the common area(s). For instance, a two-bedroom condo owner typically pays more in special assessments than a studio condo owner because they own a larger share of the property and thus, a greater portion of the common areas.
Special assessments are not always a necessary course of action, especially if there’s enough capital in reserves to pay for emergencies like a leaking roof or failing boiler. Ideally, the association should set aside somewhere between $60 and $150 per unit, per month. Or, 25 to 35 percent of your respective monthly bill.
The board will run a reserve study every few years to ensure the building’s emergency fund is adequate. The state of Illinois does not have a specific statute related to reserve studies to enforce the frequency of such studies. However, per Chapter 765 ILCS 605 Section 2, ““all budgets adopted by a board of managers shall provide for reasonable reserves for capital expenditures and deferred maintenance for repair or replacement of the common elements.”
Steps to take before you buy a condo in Chicago
- Research your Chicago condo HOA first
Once you close and take occupancy, you are entirely responsible for any dues or special assessments, which can be as minor as a few hundred dollars or as high as $50,000. Earlier this year, residents at Kennelly Square in Old Town were on the hook for as much as $80,000 to pay for an $18 million bill in city-mandated repairs and energy-saving upgrades.
A smart real estate agent will obtain building documents and association history to prevent such a financial disaster. Pay close attention to the board meeting minutes and reserve study – specifically how much capital (percentage full or total dollar amount) is currently earmarked for future repairs and improvements.
- Understand what your HOA bill covers
Some associations bundle utilities into the HOA bill, which pushes your dues higher. This can save you money since most condo buildings receive group rate discounts for services like cable that would cost more if you purchased them solo. Of course, if you don’t watch cable, you’re still responsible for your share of the utility. Keep in mind that if you’re looking at Chicago condos for sale with perks like a gym, rooftop pool or door person, your bill will inevitably cost more to maintain those elements.
- Learn the rules (by-laws)
Some condos or shared communities have strict regulations for renovations. If you plan on gutting and remodeling your new home, check with the board first. You’ll also want to ensure that pets are allowed if you plan to bring a furry friend along now or in the future. Sometimes, HOA boards require interviews with prospective buyers after the seller accepts an offer and the transaction is under contract. This to ensure you have received and read a copy of the by-laws and agree to the existing regulations.
- Know your rights
According to the City of Chicago Condo Ordinance, prospective buyers are entitled to a Disclosure Summary prior to closing:
“Chapter 13-72 of the Municipal Code of Chicago is the City of Chicago’s Condominium Ordinance. The Condo Ordinance now includes several, strengthened consumer protections. Prospective purchasers of condo units now have the right to a standard, simplified document that discloses key information about the condo for sale. Tenants in buildings being converted into condos also have several rights new rights under the ordinance.”
Although prevalent, it’s important to factor HOA dues into your total monthly housing costs before making an offer. If you plan on financing your home purchase with a mortgage, your lender will calculate those costs into your debt-to-income ratio. High HOA fees might even impact your loan approval.
Z Chicago can find the right Chicago condo that fits your overall budget – mortgage, HOA bills, utilities, and parking considered – and help you make the right decision through extensive research, preparation and honest conversation. Contact us to get started on your Chicago condo search today.
