Infighting and Poor Planning Leave Condos in Disrepair

There are positive aspects to having a condominium, including - at least in theory - that the condominium association (or the management company hired by the association) will take care of needed maintenance and upkeep and establish an adequate capital reserve fund to take on major maintenance projects as needs arise.  As the aftermath of the partial collapse of the Champlain Towers South complex near Miami is revealing in stark detail, the actual reality is all too often something quite different.  Even low rise condominium developments can face huge capital expenditures over time, but high rise projects like the Champlain Towers South complex often face staggering costs as the project ages.  Typically, as a piece in the New York Times notes, condo associations have inadequate reserves and efforts to increase monthly assessments or, more difficult yet, special assessments trigger civil wars amongst neighbors (we have several friends all too well acquainted with the phenomenon).  The lesson is that one needs to know what one is getting into when purchasing a condominium unit.  Here are excerpts from the Times piece:

For years before the partial collapse of the Champlain Towers South complex near Miami, the condo board wrestled with how to come up with the $15 million needed to fix the building’s dilapidated roof, a poorly designed pool deck and crumbling support columns.

The problem: The homeowners’ association had just $800,000 in reserves, and getting the work done meant asking residents to shoulder huge special assessments ranging from $80,000 to $200,000 on each home. No one was eager to pay.

“The dirtiest words in the community-association industry are ‘special assessment,’” Donna DiMaggio Berger, a lawyer for the board, said of the effort to get 135 homeowners — of varying means and of multiple nationalities — to agree on a plan to do the repairs.

During the prolonged tumult over the needed renovations, several members of the board had quit in frustration.

The deferred maintenance and inadequate savings at the Champlain Towers building are common dilemmas at condo associations across the country, where volunteer board members, sometimes with little expertise in financing or maintenance, find themselves dealing with vicious infighting with their neighbors and pressure to keep dues low.

Only about 10 states require associations of homeowners to assess how much money they will need for big-ticket repairs in the future, and a vast majority of states do not require condo boards to maintain robust reserves to help pay for those items when they come due.

About one-third of associations are far behind on their savings, with 30 percent or less of the money needed to prepare for future big-ticket projects, said Robert Nordlund, whose company, Association Reserves, has studied tens of thousands of condominium groups and other homeowners’ associations in all 50 states. He said some boards get stuck focusing on regular maintenance costs — utilities, gardeners and pool cleaning — but fail to think about the even bigger bills that could arrive with sudden urgency.

The debates over deferred maintenance, money management and escalating homeowners’ association dues that unfolded in Surfside are hardly unfamiliar to condo residents across the country, who often find themselves caught up in political dramas with their neighbors whose outcome can dictate everything from the color of their garages to the resale value of their homes.

Industry leaders and some states have long pressed condos and other homeowners’ associations to have robust reserve funds in order to avoid consternation and procrastination when a big bill is coming due. But with little voluntary progress, a move to reshape state laws has gained momentum in recent months, attracting support from some homeowners, community managers and engineers in the industry.

A committee at the Community Associations Institute, which advocates for homeowners’ associations, is looking at a proposal to require homeowner communities to commission expert studies to assess the amount they need in reserves. Dawn M. Bauman, the institute’s senior vice president for government and public affairs, said the committee was also looking at minimum reserve requirements, although that proposal was subject to more vigorous debate.

The next backstop is local government, which could determine that a lack of repair is a code violation, which could trigger enforcement proceedings to force compliance.

At the Champlain Towers South project, the condo association had been working with an engineer in preparation for a 40-year recertification process required by the government. A letter written in April by the condo president, Ms. Wodnicki, showed that the association did not have enough reserves or cash on hand to fund the $15 million in repairs that residents were being asked to pay. And she warned that conditions in the building had “gotten significantly worse” since a 2018 engineering review highlighted millions of dollars in problems.