Condo boards everywhere are unprepared for serious repairs • Hacker News Board

Re: Condo boards everywhere are unprepared for serious repairs

#21

Post by OldHand2018 » Fri, Jul 02, 2021, 6:59 PM UTC

Florida, like all the other states that have a lot of condos (New York, Hawaii, Illinois, etc), have their own laws and do not follow the uniform condo laws that other states have. The laws of these states are responses to problems they have seen with condos in their own states.

Florida is going to learn a lot from this tower collapse and will pass a bunch of laws to try to prevent this from happening again. It will be very expensive for the condo owners. Some may even go bankrupt. But there will not be a huge wave of collapses 10 years from now.

Up here in Illinois, there are a number of laws that would reduce the likelihood of what happened.

- Condo boards have a fiduciary duty to protect the value of unit owners to the extent possible - including conducting proper maintenance.

- Condo boards must conduct reserve studies every 5 (?) years that go into detail about the age and condition of every major component of the building (including the structure) and the cost of replacement or repair. Then they have to make sure that the reserves will cover the expected costs.

- Condo boards can enact special assessments for repairs without unit owner approval as long as it is less than 115% of the total association dues for a full year.

- All board meeting notes, financial statements, inspections, contemplated repairs or special assessments, etc must be provided to condo buyers. Legally, a buyer can cancel a sales contract at any time with zero penalty up until 2 days after all the documents have been delivered to the buyer. This is also given to the mortgage company. You cannot get a mortgage on a condo in Illinois if the association is not paying enough into the reserve fund.

You can expect to see some of this stuff in Florida and you can expect that it will make some buildings “unsellable”. But they will recover - there is a price for everything, and hedge funds at least are sitting on tons of cash. It would really suck to live in one of these buildings. But at least you will stay alive.

Re: Condo boards everywhere are unprepared for serious repairs

#22

Post by briefcomment » Fri, Jul 02, 2021, 6:59 PM UTC

moralestapia wrote: post #5

toomuchtodo wrote: post #3

Earlier quoted context omitted.

There is an easy fix. Condo finances should be public record, and when repairs are needed, the local code/planning/inspector office reviews with the condo board, approves if necessary, and then puts encumbrances on the units in the complex. Those who can afford the cost pay right away, those who can’t have essentially borrowed against their equity to finance their share of the repairs, with the loans paid back with i…

This is the right answer. Some repairs should be mandatory, if the owner can't pay it should be treated as any other debt. If the owner can't afford repairs, it should sell the unit, otherwise the damages are greater for all other owners.

I guess there's the potential problem of the inspector suggesting repairs for the sake of business. Mandatory repairs would likely be gamed unless there are robust checks and balances.

Re: Condo boards everywhere are unprepared for serious repairs

#23

Post by 41209 » Fri, Jul 02, 2021, 6:59 PM UTC

abeppu wrote: post #20

So, condos aren't that old in the US. Is there some similar structure in another country with older urban housing stock that works better? For demographic, environmental and economic reasons, it seems like more people will and should be living in cities with some density, so we need _some_ well-functioning arrangement for ownership for something other than single family homes. Is there not some country with a lot of…

Many condos are converted apartment buildings. You can easily find condos which are 100 years old.

They do some nominal renovation, but the bones are essential the same

Re: Condo boards everywhere are unprepared for serious repairs

#24

Post by grumblenum » Fri, Jul 02, 2021, 6:59 PM UTC

Diffusion of responsibility and the tragedy of the commons are pretty textbook psychological phenomena that I’m surprised more people seem to be unaware of. I would be surprised if any committee with custody of any asset were prepared to take quick, decisive, and costly action in the long-term interest of said asset.

Re: Condo boards everywhere are unprepared for serious repairs

#25

Post by seibelj » Fri, Jul 02, 2021, 7:02 PM UTC

41209 wrote: post #19

This has given me serious pause on buying a condo. If I rent the moment I have unfixed issues I can leave ( breaking a lease is pretty easy in my experience). But I'd hate to buy and then deal with bad neighbors or building issues

The same issue is with houses, and the bigger the house the bigger the issues can be. For a big condo complex, if a problem is truly big, the association can do a bond offering that can be paid off over a very long time (decades).

Re: Condo boards everywhere are unprepared for serious repairs

#26

Post by breck » Fri, Jul 02, 2021, 7:04 PM UTC

This has been such a tragic story to follow. Especially as they pull children out of there.

I'm not a civil engineer, but have been on those subreddits and blogs reading about the investigation.

Curious if anyone knows: is there an equivalent of a "blackbox" data recorder for tall buildings like this? If not, should there be? Would there have been signals given off from the columns that may have forewarned of disaster? What kind of vitals would be good to collect? It seems visual inspection is a bit too subjective.

Re: Condo boards everywhere are unprepared for serious repairs

#27

Post by paxys » Fri, Jul 02, 2021, 7:09 PM UTC

phlipski wrote: post #7

I sat on my condo board for a decade and was president for two years. My experience is that the board is not the problem - the non board sitting owners are. Our complex was comprised of 5 separate 3 story buildings. Three of those building had bad water leaking problems but when we tried to raise money for repairs - the people who weren't suffering any interior water damage wouldn't vote yes. Many buyers don't read t…

A good middle ground is condos with a central management company. Dues get a lot more expensive, yes, but residents can benefit from professional maintenance, repairs/renovations, assessments, book keeping etc. without needing to squabble among themselves.

Re: Condo boards everywhere are unprepared for serious repairs

#28

Post by gnopgnip » Fri, Jul 02, 2021, 7:13 PM UTC

phlipski wrote: post #7

I sat on my condo board for a decade and was president for two years. My experience is that the board is not the problem - the non board sitting owners are. Our complex was comprised of 5 separate 3 story buildings. Three of those building had bad water leaking problems but when we tried to raise money for repairs - the people who weren't suffering any interior water damage wouldn't vote yes. Many buyers don't read t…

>There could easily be a formula of like 10% of annual dues need to be put in a rainy day fund or something

Fannie mae and freddie mac require at least 10% of gross dues go into reserves. FHA and VA have higher standards. So only cash buyers, or buyers with non standard loans can buy condos that don't meet this requirement. But unless a condo is a townhome style building where there is very little common property this should really be 25% or higher

Re: Condo boards everywhere are unprepared for serious repairs

#29

Post by 015UUZn8aEvW » Fri, Jul 02, 2021, 7:13 PM UTC

It’s not clear that condo units have higher long-term capex costs than single-family homes; arguably economies of scale make their capex lower as a percentage of home value. So the problem isn’t a problem of cost per se, it’s a collective action problem.

The issue is that the buyers of condo units don’t really pay much attention to the condo association’s reserve balance. A current owner who contributes $1 to the reserve fund won’t see a corresponding $1 increase in the value of their unit. The increase, if any, will likely be a small fraction of that.

So an owner who’s considering selling in the next few years - which is common, since the tenure of condo owners is lower than that of single-family homeowners - is rational to fight attempts to fund the reserve. They’re also rational to keep monthly condo fees as low as possible, since buyers do look at the fees. But that also makes preventative maintenance difficult.

Re: Condo boards everywhere are unprepared for serious repairs

#30

Post by edwhitesell » Fri, Jul 02, 2021, 7:13 PM UTC

phlipski wrote: post #7

I sat on my condo board for a decade and was president for two years. My experience is that the board is not the problem - the non board sitting owners are. Our complex was comprised of 5 separate 3 story buildings. Three of those building had bad water leaking problems but when we tried to raise money for repairs - the people who weren't suffering any interior water damage wouldn't vote yes. Many buyers don't read t…

I sat on the board in my previous neighborhood and served two terms as president, this was definitely true for that community too. And, many other HOAs of individual homes (structures) too.

We were lucky to have a decent management company that provided a lot of guidelines and information about what we should be doing. As well as the things we were obligated to do (either because of bylaws or laws, in Texas). Still, any time there was a storm resulting in additional costs for landscaping/cleanup, or work on a damaged/degrading stone wall, or the pool area, etc. We heard about it from some neighbors who didn't want to spend any money, because it didn't directly affect them.

It's definitely an area that more regulations would help everyone involved. We were not experts, but could make some decisions if we had the right information (or knew what questions we should ask).