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No. of Recommendations: 12
Good opinion piece in the NYTimes on how the deadly politics of condo board governance likely caused the Florida condo collapse. People don't like paying for maintenance any more than they like taxes.

https://www.nytimes.com/2021/07/29/opinion/condominiums-surf...

intercst
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People don't like paying for maintenance any more than they like taxes.


I'm guessing that is why we need regulations (force of law) for both?

Anymouse

https://novascotia.ca/just/regulations/regs/conregs.htm
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When I was considering condos to buy, I always required the financials of the business. I wanted to know what reserves were being built to pay for the future large expenses that were sure to come.
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One of the problems with Condo fees is the matter of control. An older friend of ours who moved into a condo when her husband died just got hit with a $27,000 surcharge for a roof replacement because the condo management wasted the money on "pool" enhancements.

In a normal home owner situation most people would spend their money on a need, new roof, instead of a want, new cabanas. So my question is what did this condo's management spend their money on.
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An older friend of ours who moved into a condo when her husband died just got hit with a $27,000 surcharge for a roof replacement because the condo management wasted the money on "pool" enhancements.

When wife and I first started looking at condos, #1 automatic reject criteria on the list was a pool. They stink up the building with chlorine, are a hole you pour money into and have serious liability issues with kids around.

We live just five minutes walk from these guys and the big indoor soccer field where my granddaughters play.

Anymouse

https://www.google.com/maps/uv?pb=!1s0x4b5a20457af98739%3A0x...
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From the article:

Even the most well-intentioned and fiscally prudent condominium board members may have a hard time envisioning the possibility of a catastrophic building collapse or fire. That’s why we need ethical, licensed and experienced experts making determinations about what repairs are required on a regular basis. If those decisions involve life-safety repairs, the engineers should have the final word.

https://www.nytimes.com/2021/07/29/opinion/condominiums-surf...

Good article and my comments on the subject:

This will take years to resolve and there are plenty of scam opportunities with new inspections and new repairs. Not all licensed and experienced experts are honest/ethical. Speaking from experience, states have problems with catching licensed engineers doing shoddy engineering and licensed contractors doing shoddy construction. There is a shortage of qualified independent state/county/city inspectors in many states. Furthermore, many state/county/city governments do not provide adequate funds for hiring qualified inspectors to perform these activities.

Jaak
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I'm guessing that is why we need regulations (force of law) for both?

Ironically, Florida is one of the most thoroughly regulated states in the country as far as condos and HOAs go.

In practice, some of the regulations are actually counterproductive.

For example, I always shake my head at some state laws or condo governing documents that require homeowner approval for special assessments or regular assessments over a certain percentage (I refer to these as FiddleFaddle's License to Commit Financial Suicide).

The laws sound good, don't they? Putting authority where it belongs, protecting people from rogue boards, and all that. In practice, though, the average person in this country isn't too good at personal finance, let alone understanding finances for a multi-million dollar corporation. In addition, while board members have a fiduciary duty to act in the best interests of the association, individual homeowners have no such duty and may act in ways that are actually detrimental to the association.

And that's what happens in these communities. Condo budgets tend to be inadequate in general because boards are often loathe to upset the membership. Couple that with laws requiring homeowner approval for all but the most modest assessment increases, and you know what will happen.

Having spent many years living in condos and serving on the boards of directors, I believe that there are many problems with condo governance that will not be addressed by any changes in regulations. As long as decisions are in the hands of people with no qualifications whatsoever other than having enough money to buy a home, nothing will change.

I'll step off my soapbox now.
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Everyone who considers buying a condo should be aware that it's like strolling into a bar and becoming business partners with everybody in the joint.

There is no amount of due diligence anyone can do to offset the risks of doing something like that. Yes, you can and should take a hard look at the financials, but keep in mind that those are mostly a snapshot of what's happening now. They are not a history of the community and - more importantly - they are no guarantee of the future.

About the only thing I've found so far that may protect you is purchasing your home through an LLC. There are financial implications to doing things that way, however, that may cause more problems than it solves.
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I'm guessing that is why we need regulations (force of law) for both?

Ironically, Florida is one of the most thoroughly regulated states in the country as far as condos and HOAs go.



OK ... you do know I don't live in US right? Of course many of my fellow citizens do spend winter months in Florida and I'm sure some of them own condos there.

Anymouse
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No. of Recommendations: 8
FiddleFaddle writes,


The laws sound good, don't they? Putting authority where it belongs, protecting people from rogue boards, and all that. In practice, though, the average person in this country isn't too good at personal finance, let alone understanding finances for a multi-million dollar corporation. In addition, while board members have a fiduciary duty to act in the best interests of the association, individual homeowners have no such duty and may act in ways that are actually detrimental to the association.

And that's what happens in these communities. Condo budgets tend to be inadequate in general because boards are often loathe to upset the membership. Couple that with laws requiring homeowner approval for all but the most modest assessment increases, and you know what will happen.

Having spent many years living in condos and serving on the boards of directors, I believe that there are many problems with condo governance that will not be addressed by any changes in regulations. As long as decisions are in the hands of people with no qualifications whatsoever other than having enough money to buy a home, nothing will change.

</snip>


Oddly, I think the liability insurers will come to the rescue on this issue by denying coverage to condo communities the underwriters deem substandard. Without proper insurance coverage for the condo association, it will be difficult to get a mortgage on the purchase of a unit in the community.

I'm a Registered Professional Civil Engineer and did steel and concrete design in the first three years of my career before I moved on to more financial analysis-type activities after I got my MBA. I'm very aware of the risk of collapse in poorly-maintained high-rise structures. (Pro tip: If you're interested in a high rise condo, favor steel-frame construction over reinforced concrete. It's more expensive, but there are fewer things that can go wrong with steel.)

When I bought my current home (an upper-level condo unit in a 2-story building in a community of 150 homes) I put offers in on about a dozen properties before settling on the one I purchased. I told my real estate agent that the most important thing I needed to see was the "disclosure document" (i.e., the 50 to 100 page package of stuff that no one reads that includes the HOA budget and financials, CCRs and condo community rules, the reserve study, meeting minutes of the HOA board, any planned special assessments, active lawsuits, and the binder for insurance coverage.) I told my agent that I could likely eliminate consideration of a property after about 10 minutes with the disclosure document, so if there was any way he could get that to me without going through the hassle of making and offer on a property, that would greatly streamline the search process. Regrettably that wasn't possible, so offers were made and quickly pulled once I reviewed the documents. I looked at a couple of high-rises and found the reserves severely lacking, so I concentrated my search on two-story construction where less can wrong and a structural collapse is less likely to result in injury or death.

The condo I purchased had some unusual construction features. The condo is the typical, cheap wood frame with vinyl lap siding and there are wooden decks at both the front and rear of the unit. But the stairs leading to my upper-floor unit is steel frame with concrete stair treads -- the kind of thing you'd see in a high traffic application like a school or a commercial building, not a residential condo. I calculated the stairs as weighing close to 2,000 lbs and it was being supported by two 4x4 untreated wood columns placed at the centerline of the stairs. This centerline position meant that one-half of the landing was a cantilever providing an additional load to the structure. Since the stairs only served one (my) unit (it's on the end of the building), I judged the risk of collapse low. But if you had 10 or 15 college students dancing on the deck, you probably would worry about a collapse, but you'd on fall about 10 feet to the ground.

Anyway to get to the end of a long story, two years ago the condo's insurance carrier sent an underwriter to survey the property and told the board that if my deck and about 15 others were redesigned to something more structurally acceptable they were going to either jack the premium or pull the condo association's policy. So I now have a nice new deck with two additional support columns (and concrete foundations) with the cost of the new construction shared by my 150 neighbors in the condo association.

intercst
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I'm guessing that is why we need regulations (force of law) for both?

Ironically, Florida is one of the most thoroughly regulated states in the country as far as condos and HOAs go.


OK ... you do know I don't live in US right? Of course many of my fellow citizens do spend winter months in Florida and I'm sure some of them own condos there.


Yes, I know. :-) I was just commenting on condos in general.

Florida does seem to have more of them since people like to go there, and the buildings are exposed to some unique challenges like salt water and hurricanes. But for all the regulations, they have the same issues that all the rest do: mainly reluctance of owners to pay for necessary upkeep and the ability to keep kicking the can down the road since problems won't necessarily be in their faces - unlike when you neglect a single family home and the roof leaks and the furnace dies).

I agreed with the Times' editorial, but only up to a point. You can require re-certification and reserves until the cows come home. But as long as owners have the ability to vote down the assessments needed to pay for these things, or have the ability to vote down contributions to the reserves - both of which are not that unusual - then you're handing condo owners a "get out of jail free" card. And everybody is surprised when the owners use that card as much as possible.

Personal opinion: the underlying issue is that condo owners are often ignorant of the true cast of ownership and forcing this reckoning will drive up prices, which in turn will affect the Big Money interests' ability to sell these things. I question the desire of these interests to do anything meaningful that harms profits.
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Intercst — terrific knowledgable post.

I think the liability insurers will come to the rescue on this issue by denying coverage to condo communities the underwriters deem substandard.

I am puzzled why this has not taken place yet, and I’ve been puzzled and waiting for 40 years.

After a few years as a resident my engineer Dad discovered that the developer seller of the new condo he had bought into had failed to provide correct data on the maintenance of the shared roof. He then ran for the BofD, became Prez, by the skin of his teeth got a majority to OK a pathetic budget for a lawsuit, and the developers caved and paid. Then he tried to put a real budget in place that accumulated barely sufficient increased assessments for future maintenance. No dice. Then he and a few brave allies threatened the entire condo association with “disclosures” to the main insurers unless sanity came to the budget. Extreme unneighborliness ensued, but the reformers won (barely). He resigned relieved and happy.

I bought into a condo in construction on the Mexican coast pre-sale, and you can be damn sure I was there watching and inspecting at key moments, especially as the foundations and main support column rebar were put in place and tied. As I was leaving after my last visit the construction super grabbed me and told me that i was the first smart gringo he had ever met. Then he showed me photos of the Mexico City collapsed school building that had killed one of his nephews in 2017. He told me he has the photo with him “always”.

https://www.npr.org/sections/thetwo-way/2017/09/21/552574762...


David fb
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Anyway to get to the end of a long story, two years ago the condo's insurance carrier sent an underwriter to survey the property and told the board that if my deck and about 15 others were redesigned to something more structurally acceptable they were going to either jack the premium or pull the condo association's policy. So I now have a nice new deck with two additional support columns (and concrete foundations) with the cost of the new construction shared by my 150 neighbors in the condo association.

===========================================

You were fortunate to have the insurance carrier do a good inspection. I wonder if someone tipped them off about the structural problem.

My home insurance company has never visited my property to see if I meet CA safety, fire, and seismic requirements. My home is partially 140 years old with the remainder being 40 years old. It does have a perimeter foundation added 40 years ago, but new seismic restraints are not included. Oak tree limbs over the house were removed 10 years ago. Recently I have been busy removing all the dried up vegetation around the house as we longer water any plants around the house because we want to save our well. Dirt, gravel, rocks and concrete are now the new normal around houses in CA.

Jaak
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jaagu writes,

You were fortunate to have the insurance carrier do a good inspection (on the condo property). I wonder if someone tipped them off about the structural problem.

My home insurance company has never visited my property to see if I meet CA safety, fire, and seismic requirements. My home is partially 140 years old with the remainder being 40 years old. It does have a perimeter foundation added 40 years ago, but new seismic restraints are not included.

</snip>


I think it depends on the amount of money at risk for the insurance company. I think my HOA's condo policy has a $50 million value on the cost of rebuilding the structure and common elements if everything burns to the ground. With those kind of numbers at risk, it probably pays to send someone out to occasionally to look at it. For a $500,000 policy on a single-family home, not so much.

intercst
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Thank you for recommending this post to our Best of feature.

...

Yes, I know. :-) I was just commenting on condos in general.

...

But as long as owners have the ability to vote down the assessments needed to pay for these things, or have the ability to vote down contributions to the reserves - both of which are not that unusual - then you're handing condo owners a "get out of jail free" card. And everybody is surprised when the owners use that card as much as possible.


We had an issue with water running into the units not long after the building was first occupied. We hired an engineer who quickly discovered that the vents that were supposed to flow the water to the outside were incorrectly installed and we sued the builder but of course that was going to take time and the problem needed to be fixed quickly.

An assessment was put on all 50 units and the meeting got a bit loud. It didn't help that one of the residents (rental not an owner) worked for the builder and he was ordered out of the meeting as that happened after the problems first came to light. The engineer we hired was great, went to court with our lawyer and managed to get a lien put on the builders office building and some of their heavy equipment.

I wasn't privy to all the information but one young lady on my (5th) floor got help from her parents and another on the ground floor small unit next to the doorway sold hers at a loss. I think most of the rest were able to come up with the money. Meanwhile our local provincial MP showed up at our meetings. She was not only our MP but also the Minister of Justice (and of course a lawyer) and she went into attack mode. One of the top guys from the company showed up to argue and left with his tail between his legs. We had a reasonably fast court case and got back about 95% of the assessments a few months later. News reports finally crushed the builders resistance as they were supposed to build two more buildings on the site around a central fountain with a total of 110 units.

There was no vote mentioned for the assessment, the board had no choice and we stayed till it was done.

Anymouse
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tim443 writes,

I wasn't privy to all the information but one young lady on my (5th) floor got help from her parents and another on the ground floor small unit next to the doorway sold hers at a loss. I think most of the rest were able to come up with the money. Meanwhile our local provincial MP showed up at our meetings. She was not only our MP but also the Minister of Justice (and of course a lawyer) and she went into attack mode. One of the top guys from the company showed up to argue and left with his tail between his legs. We had a reasonably fast court case and got back about 95% of the assessments a few months later. News reports finally crushed the builders resistance as they were supposed to build two more buildings on the site around a central fountain with a total of 110 units.

There was no vote mentioned for the assessment, the board had no choice and we stayed till it was done.

</snip>


It's likely that the Canadian legal system puts the common folk and the oligarchy on a more even footing. A reasonably fast case for the benefit of the plaintiffs in the US? No way.

intercst
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It's likely that the Canadian legal system puts the common folk and the oligarchy on a more even footing. A reasonably fast case for the benefit of the plaintiffs in the US? No way.

One does get cynical after a while.

One thing I noticed in the Times editorial - most of which I thought was spot on - was that the author mentioned the issue of owners on fixed incomes being unable to afford the assessments, and suggested the possibility of a long-term loan program to address this issue.

Uh... no. You can't borrow your way to solvency, and loans are great as tools if you can otherwise afford what you've bought. The real issue, as I'd mentioned earlier, is that the true cost of condo ownership is often hidden from buyers, and we've got associations filled with people who can't really afford their homes. This would be bad if these people owned their own homes in neighborhoods without HOAs. But now these owners are in financial and legal partnerships with all of the other owners in their associations, and those who are in stronger financial positions aren't capable of keeping the entire ship afloat. They may do so temporarily, which is one of the things that keeps true costs hidden, but it can't go on forever - and when the whole thing goes, it takes everyone with it.

That loan program would be a dandy way to give the oligarchy an even bigger slice of the pie, though...
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> I'm guessing that is why we need regulations (force of law) for both?

This is a self-correcting issue. As buildings fall down and/or are condemned, the readiness to pay for maintenance increases quickly.
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