Increasing residents’ monthly fees is never popular, but with insurance, labor, materials, utilities, code compliance and other operational costs rising across the board, your building’s cash inflow needs to reflect economic realities in order to remain fiscally healthy. Keeping maintenance fees artificially low may be tempting—but one big, unexpected expense at any point during the year can trigger a cascade of trouble for your board and residents alike.

Keeping Up With COLA

“A lot of boards don't realize that if they don’t keep up with cost of living allowances (COLA), they subject themselves to deficits during the year, which then result in monies being transferred out of their reserves, depleting those accounts,” says Jay Cohen, president of New York City-based property management firm A. Michael Tyler Realty Corp. “They should be keeping up with the maintenance to make sure that their day-to-day operational expenses are being covered, and keeping up with inflationary costs by increasing fees at least two to three percent each year.” 

“In New Jersey,” says Christopher Antonacci of property management company Association Advisors of New Jersey, “the new reserve study and structural integrity laws make it virtually impossible to maintain flat fees without creating risk. Boards are now legally required to fund their reserves in accordance with those studies—not based on preference or politics. From both a financial and legal standpoint, artificially low fees are unsustainable.”                  

Jessica Ruiz, Senior Vice President of Management for AKAM Property Management Southeast, says that particularly in Florida, condo associations are now also required to fund Structural Integrity Reserve Studies (SIRS) compliance components, which need to be factored into any increases on the horizon. A board’s obligation is long-term stewardship, not short-term appeasement, and having consistent increases is better for everyone—boards, residents, and shareholders. 

Underfunding budgets also has an impact on resale values. “Lenders in Florida—especially now with the SIRs requirement—are looking to make sure that associations are funding reserves properly,” Ruiz says. “In some cases, they require a 10% of their annual budget to go into reserves. Otherwise, buildings are not financeable, and they won't be funded.”

Special Assessments & How They Work

When reserves are underfunded, or when a major building component reaches the end of its useful life and must be replaced, a board may vote to make a special assessment. A special assessment is a one-time charge to residents, added to their monthly bill and often spread out over several months to make payment more manageable. It does not permanently increase maintenance fees; once the assessment is paid and the project completed, the additional charge disappears. Used properly, assessments are a practical solution, not a failure—in fact, from a resale perspective, an assessment can actually be more attractive than inflated monthly costs.

“The majority of our associations are going through some type of capital improvement right now,” says Ruiz, “whether it's driven by a recertification requirement, or just a project that has to get done that hasn't been completed yet. We’re finding that a lot of associations don’t have the funds on hand to do these projects, so we're leaning on lending institutions to provide construction lines of credit, term loans, or whatever the association needs at that time to fund their required projects. We use special assessments in conjunction with those lines of credit to have the funds up-front to do the necessary work. But these banks will not close on a loan unless there’s collateral. The collateral is a special assessment.” 

Legal Requirements

Boards in New Jersey face legal exposure if they fail to comply with the state’s Reserve Study Law and structural integrity requirements. A board that knowingly underfunds their reserves may be in breach of both its fiduciary duty and state law. “This creates potential personal liability for directors and could jeopardize D&O insurance coverage,” says Antonacci. “From a governance standpoint, ignoring required funding is no longer a judgment call—it’s a compliance issue. Boards that fail to act are taking on unnecessary and avoidable risk.”

Ruiz agrees that boards have a fiduciary responsibility to maintain the common elements and comply with state statutes. “Failing to adequately fund their obligations definitely exposes boards,” she adds.

And depending where a community is located, a board may not be able to simply pull funds from whichever account is the most flush to fund a big repair or replacement project. For example, says Antonacci, “Under New Jersey’s reserve study law, funds earmarked for specific components must be used for that purpose, which limits flexibility.” But no matter where they are, “What boards cannot do is act arbitrarily or without transparency,” Antonacci continues. “Decisions must be made in open meetings with proper notice. When boards follow their governing documents and the law, their authority is clear.”

How Much to Increase?

A community’s bylaws typically give the board the power to set monthly maintenance fees, including increases. “In most cases, boards are able to increase fees without an owner vote,” says Ruiz. “And in other cases—like special assessments—there are some thresholds that if a project costs over a certain amount, it requires owner approval.” 

When it comes to exactly how much to increase in any given year, Ruiz says that “If an association has been incrementally increasing fees every year, as they should be generally, you’ll typically see anywhere between three to 5% increase up to seven.” However, she continues, “If an association hasn’t increased for a couple of years, residents could see a one-time jump of maybe 15 to 20%.” She notes that in her state, “Anything over a 15% increase can be contested by a unit owner.”

Some boards can only raise fees by so much at any one time, says Antonacci, adding that “those limits are spelled out in the governing documents and applicable state law. Some documents require owner approval if increases exceed a certain threshold, but many do not.” 

Antonacci says there is no one-size-fits-all number for increases, but CPI is a reasonable baseline for operating increases under normal circumstances. “The reserve component is no longer optional in New Jersey—it’s mandated. Communities with deferred maintenance or underfunded reserves will require more aggressive adjustments,” he says, “Outside of reserve requirements, I generally recommend increases aligned with CPI as a baseline for operating costs. This approach keeps budgets realistic and predictable for residents. It also avoids sticker shock and reduces conflict. Consistency is easier to explain and easier for owners to plan around.”

When it comes to how much a building or association should hold in their reserves to avoid having to hit residents with assessments or fee increases in the event of a big repair, says Cohen, “Normally I would suggest that a 30-unit building should have at least $90k to $100k in reserve; a 50-unit building should have at least $150 to $200k in reserves. Because for example, if a boiler blows up or an elevator goes, you're looking at hundreds of thousands of dollars to repair them. So the boards only have a few options: take money from their reserve accounts, do a special assessment, or borrow from the bank.”

Looking—and Planning—Ahead

According to the pros, the best approach to planning prudent, manageable fee increases is to review operating budgets annually and update reserve studies as required by law, or whenever conditions materially change—especially as buildings age and systems approach the end of their useful life. 

Insurance costs are at the top of the list of things boards should be paying close attention to right now, followed closely by labor, materials, utilities, and compliance-related costs, says Ruiz. “We're also finding that if condo associations are not funding their reserves as needed, they could potentially have an issue during their insurance renewal process, so they're keeping an eye on it as well.”

“Landscaping, snow removal, and service contracts also need to be reviewed annually,” Antonacci notes. “Management should be evaluating these contracts as part of the budget process, and advising boards on the best options. The reality is that rising costs make flat budgets extremely difficult to justify. Ignoring these increases doesn’t make them disappear—it just delays the impact. Too many communities only react when something breaks. Proactive planning allows boards to spread costs over time instead of scrambling in crisis mode. Boards need to budget based on reality, not hope.”

Communication & Resident Engagement

Regular reviews of budgets versus expenses also improves transparency and credibility with residents. 

A New York co-op board member emphasizes the importance of balancing and communicating maintenance fee increases saying, “This is the only major investment I have on the planet—my mortgage and my maintenance. People want to know what’s happening with their money.” She adds that knowing how much information to share with the community as a whole can be tough to estimate. “You want to make sure people know what’s coming up in advance, and why,” she says, “but you also need to make sure your information is accurate and up to date.”

Communication doesn’t eliminate disagreement, but it does build trust, keeping the community updated on timelines and costs. That’s why transparency and timing are critical. “Open meetings and written explanations go a long way toward reducing resistance,” to fee hikes, says Antonacci. “Boards should explain not just what the increase is, but why it’s necessary, using plain language and real numbers.” 

At the end of the day, no one wants to spend more money than is absolutely necessary. Proactive planning, transparency, education, and involvement can help keep projects funded and reserves ready. As Antonacci notes, “Tying increases back to insurance costs, reserve requirements, and long-term protection of the property helps residents understand the rationale. Even if residents don’t like the increase, they appreciate honesty.” 

Kate Mattiace is associate editor of CooperatorNews