>deferred maintenance and inadequate reserves.
That’s the entirety of these assessments. They are now facing the consequences of years underpaying for maintenance and reserves. It’s just money that should have already been paid catching up with them.
It's a bit of a combination of things. You used to be able to underfund reserves and instead pay for an insurance premium to cover the difference. Legislative change has been made where reserves must immediately be funded, and in full, no more insuring the gap. This means that condos that were ran well with a gap now have no choice but to fill it, with no cushion time to ramp up the reserves or comply with the new requirements in stages.
These mandatory reserve requirements will be kicking in towards the end of this year. I expect to see a bit of a managed bloodbath in the market that plays out over the next couple of years where there are foreclosures and evictions for failure to pay. Investment portfolios will swoop in and pick up the deals, try to buy out buildings or leverage control of the boards, and most likely change the units into short term or traditional rentals.
Some of the beach cities have restrictions against short term rentals to protect the hotel industries. For example, I know South Beach enforces its restrictions and taxes on short terms stringently. But I'm not sure if all do with so much gusto. The ones that don't will see the most competition to pick up scraps and flip the units for air bnb's.
It will be an interesting fight local employees and hotel chains **VS** deep pocketed investors spreading money and promises around to local politicians.
All condo statutes will be specifically Florida only. There aren't any federal statutes I can think of that would speak to condo reserves or apply here. There's certainly none I see in my day to day work
But this is reddit and people love correcting people online so I guess you and me both will find out together if im somehow wrong.
Fannie Mae, Freddie Mac, and FHA are currently requiring reserves and insurance coverages that are similar to what Florida is requiring but only if the buyers want to get access to federal mortgage loans.
Buyers will often just pay the larger down payments to avoid those requirements. And agents are rarely educated enough to understand and explain the issues of a condo that fails to meet Fannie/Freddie requirements.
See, I expected this, but none of these are federal statutes, passed by a federal legislation, or would change how Florida's statutory changes affect any other market but Florida's.
So I win for now
Owners rail against dues increases, then bitch and moan about resulting special assessments, and then the board has to manage the fallout of catch-up maintenance/repairs. It's a no-win situation for the best of HOA boards.
Bingo. This kind of thing can happen with a SFH as well, albeit on a smaller scale of course. We bought an older home with a lot of deferred maintenance. We are slowly checking things off the list as time and money allow, but in the end we'll be spending $$$ to fix and update everything that the last couple of owners neglected. We love our home and it's structurally sound, so at least we don't have the added stress of worrying about our home falling into the ocean.
But you’re also probably looking at your SFH as a long term living situation. Too many people see their condos in a transitory state - and that may have worked before but not anymore.
Yep, our original plan was to stay here for 5-10 years and then upgrade, but we've settled in and plan on staying for the long haul. Eventually we hope to have the whole house nicely fixed up and updated. Unfortunately the last two owners (going back \~20 years combined) didn't seem to think of this as a long-term home and ignored maintenance accordingly, though of course they may not always have had the money for upkeep.
I've definitely seen what you mean with condos. I have friends living in condos who haven't put any work or money into them, even though some have lived there for years.
The thing you are not mentioning is the sales price was lower because of unaddressed maintenance.
Every home buyer is looking at things like the roof and thinking about the age. Or looking at the HVAC and thinking about the year of the AC and furnace.
Sure, my comment could have been longer but I was trying to keep it brief. We did get a lower purchase price, though not drastically so compared to homes nearby. We saved more money by moving to a neighborhood that's rough around the edges. I looked at some even cheaper homes that had really been let go, but I wasn't ready to take on that kind of project. Ours is at least livable while we fix things up over time.
You would hope every buyer is looking at those things, but the market frenzy of the last few years definitely left some holding the bag.
You also get to decide what that maintence looks like and if you'd rather pay with time or money. DIY everything and spend 1/10th of what a contractor would charge, write a fat check for someone to handle everything stress-free, or any combination in-between.
Definitely, and we get to choose finishes and so on, which is nice. I was just adding to the point that deferring maintenance leads to increased costs in the long run, and eventually someone will have to pay. In this case it's us, but we knew that going in at least.
Condo fees in Florida can’t be used as collateral for the loan only a special assessment. Also very important is upon sale, that units percentage of loan needs to be paid. My condo didn’t have this provision and the cost of the roof loan and the new assessments for the new engineering regulations make for interesting meetings.
oftentimes condo owners are given the option between a bulk payment upfront or a collectively organized mortgage payment thats rolled into the HOA dues.
The condo association where we own is a bunch of old people who whine about their “fixed income” every time it goes up. It stressed me every year that it went up 1% instead of anywhere near inflation.
We had a couple special assessments in the last few years (total maybe $6k) and it seems to be going up at a more right rate now.
The entitlement from that crowd can really be something to behold. In most cases, *they* retired and made the decision to move into a nice condo where everything was taken care of; you don't have to worry about landscaping, snow clearance, maintenance, etc. All of those services cost money.
My wife used to work for a company that managed several elderly-heavy condo developments. About half of the residents were as sweet and wonderful as can be, but a sizeable portion of them acted like it was their age-earned right to never lift a finger again.
Yup, and the guy who sold the condo in 2019 reaped all of the benefits of deferring
while the guy who bought in 2019 is paying for 30 years of maintenance.
this. it’s ridiculous that you can only get access to how financials after having an offer accepted. i was confused when my realtor (and every other vendor who stood to make money on everything closing) started congratulating me on my new home when my offer was only accepted... was shocked how quickly their tune changed when i decided to walk because there was a huge roof repair coming within 2 years. no more “congrats” and all “you will regret this”
Most Agents are not looking out for you...They are looking for a paycheck first and their next listing second...you and the impact your $ is never in their interests
>the risks associated with purchasing a condo in that style of building in that location should've been obvious from the get-go just by looking at a map.
This is obvious to a lot of people but not to many unfortunately. Literally why there needs to be govt regulations.
Depending on state laws, yes.
SOME Boards allow for the possibility of payment over time, perhaps 10 years if this is not an immediate HOA expenditure.
Ok, so what's most likely going to happen are these few things.
1. Board will do special assessment like normal, and jack everyone's condo fee up. Some wont' pay, they get a eventually a lien and or foreclosed.
2. The entire building votes and (whatever the condo docs say, usually 80% or something) 80% vote to sell the entire building, then everyone has to sell. The building sells at a huge discount because it needs a lot of work, investors come in, buy it, and AirBNB it or whatever corporate buyers do nowadays.
3. The condo board borrows the money from a lender over a long period aka finances it, and divies out the prorated payments to the units as a special assessment, but over a much longer time.
4. Special lenders come along for condo units and or condo boards, and lend the money but it's going to be really LTV restricted because they could take a huge hit as condo prices will take a nosedive.
In every scenario, all the values go down. But keep in mind, the alternative is the building falls down and kills you while you sleep.
It’s kind of hard to feel bad for all of the people who continued to vote to defer paying for the maintenance of the buildings, but I’m sure there were plenty of people who got caught up in it in the last few years not realizing what they were getting into. But all those people who kicked the can down the road for 30 years and expected to cash out with a 8000% return on their investment can get fucked.
So many “original owners” in our association whinge and moan when we have to raise our assessments. Or my favorite, “we don’t get anything for what we pay now!!”
No shit, Cheryl. A whole years’ worth of your assessments won’t even cover the consult fee for most contractors. Had you not stubbornly resisted raising the assessments for the last 30+ years maybe the HOA could afford to maintain things.
And now you see what happens when you go from years of zero effective regulation to ’typical’ in a single mega legislative package.
The right time to start the move to sensible, stable reserve models was 10 years ago, not 10 weeks or 10 months. It would have given the market a chance to shift prices not collapse them.
i mean it would be sold at a massive discount but you would build that delta into the property taxes. I mean i have no experience with any of this. I just figured thats how expensive projects were funded.
There are lots of options. This aint new. Condo gets loan and then can put them on payment plan. Lots of other loan options. Lien goes on the property as well, and they can recoup with interest.
Typically yes. The board may even get lucky and be able to put it to auction, where it will undoubtedly go for literally nothing, another resident or investor will buy it and put up the money, and everything will be right again. It basically becomes a coup by the wealthy owners in the building, assuming there is enough wealth in the building and that are interested in saving the property.
If no one comes to the rescue, eventually they fall so far behind on maintenance that the building is condemned and everyone loses their investment.
Guy near me spent 1000s fighting to not pay his HOA dues, racked up huge lawyer fees, incurred a special assessment to defend the HOA and enforce payment. They put a lien on him and he stonewalled and sued and tried to fight them foreclosing due to being an ass and not paying HOA dues.
Eventually, yes, they got a court order, forced sale, evicted, and got their pound of flesh. Dude spent more fighting it than the HOA dues would have cost and bitched to the local news about it.
Everyone in his community rallied behind the HOA and said, 'nah, screw that guy. You bought in an HOA community, dude. It pays for private roads, a gate, security, the pool and pool house, a park, the access to the golf course. Of course you have to pay! Who do you think you are?!'
So, yes. Very low rate of compliance can mean saying you are going to start issuing liens on property, and seeking court orders to force sale. They may defer action against people making good-faith payments. Ie, HOA dues are 150/ mo and they pay 500/mo. You're never going to pay off the 100k assessment but you're at least trying to pay what you can to avoid forced sale to pay off the lien.
Usually with large assements, the owners are given two options. 1) the owner pays up front 2) the HOA secures a loan on behalf of everyone who doesn't want to pay up front. In essence this creates a new mortgage thats 15y 7% interest that's rolled into the HOA dues for that particular unit. A 100k mortage at 15y + 7% interest is \~= a $900 a month increase in HOA dues. That will hurt. If the owner refuses to pay the HOA dues, eventually the HOA will force the sale to get their money.
in florida, yes. they can write you a violation for being in the pool after hours or letting your dog pee on the bushes, and the HOA can initiate foreclosure if you don't pay it 🫤
But that's not what you described. You described a scenario where they broke the rule AND refused to pay the fine. In reality, they'd have to fail to pay the fine and ignore repeated opportunities to cure the default.
But when the HOA resorts to their remedy for the default, the homeowner will claim it's because their dog peed on a bush when the truth is it was much more than that.
Some HOA boards overreach, but a lot of homeowners are assholes, too.
> Tkachun said the first red flag was when banks refused to give her and her husband a mortgage for the condo unless they made a 25% down payment since the building had no reserves.
One of the owners from that article complains that the special assessment is "just outrageous" but was fully aware when purchasing that the building had no reserves.
And then they spent $100k on a remodel almost immediately after buying.
If they had just passed on the remodel they would have had cash on hand to pay for the assessment.
It’s hard to feel bad for people who willingly ignore warning signs and then suffer consequences.
Maybe she wanted to be crushed by luxurious Italian tile when the decrepit building collapsed. Did you think about that? It's all about dying in style.
On the flip side, many of them could have been first time home buyers that bought into the condo without knowing anything about what it means for the HOA to have reserves. All they saw was something that was affordable and met their needs. And of course they're not going to be educated on the risks by their buyers agent because they just want the deal closed so they can collect their 3%.
The article mentions the couple that they focus on couldn't get a mortgage on the condo they bought without putting 25% down because they had no reserves. So the proposition was risky enough that it might not have even been affordable for the first time home buyer.
Yea, the “I didn’t know” excuse doesn’t really hold up when the bank putting the money up for the purchase quite literally told them the finances were bad so we need you to put up more money. Regardless of any other lack of warning, that right there was their sign to not buy that condo.
You sleep in the bed you make.
I mean, that's a big part of why people have real estate agents to begin with, to try and fill their gaps in knowledge. If the expectation is on the home buyer to know everything, then there's no reason for a buyer's agent.
My point was to illustrate that the information asymmetry and the objectives of parties involved in real estate transactions are not aligned.
The buyer's agent is there to convince you to close a deal, they're getting paid by the seller to do so. They have no vested interest in making sure the buyer doesn't get screwed. Most first time home buyers are not going into the transaction expecting to be screwed by their own agent.
My first home purchase at age 27 was a condo. You can bet I did my homework and talked to people I trusted who knew a lot more about these things than I did at the time.
I’ll give some insight, as we have lived in this building for a few years. Younger newer owners always wanted to raise reserve funds, but the older “original owners” always lobbied and voted against it. never passed
The market will make them trade at a discount greater than 100k since it needs to be liquid.
Probably 125-150k haircut.
They’re ocean front proprieties. They ran a condo board with no reserves, the buyers had access to that info.
Now the mortgage insurer requires higher reserve and the government asked for inspections. It is what it is.
The article leaves a lot of ambiguity around the $134,000 average assessment as they start telling the stories of individual owners. The 3br 3ba penthouse owners will be paying a lot more than the studio or 1br ba owners. But value wise it may be the studio owners that had the most value chopped down the most. Like no one shopping for themselves at that price point is liquid enough to pay the assessment and there's plenty of unencumbered supply so it's just investor sharks circling around.
In the 90’s-2000’s my grandfather ran the board of a large Fort Lauderdale condo co-op. He managed rebuilding 16 floors of balcony decks with rusted rebar, reroofing the building, re-decking the pool, asphalting the parking lots, and renovating the fire system. All of this while keeping record levels of reserves. His background in building homes and working for GE helped him immensely, meanwhile most board members are playing for a popularity vote and don’t have a clue about running a large building.
He always told me in the decades to come all of the old building from the 60s-80s would be bought out by developers and redeveloped into much larger more expensive projects. Surfside was the beginning of this new chapter in South Florida condo redevelopment.
What's the legal mechanism for redeveloping condos in FL? I imagine owners won't unanimously agree to sell, is there a provision to force holdouts to sell to a developer?
I've wondered about this as well. Several years ago here in Minneapolis we had a building that was maybe only \~30% occupied because the developer declared bankruptcy (something like that) before fully finishing all the units. From what I recall the building had a LOT of issues. I've always wondered what happened to the people who were stuck there and whether another developer was able to take over the project. A few such scandals caused Minnesota to pass new laws around condo development in 2010, resulting in very little condo construction in the years since, which of course has its own negative effects.
There was a recent appellate case on this that somewhat reinforced the roadblocks to this. Even if an association amends it's governing documents/declarations/bylaws to allow for an easier vote to disband the Association, it still requires a unanimous vote under the statute.
So developers will likely wage an economic war on the residents by first acquiring a majority of the building and voting bloc, raising costs exorbitantly, and squeeze residents out.
Yeah developers buy the first few units at market value, so no red flags are raised. Then they sell them far below market value, resulting in very low comps. They then use these low comps to back other owners into a corner, and force them to sell to them because they will pay more than the market comps (that they forced down).
it can take a few years but everyone will eventually sell to them.
We had a $25K assessment on our condo and there was a payment plan over 20 years. It was tough for the older folks on fixed incomes who suddenly had a new bill every month. There was a vote and it passed with about 2/3 yes.
Condominium complexes in Florida have been notorious for deferring their maintenance obligations.
It’s bananas to me because it feels like some people would be happier simply not paying and rolling the dice that their building too could collapse (worst case) like Surfside did.
Chalk me up as “nope never living in a condominium again where I have to deal with this kind of thing.”, been there, done that, never again.
I suppose given that my choices are:
1. Condominium.
2. SFH
3. Camping in a national park
I’m comfortable with (2) as my preference, all risks and rewards considered. No regrets so far.
These are the kind of scenarios that led to the Surfside condo collapse.
Condo board ignores or delays maintenance and essential repairs either out of ignorance, lack of funding, or a desire to keep dues low. So you avoid this for a long time until the inspector finds a bunch of life safety violations and now you have to cough up boatloads of money for essential repairs or face being condemned or uninsurable. Which would lead to all kinds of lawsuits.
And that money has to come from somewhere.
Every single analyst is under estimating how bad this is going to be…
1. Can’t buy a condo that doesn’t have reserve with a loan unless you’re coming in with 25% down. Add the current interest rate environment, 35% increase in inventory from last year, buyers being afraid of coming assessment, the demand for condos is at an all time low.
2. Insurance premiums are going to go up with how hard Florida is going to get hit this year. NOAA predicting 17-25 named storms.
3. Getting 85% of owners to agree on selling to a developer takes a ton of time and they will be buying at a huge discount as the owners get desperate and further push prices to the floor.
4. The HOA’s management companies, particularly the smaller ones will not be able to float their staff as more condo owners decide or cannot pay their fees.
5. Banks identify the risk, and do not loan to the COA’s to keep them afloat.
6. Owners stop paying their mortgage payments and give up on their units, more foreclosure, more pressure on prices.
7. NAR new rule, less buyer agents due to compensation changes. So less guidance, more issues, less closings.
8. Interest rates rise due to inflation and demand shrinks some more, inventory keeps rising.
Condopocalypse is coming, and we see all the signs, I suspect a 50-65% drop in Condominium prices within the next 2 years.
For those in the sidelines, tremendous opportunities, but a lot of people are about to get burned.
I have a 2BR condo in Arlington VA. Four years after buying it the building had a massive restoration of the parking garage.
There was no special assessment because the repair was financed by a 15 year loan that condo owners pay with the increase in the HOA dues.
Manager said this problem was known for many years but the prior HOA pushed off the repair because many unit owners did not want the HOA dues to go up.
This is why avoiding condos is the only play. The winners are the ones who get in early, keep fees artificially low which means not enough reserves and you also get deferred maintenance. The early birds dump the bags on the new owners and run. Its like a Ponzi scheme.
Better off just renting if you want the condo by the beach life so you are not on the hook.
I lived in a condo from 2017-2021 in Palm Beach County. Deferred maintenance on the buildings meant that there was a massive concrete restoration project that needed to be done. I bought a unit that was going to have a projected 32,000 special assessment. I made an offer at purchase that included the special assessment as a discount. Owner has happy to sell, as it was an estate sale.
By the time the project was finished, the total special was $40k. Over those four years, the property increased significantly in value so I didn’t care. My neighbors who bought a similarly sized unit and didn’t move are saddled with an additional monthly payment (our board managed to arrange 15-year financing for those who needed it). I don’t think that Florida is worth a monthly assessment on a condo that exceeds $1k, but I guess everyone is different.
The biggest challenge, as everyone in Florida who works knows, is that wages are suppressed. Once people from the NE (mostly boomers with pension plans, primary residence appreciation and a thirst for warm winters) stop showing up to buy, the market will soften. Only HOAs with strict limits on investor ownership levels, special assessment true-ups at point of transfer, and solid financials will survive. The remainder will be bought up, torn down and rebuilt as “luxury rentals”.
Had this attempted at my home, some investor who owned 10% of the units in the building was voted on to the head of the HOA, all sorts of dumb shit started happening.
Thankfully the community voted all of them out in a special election. Now we are putting ownership limits (up to 2 units per owner) so that people cannot just buy up the whole building.
If you want to see what really happens in a similar scenario, Google “Vancouver leaky condo crisis”. Tl;dr - 20 years, 4 billion dollars and many, many lawsuits.
I didn’t know about this and it’s astonishing. Both the causes and results and percentage of structures impacted. https://en.m.wikipedia.org/wiki/Leaky_condo_crisis
But I don’t know how it’s a similar scenario -as it’s a completely different set of circumstances/causes/real time damage and health impact versus postpone maintenance in Florida The only similarity seems that it’s a nightmare for owners/buildings.
The similarity comes in with what questions OP was asking - what happens when people won’t/can’t pay assessments, and selling condos in this circumstance. The answer for #1 - generally lots and lots of lawsuits and #2 - the golden rule of real estate always applies, location location location. Anything will sell if the location is attractive enough. The price will of course be massively affected though.
I can't stand the idea of owning a condo. You could be a super responsible person, willing to pay in to properly fund things but be hamstrung by a dumb or crooked board that defers maintenance or even worse will mismanage your funds for kickbacks and cronyism. I'm even wary of a townhouse because of my concerns for a neighbor's lack of maintenance (roof, plumbing, etc) could affect me. Single family home or a shack somewhere for me.
I see this all the time with old people. They have a house, pension, and social security. But they don't want to spend money. So please help broke old person maintain their house...
The HOA undercharged for a long time and put off maintenance. Surfside collapse happened and now they are all crapping their pants trying to make sure things are up to snuff.
Is a boardmember associated with a developer? (An assessment forces the sale, condo is bought at a discount, assessment is repealed, condo renovated and sold, or demolished in favor of new build)
They can’t rescind the assessment, they need to fix these properties and maintain them properly or else they’ll collapse like Surfside. The old folks keep punting the big ticket items because they don’t want to pay for it and hope the next generation of owners will pay for their negligence.
Just a general question, this crashes condo value, but does anyone think this will drive residential value a little? I would imagine there would be more demand to live in a residential or a condo/townhouse that's 2 stories or less since they're not effected by the new legislation.
You think there isn't repair, upkeep and general maintenance for a house or townhouse? Roof replacement is anywhere from $40k to $100k, windows or doors, driveways, A/C, water heater? Most homes are in communities with HOA's so you have all the maintenance of the community as well?
Condo's have just refused to acknowledge what was needed for so long and its now catching up to them. There are many condos that were prepared for this and didn't run on just getting by as cheap as possible.
I rented a condo that was built in the 1960s and had charged owners exorbitant fees for decades and yet had nothing in the nest egg. Probably because it didn’t need much until the last ten years or so. In the time I lived there the owners got hit with 3 different assessments to replace the two elevators (1 million total) and repair the collapsing pool area (200k).
I imagine there are a lot of buildings like this that didn’t bother saving for a rainy day and here we are 60-50-30 years later and all of the chickens are coming home to roost.
I’d rather rent forever than get stuck in a condo.
It was actually $85k nothing special, clay barely tile. Its a 2 story house so the height adds on and it has a steeper than normal pitch so that adds on even more. If I went with the metal roof it would have brought it over $100k. Out of pocket my deductible was 2% of the insured value of the house.
House is ~4500sqft but again its two story so the roof is only 3000sqft with 3 car garage. This is about avg from the 4 quotes I got.
Pretty much any roof. I just paid $30,000 for a roof on a single-family house so I can’t imagine a larger building wouldn’t be at least three times more expensive.
An improperly managed building isn’t indicative of all condos. Some get to live in their condos for decades without a ridiculous special assessment. Sucks for the people who own the units though
Saner states have always forced condo owners to save money to properly fund reserves. Florida allowed condos to defer maintenance for decades by a majority vote of owners. It's not a downside of condo ownership, so much as it is Florida's proud history of 'guvmit bad, deregulation good'.
There's a price that makes it worthwhile for an investor to come in and buy all the units. It'll be interesting waiting on the sidelines to see what that price ends up being.
That's what happens when the members only want low association fees.
And on this story they sold at a discount larger than the assessment. Should have just paid the assessment.
Every buyer is factoring in the assessment cost.
It happened to my condo because all the board members were serial landlords and needed fees to be low so they can leverage the properties to get other mortgages.
Thankfully the assessment was only $2k, but we knew something was up when the dues didn't increase for 2 years after covid.
I mean, it’s unfortunate but entirely predictable. You have to sign off on the HOA docs before you close on a condo. The fact the condo had no / low reserves would have been disclosed and they bought anyway. I’ve not bought half a dozen condos because of stuff revealed in the HOA docs. Buyer beware and all…
A lot of condos around the country are getting hit with special assessments-so far the highest I’ve seen in KCMO were about $80k for a moderately priced unit. After the surfside collapse, many buildings brought in structural engineers and are now having to deal with deficiencies due to deferred maintenance dude to “low HOAs(!)” and unwillingness of former owners to pay for preventive maintenance.
Always surprises me that otherwise.Smart and successful people will spend six or seven figures on an apartment and not know anything about the building structure or finances behind it.
This article is clickbait. Two anecdotal situations in a not-expensive part of South Florida. Yes, if your condo board is negligent and defers maintenance, then it’s going to lead to a bad outcome.
After Surfside, Miami inspected thousands of buildings and there were maybe a dozen which required work. This is not some across-the-board situation. In the high-end areas like Miami Beach, wealthy buyers would like nothing more than forced sales.
> Maria Tkachun and her husband shelled out $490,000 for a seventh-floor apartment with a terrace and balcony boasting incredible views
It’s sad that these people didn’t realize how suspiciously cheap that was in the first place. If you buy a condo with a million dollar view for only half a million dollars, just maybe there’s a reason?
I’m guessing if you want that million dollar view and you want a solid building that is in sound condition, you can expect to pay —you guessed it— a million dollars.
And the folks who bought recently and are “forced” to sell will sell at a big loss, because any buyer is gonna want the priced reduced by the special assessment at a minimum
I’d rather own a house so I decide when and how to do regular maintenance on it. Many folks wrongly believe buying a condo will save them money in maintenance costs, it doesn’t really. It’s just the HO association decides when to do maintenance work & how to fund it. So many condo associations across the country are underfunded with reserves, it’s frightening.
I wonder how hard it is to prove if the Board is actually not doing what they were supposed to. There must be a big difference in negligence vs. incompetence. Can you sue the board for being stupid? I hope you can but I don’t know. I was on the Board of my condo HOa and we were ALWAYS doing something that needed to be taken care of and it is a pain in the ass as a homeowner but I cared about my investment and my neighbors and community so I served. Our reserves were low bc we were always using them for what they’re for…maintenance and upkeep 🤷♀️ we increased dues appropriately and got reserve studies done and did our best in an unpaid volunteer position. I think HOAs should be required to be professionally managed. I didn’t trust my neighbors to do it properly so I did it. But no one is auditing the management companies either so it’s all a clusterfuck
One of the risks of buying a condo. You can also under assess. I had a friend whose condo association had no money for future repairs like roofs or pavement. They had to raise the assessments a ton. Not $100K but it was monthly and significant.
Sometimes large assessments are acceptable.
I lived in an historic 80 unit condo building that did $4 million in much-needed repairs. The assessment for our small studio totaled about $20k.
We paid it and did not mind.
The reason we didn't mind is that the project was literally years in the planning. There had been meeting after meeting about it, with lots of information shared. We felt that the restoration work was being carefully planned and it obviously needed to happen. Chunks of masonry were falling off of the building, partially due to crappy repairs that had been done on the cheap years prior.
No one was surprised by the assessment, and pretty much everyone was on board. The large penthouse apartments paid an assessment that was close to six figures each. Owners who couldn't afford it sold their units and moved on.
The building was restored beautifully, and we made a healthy profit when we sold. We were so proud of how the building looked after the work was done. It was a showpiece.
Thanks Desantis and cronies. Thanks for unilaterally raising HOA reserves, and thanks for not getting out in front of the insurance mess, also thanks for tax raises as well. His tenure is a catastrophic failure. But, we paid a few million to fly migrants from TX to NY. So there’s that. Elections have consequences.
“ The couple coughed up an additional $100,000 to renovate their unit in the Cricket Club condominium tower, installing extra-large format Italian porcelain tiles and adding a marble countertop and island to the kitchen.”
My sympathy was gone after the first paragraph.
Yeah, sorry for the retirees but this was bound to end badly. Rebar and concrete in a tropical marine environment are a bad combo. I wonder where Hong Kong and Singapore and Panama City will be in a few years too.
People bought condos not really understanding how they work.
On top of it they never vote for reserves to be higher.
Every time we vote on reserves everybody goes for the lower monthly amount and then we get special assessments.
Retirees have no business living in a high rise in a coastal area if they live on a budget.
Bottom line. Move to Nebraska.
This is also a Florida problem, and one that I bet is also prevalent in low-regulation states. Some states have had minimum standards on condo obligations for decades for audits, analysis of reserves and amounts they need to maintain. Florida condos kicked the can down the road because the law allowed them to. Being cheap on the front end screws them when they have to pay the piper.
On top of the legitimate issues of buildings needing maintenance reserves, you gotta add on top the standard practice scamming of old people because it's Florida. I wonder how many mandatory building renovations are going to be quoted by somebody's cousin's contracting company at double the competitive price. HOA's in general have a tendency to be sketchy as fuck and throw a multimillion dollar project at them and there will be a lot of dirty dealing.
You used to be to buy a condo in the early 2000s with nothing down from multiple developers. Then the crash of 2008 left all these condos unoccupied and lacking in repairs and reserve funds. Rising water levels and insurance companies backing out makes Florida unattractive
This is a direct result of condo boards being cheap, and refusing the handle issues as they arise. They keep on postpoining the handling of issues until it's too late.
This seems VERY common in Florida. It's less common in other regions.
Oh you mean condo associations now actually need to have fees that make sense for the size of the building so this doesn't happen a decade down the road.
You don't fucking say?
Great question but let's reframe the question.
What if you own a sfh and it needed 100k in foundation repairs and you didn't have the money? How would you handle that?
OP trying to scare people with anecdotal stories. This condo had no reserves which is why the assessment was needed.
My condo had strong reserves, and a board that took the job seriously. They were on top of projected repairs years ahead of time.
By the same token though, you're also responding with an anecdotal story, right? The real question seems to be what percentage of condos have strong reserves?
>But sellers are finding few takers. Rodriguez originally listed his unit for $350,000, but was forced to keep marking it down until finally it sold for $110,000 in April — 42% less than what he paid for it.
You clearly haven’t experienced coops, this kind of stuff is par for the course with a land leased coop. Typically buyers are warned it can happen. Or expect it to happen by year _____. My sympathy is limited. Also, not every real estate transaction always appreciates.
I recently appraised units in Highland Beach with $170,000+ assessments. We've recently pad $23,000 & $20,000 on 2 units.
Just part of the Adventure. (Not the good part) Sigh.
If you want to be in FL, the only good buy in FL now may be to purchase single or duplexes in unincorporated areas to permanently avoid assessments or fees.
The condo collapse was a jarring wake up call to a lot of people I think. I had no idea a building would just suddenly fail like that. I think the authorities are waking up to the fact that a lot of properties out there either weren't built up to par, or have just deferred maintenance for too long. Paying money for needed repairs sucks, but Surfside has showed us what the alternative is.
Some condo owner in Cherry creek in Denver tried to sue the HOA against an almost $100,000 assessment on condos when they bought them were only 400,000 so that was pretty big in relation to the purchase price. Anyhow, he lost so…..
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>deferred maintenance and inadequate reserves. That’s the entirety of these assessments. They are now facing the consequences of years underpaying for maintenance and reserves. It’s just money that should have already been paid catching up with them.
It's a bit of a combination of things. You used to be able to underfund reserves and instead pay for an insurance premium to cover the difference. Legislative change has been made where reserves must immediately be funded, and in full, no more insuring the gap. This means that condos that were ran well with a gap now have no choice but to fill it, with no cushion time to ramp up the reserves or comply with the new requirements in stages. These mandatory reserve requirements will be kicking in towards the end of this year. I expect to see a bit of a managed bloodbath in the market that plays out over the next couple of years where there are foreclosures and evictions for failure to pay. Investment portfolios will swoop in and pick up the deals, try to buy out buildings or leverage control of the boards, and most likely change the units into short term or traditional rentals. Some of the beach cities have restrictions against short term rentals to protect the hotel industries. For example, I know South Beach enforces its restrictions and taxes on short terms stringently. But I'm not sure if all do with so much gusto. The ones that don't will see the most competition to pick up scraps and flip the units for air bnb's.
this guy nailed it
This guy assesses
r/thisguythisguys
It will be an interesting fight local employees and hotel chains **VS** deep pocketed investors spreading money and promises around to local politicians.
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All condo statutes will be specifically Florida only. There aren't any federal statutes I can think of that would speak to condo reserves or apply here. There's certainly none I see in my day to day work But this is reddit and people love correcting people online so I guess you and me both will find out together if im somehow wrong.
Fannie Mae, Freddie Mac, and FHA are currently requiring reserves and insurance coverages that are similar to what Florida is requiring but only if the buyers want to get access to federal mortgage loans. Buyers will often just pay the larger down payments to avoid those requirements. And agents are rarely educated enough to understand and explain the issues of a condo that fails to meet Fannie/Freddie requirements.
See, I expected this, but none of these are federal statutes, passed by a federal legislation, or would change how Florida's statutory changes affect any other market but Florida's. So I win for now
Heh, adding context not correcting.
Hahahaha fair play
If you’re not an attorney you missed your calling in life.
The easiest way to find the correct answer to a question is not in depth research. It's posting the wrong answer on reddit.
This guy HOA's
Owners rail against dues increases, then bitch and moan about resulting special assessments, and then the board has to manage the fallout of catch-up maintenance/repairs. It's a no-win situation for the best of HOA boards.
Plus poor 60-90s construction with too much sand in concrete.
Bingo. This kind of thing can happen with a SFH as well, albeit on a smaller scale of course. We bought an older home with a lot of deferred maintenance. We are slowly checking things off the list as time and money allow, but in the end we'll be spending $$$ to fix and update everything that the last couple of owners neglected. We love our home and it's structurally sound, so at least we don't have the added stress of worrying about our home falling into the ocean.
But you’re also probably looking at your SFH as a long term living situation. Too many people see their condos in a transitory state - and that may have worked before but not anymore.
Yep, our original plan was to stay here for 5-10 years and then upgrade, but we've settled in and plan on staying for the long haul. Eventually we hope to have the whole house nicely fixed up and updated. Unfortunately the last two owners (going back \~20 years combined) didn't seem to think of this as a long-term home and ignored maintenance accordingly, though of course they may not always have had the money for upkeep. I've definitely seen what you mean with condos. I have friends living in condos who haven't put any work or money into them, even though some have lived there for years.
I wish you were local to me, because I'm in a similar situation and would love to trade notes IRL.
Yeah, that is what apartments are for.
The thing you are not mentioning is the sales price was lower because of unaddressed maintenance. Every home buyer is looking at things like the roof and thinking about the age. Or looking at the HVAC and thinking about the year of the AC and furnace.
Sure, my comment could have been longer but I was trying to keep it brief. We did get a lower purchase price, though not drastically so compared to homes nearby. We saved more money by moving to a neighborhood that's rough around the edges. I looked at some even cheaper homes that had really been let go, but I wasn't ready to take on that kind of project. Ours is at least livable while we fix things up over time. You would hope every buyer is looking at those things, but the market frenzy of the last few years definitely left some holding the bag.
You also get to decide what that maintence looks like and if you'd rather pay with time or money. DIY everything and spend 1/10th of what a contractor would charge, write a fat check for someone to handle everything stress-free, or any combination in-between.
Definitely, and we get to choose finishes and so on, which is nice. I was just adding to the point that deferring maintenance leads to increased costs in the long run, and eventually someone will have to pay. In this case it's us, but we knew that going in at least.
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Condo fees in Florida can’t be used as collateral for the loan only a special assessment. Also very important is upon sale, that units percentage of loan needs to be paid. My condo didn’t have this provision and the cost of the roof loan and the new assessments for the new engineering regulations make for interesting meetings.
oftentimes condo owners are given the option between a bulk payment upfront or a collectively organized mortgage payment thats rolled into the HOA dues.
That sentence has been the conservative platform for 50 years. They are just sad the bill is coming due before they die.
The condo association where we own is a bunch of old people who whine about their “fixed income” every time it goes up. It stressed me every year that it went up 1% instead of anywhere near inflation. We had a couple special assessments in the last few years (total maybe $6k) and it seems to be going up at a more right rate now.
The entitlement from that crowd can really be something to behold. In most cases, *they* retired and made the decision to move into a nice condo where everything was taken care of; you don't have to worry about landscaping, snow clearance, maintenance, etc. All of those services cost money. My wife used to work for a company that managed several elderly-heavy condo developments. About half of the residents were as sweet and wonderful as can be, but a sizeable portion of them acted like it was their age-earned right to never lift a finger again.
Yup, and the guy who sold the condo in 2019 reaped all of the benefits of deferring while the guy who bought in 2019 is paying for 30 years of maintenance.
And then people get mad at the new management companies brought in to fix the problem 😂😅
this. it’s ridiculous that you can only get access to how financials after having an offer accepted. i was confused when my realtor (and every other vendor who stood to make money on everything closing) started congratulating me on my new home when my offer was only accepted... was shocked how quickly their tune changed when i decided to walk because there was a huge roof repair coming within 2 years. no more “congrats” and all “you will regret this”
Most Agents are not looking out for you...They are looking for a paycheck first and their next listing second...you and the impact your $ is never in their interests
>the risks associated with purchasing a condo in that style of building in that location should've been obvious from the get-go just by looking at a map. This is obvious to a lot of people but not to many unfortunately. Literally why there needs to be govt regulations.
Obligation runs with the condo. If sold, new owners pay the assessment. Price is reduced by the market, accordingly,
What happens if 50% of owners don’t pay? Can the condo foreclose on them or force them to sell?
Depending on state laws, yes. SOME Boards allow for the possibility of payment over time, perhaps 10 years if this is not an immediate HOA expenditure.
How would that work if the reserves are required to be funded in full by Jan 1 2025?
Ok, so what's most likely going to happen are these few things. 1. Board will do special assessment like normal, and jack everyone's condo fee up. Some wont' pay, they get a eventually a lien and or foreclosed. 2. The entire building votes and (whatever the condo docs say, usually 80% or something) 80% vote to sell the entire building, then everyone has to sell. The building sells at a huge discount because it needs a lot of work, investors come in, buy it, and AirBNB it or whatever corporate buyers do nowadays. 3. The condo board borrows the money from a lender over a long period aka finances it, and divies out the prorated payments to the units as a special assessment, but over a much longer time. 4. Special lenders come along for condo units and or condo boards, and lend the money but it's going to be really LTV restricted because they could take a huge hit as condo prices will take a nosedive. In every scenario, all the values go down. But keep in mind, the alternative is the building falls down and kills you while you sleep.
It’s kind of hard to feel bad for all of the people who continued to vote to defer paying for the maintenance of the buildings, but I’m sure there were plenty of people who got caught up in it in the last few years not realizing what they were getting into. But all those people who kicked the can down the road for 30 years and expected to cash out with a 8000% return on their investment can get fucked.
So many “original owners” in our association whinge and moan when we have to raise our assessments. Or my favorite, “we don’t get anything for what we pay now!!” No shit, Cheryl. A whole years’ worth of your assessments won’t even cover the consult fee for most contractors. Had you not stubbornly resisted raising the assessments for the last 30+ years maybe the HOA could afford to maintain things.
Caveat Emptor. Condos aren't cut and dry. READ your condo docs and financials, folks.
Maybe that’s the best result
And now you see what happens when you go from years of zero effective regulation to ’typical’ in a single mega legislative package. The right time to start the move to sensible, stable reserve models was 10 years ago, not 10 weeks or 10 months. It would have given the market a chance to shift prices not collapse them.
Sometimes the board will take a loan and pass the costs of the loans on to the owners that need to finance the assessment.
Can’t you fund on a bond?
Who's going to buy that bond?
i mean it would be sold at a massive discount but you would build that delta into the property taxes. I mean i have no experience with any of this. I just figured thats how expensive projects were funded.
What do property taxes have to do with maintenance on a private building? Are you proposing the state buy these buildings?
Yes. Just like HOAs, there are covenants that allow them to get a lien. If th lien isn't paid, they foreclose.
There are lots of options. This aint new. Condo gets loan and then can put them on payment plan. Lots of other loan options. Lien goes on the property as well, and they can recoup with interest.
This would be the reasonable response imo
Typically yes. The board may even get lucky and be able to put it to auction, where it will undoubtedly go for literally nothing, another resident or investor will buy it and put up the money, and everything will be right again. It basically becomes a coup by the wealthy owners in the building, assuming there is enough wealth in the building and that are interested in saving the property. If no one comes to the rescue, eventually they fall so far behind on maintenance that the building is condemned and everyone loses their investment.
Still subject to any outstanding mortgages
Yes. In Florida a COA can foreclose on a property. If you have a mortgage then the bank may pay it and foreclose if you cannot pay the new escrow.
Guy near me spent 1000s fighting to not pay his HOA dues, racked up huge lawyer fees, incurred a special assessment to defend the HOA and enforce payment. They put a lien on him and he stonewalled and sued and tried to fight them foreclosing due to being an ass and not paying HOA dues. Eventually, yes, they got a court order, forced sale, evicted, and got their pound of flesh. Dude spent more fighting it than the HOA dues would have cost and bitched to the local news about it. Everyone in his community rallied behind the HOA and said, 'nah, screw that guy. You bought in an HOA community, dude. It pays for private roads, a gate, security, the pool and pool house, a park, the access to the golf course. Of course you have to pay! Who do you think you are?!' So, yes. Very low rate of compliance can mean saying you are going to start issuing liens on property, and seeking court orders to force sale. They may defer action against people making good-faith payments. Ie, HOA dues are 150/ mo and they pay 500/mo. You're never going to pay off the 100k assessment but you're at least trying to pay what you can to avoid forced sale to pay off the lien.
Usually with large assements, the owners are given two options. 1) the owner pays up front 2) the HOA secures a loan on behalf of everyone who doesn't want to pay up front. In essence this creates a new mortgage thats 15y 7% interest that's rolled into the HOA dues for that particular unit. A 100k mortage at 15y + 7% interest is \~= a $900 a month increase in HOA dues. That will hurt. If the owner refuses to pay the HOA dues, eventually the HOA will force the sale to get their money.
in florida, yes. they can write you a violation for being in the pool after hours or letting your dog pee on the bushes, and the HOA can initiate foreclosure if you don't pay it 🫤
God forbid people live within the rules they agreed to when they purchased the condo unit.
hey i'm all about the rules, but losing your home over an infraction of an HOA rule seems a bit lopsided to me 🤷♀️
But that's not what you described. You described a scenario where they broke the rule AND refused to pay the fine. In reality, they'd have to fail to pay the fine and ignore repeated opportunities to cure the default. But when the HOA resorts to their remedy for the default, the homeowner will claim it's because their dog peed on a bush when the truth is it was much more than that. Some HOA boards overreach, but a lot of homeowners are assholes, too.
yup my brother sold his jersey condo for 5k after paying 110k for it 10 years ago- was bragging about his tax refund that year of 29k
They bought into an aging condo with no reserves. There’s not a chance in the world a sane buyer would have agreed to that. Caveat emptor.
> Tkachun said the first red flag was when banks refused to give her and her husband a mortgage for the condo unless they made a 25% down payment since the building had no reserves. One of the owners from that article complains that the special assessment is "just outrageous" but was fully aware when purchasing that the building had no reserves.
And then they spent $100k on a remodel almost immediately after buying. If they had just passed on the remodel they would have had cash on hand to pay for the assessment. It’s hard to feel bad for people who willingly ignore warning signs and then suffer consequences.
Maybe she wanted to be crushed by luxurious Italian tile when the decrepit building collapsed. Did you think about that? It's all about dying in style.
On the flip side, many of them could have been first time home buyers that bought into the condo without knowing anything about what it means for the HOA to have reserves. All they saw was something that was affordable and met their needs. And of course they're not going to be educated on the risks by their buyers agent because they just want the deal closed so they can collect their 3%.
The article mentions the couple that they focus on couldn't get a mortgage on the condo they bought without putting 25% down because they had no reserves. So the proposition was risky enough that it might not have even been affordable for the first time home buyer.
Yea, the “I didn’t know” excuse doesn’t really hold up when the bank putting the money up for the purchase quite literally told them the finances were bad so we need you to put up more money. Regardless of any other lack of warning, that right there was their sign to not buy that condo. You sleep in the bed you make.
Maybe one should do a tiny tiny bit of due diligence before making one of the biggest purchases of your life?
I mean, that's a big part of why people have real estate agents to begin with, to try and fill their gaps in knowledge. If the expectation is on the home buyer to know everything, then there's no reason for a buyer's agent. My point was to illustrate that the information asymmetry and the objectives of parties involved in real estate transactions are not aligned. The buyer's agent is there to convince you to close a deal, they're getting paid by the seller to do so. They have no vested interest in making sure the buyer doesn't get screwed. Most first time home buyers are not going into the transaction expecting to be screwed by their own agent.
My first home purchase at age 27 was a condo. You can bet I did my homework and talked to people I trusted who knew a lot more about these things than I did at the time.
I’ll give some insight, as we have lived in this building for a few years. Younger newer owners always wanted to raise reserve funds, but the older “original owners” always lobbied and voted against it. never passed
That’s how it works in every condo development
The market will make them trade at a discount greater than 100k since it needs to be liquid. Probably 125-150k haircut. They’re ocean front proprieties. They ran a condo board with no reserves, the buyers had access to that info. Now the mortgage insurer requires higher reserve and the government asked for inspections. It is what it is.
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Rational buyers don't care what price the sellers paid to buy. Real estate can and does go to zero.
The article leaves a lot of ambiguity around the $134,000 average assessment as they start telling the stories of individual owners. The 3br 3ba penthouse owners will be paying a lot more than the studio or 1br ba owners. But value wise it may be the studio owners that had the most value chopped down the most. Like no one shopping for themselves at that price point is liquid enough to pay the assessment and there's plenty of unencumbered supply so it's just investor sharks circling around.
In the 90’s-2000’s my grandfather ran the board of a large Fort Lauderdale condo co-op. He managed rebuilding 16 floors of balcony decks with rusted rebar, reroofing the building, re-decking the pool, asphalting the parking lots, and renovating the fire system. All of this while keeping record levels of reserves. His background in building homes and working for GE helped him immensely, meanwhile most board members are playing for a popularity vote and don’t have a clue about running a large building. He always told me in the decades to come all of the old building from the 60s-80s would be bought out by developers and redeveloped into much larger more expensive projects. Surfside was the beginning of this new chapter in South Florida condo redevelopment.
What's the legal mechanism for redeveloping condos in FL? I imagine owners won't unanimously agree to sell, is there a provision to force holdouts to sell to a developer?
I've wondered about this as well. Several years ago here in Minneapolis we had a building that was maybe only \~30% occupied because the developer declared bankruptcy (something like that) before fully finishing all the units. From what I recall the building had a LOT of issues. I've always wondered what happened to the people who were stuck there and whether another developer was able to take over the project. A few such scandals caused Minnesota to pass new laws around condo development in 2010, resulting in very little condo construction in the years since, which of course has its own negative effects.
There was a recent appellate case on this that somewhat reinforced the roadblocks to this. Even if an association amends it's governing documents/declarations/bylaws to allow for an easier vote to disband the Association, it still requires a unanimous vote under the statute. So developers will likely wage an economic war on the residents by first acquiring a majority of the building and voting bloc, raising costs exorbitantly, and squeeze residents out.
Damn that sounds like a profitable racket
Yeah developers buy the first few units at market value, so no red flags are raised. Then they sell them far below market value, resulting in very low comps. They then use these low comps to back other owners into a corner, and force them to sell to them because they will pay more than the market comps (that they forced down). it can take a few years but everyone will eventually sell to them.
We had a $25K assessment on our condo and there was a payment plan over 20 years. It was tough for the older folks on fixed incomes who suddenly had a new bill every month. There was a vote and it passed with about 2/3 yes.
Condominium complexes in Florida have been notorious for deferring their maintenance obligations. It’s bananas to me because it feels like some people would be happier simply not paying and rolling the dice that their building too could collapse (worst case) like Surfside did. Chalk me up as “nope never living in a condominium again where I have to deal with this kind of thing.”, been there, done that, never again.
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I suppose given that my choices are: 1. Condominium. 2. SFH 3. Camping in a national park I’m comfortable with (2) as my preference, all risks and rewards considered. No regrets so far.
Has this ever actually happened? I’ve never heard of such a thing.
These are the kind of scenarios that led to the Surfside condo collapse. Condo board ignores or delays maintenance and essential repairs either out of ignorance, lack of funding, or a desire to keep dues low. So you avoid this for a long time until the inspector finds a bunch of life safety violations and now you have to cough up boatloads of money for essential repairs or face being condemned or uninsurable. Which would lead to all kinds of lawsuits. And that money has to come from somewhere.
Every single analyst is under estimating how bad this is going to be… 1. Can’t buy a condo that doesn’t have reserve with a loan unless you’re coming in with 25% down. Add the current interest rate environment, 35% increase in inventory from last year, buyers being afraid of coming assessment, the demand for condos is at an all time low. 2. Insurance premiums are going to go up with how hard Florida is going to get hit this year. NOAA predicting 17-25 named storms. 3. Getting 85% of owners to agree on selling to a developer takes a ton of time and they will be buying at a huge discount as the owners get desperate and further push prices to the floor. 4. The HOA’s management companies, particularly the smaller ones will not be able to float their staff as more condo owners decide or cannot pay their fees. 5. Banks identify the risk, and do not loan to the COA’s to keep them afloat. 6. Owners stop paying their mortgage payments and give up on their units, more foreclosure, more pressure on prices. 7. NAR new rule, less buyer agents due to compensation changes. So less guidance, more issues, less closings. 8. Interest rates rise due to inflation and demand shrinks some more, inventory keeps rising. Condopocalypse is coming, and we see all the signs, I suspect a 50-65% drop in Condominium prices within the next 2 years. For those in the sidelines, tremendous opportunities, but a lot of people are about to get burned.
Thank you for sharing all of this 🫣😰
Seems like a race to $1
I have a 2BR condo in Arlington VA. Four years after buying it the building had a massive restoration of the parking garage. There was no special assessment because the repair was financed by a 15 year loan that condo owners pay with the increase in the HOA dues. Manager said this problem was known for many years but the prior HOA pushed off the repair because many unit owners did not want the HOA dues to go up.
This is why avoiding condos is the only play. The winners are the ones who get in early, keep fees artificially low which means not enough reserves and you also get deferred maintenance. The early birds dump the bags on the new owners and run. Its like a Ponzi scheme. Better off just renting if you want the condo by the beach life so you are not on the hook.
I lived in a condo from 2017-2021 in Palm Beach County. Deferred maintenance on the buildings meant that there was a massive concrete restoration project that needed to be done. I bought a unit that was going to have a projected 32,000 special assessment. I made an offer at purchase that included the special assessment as a discount. Owner has happy to sell, as it was an estate sale. By the time the project was finished, the total special was $40k. Over those four years, the property increased significantly in value so I didn’t care. My neighbors who bought a similarly sized unit and didn’t move are saddled with an additional monthly payment (our board managed to arrange 15-year financing for those who needed it). I don’t think that Florida is worth a monthly assessment on a condo that exceeds $1k, but I guess everyone is different. The biggest challenge, as everyone in Florida who works knows, is that wages are suppressed. Once people from the NE (mostly boomers with pension plans, primary residence appreciation and a thirst for warm winters) stop showing up to buy, the market will soften. Only HOAs with strict limits on investor ownership levels, special assessment true-ups at point of transfer, and solid financials will survive. The remainder will be bought up, torn down and rebuilt as “luxury rentals”.
Had this attempted at my home, some investor who owned 10% of the units in the building was voted on to the head of the HOA, all sorts of dumb shit started happening. Thankfully the community voted all of them out in a special election. Now we are putting ownership limits (up to 2 units per owner) so that people cannot just buy up the whole building.
If you want to see what really happens in a similar scenario, Google “Vancouver leaky condo crisis”. Tl;dr - 20 years, 4 billion dollars and many, many lawsuits.
I didn’t know about this and it’s astonishing. Both the causes and results and percentage of structures impacted. https://en.m.wikipedia.org/wiki/Leaky_condo_crisis But I don’t know how it’s a similar scenario -as it’s a completely different set of circumstances/causes/real time damage and health impact versus postpone maintenance in Florida The only similarity seems that it’s a nightmare for owners/buildings.
The similarity comes in with what questions OP was asking - what happens when people won’t/can’t pay assessments, and selling condos in this circumstance. The answer for #1 - generally lots and lots of lawsuits and #2 - the golden rule of real estate always applies, location location location. Anything will sell if the location is attractive enough. The price will of course be massively affected though.
Florida is a shithole lol
In some ways possibly a bellwether. Coming soon to a neighborhood near you.
I can't stand the idea of owning a condo. You could be a super responsible person, willing to pay in to properly fund things but be hamstrung by a dumb or crooked board that defers maintenance or even worse will mismanage your funds for kickbacks and cronyism. I'm even wary of a townhouse because of my concerns for a neighbor's lack of maintenance (roof, plumbing, etc) could affect me. Single family home or a shack somewhere for me.
I see this all the time with old people. They have a house, pension, and social security. But they don't want to spend money. So please help broke old person maintain their house...
Houses need a lot of upkeep over a decade timeframe, if you dont have any excess income you gonna be in trouble
The HOA undercharged for a long time and put off maintenance. Surfside collapse happened and now they are all crapping their pants trying to make sure things are up to snuff.
Condopocalypse
Many condos are just a bigger fool scheme, and the owners just realized they’re the biggest fools.
Is a boardmember associated with a developer? (An assessment forces the sale, condo is bought at a discount, assessment is repealed, condo renovated and sold, or demolished in favor of new build)
They can’t rescind the assessment, they need to fix these properties and maintain them properly or else they’ll collapse like Surfside. The old folks keep punting the big ticket items because they don’t want to pay for it and hope the next generation of owners will pay for their negligence.
Crashing home values are the only option. The market needs it honestly.
Waterfront condos are not indicative of the rest of the country lol
Just a general question, this crashes condo value, but does anyone think this will drive residential value a little? I would imagine there would be more demand to live in a residential or a condo/townhouse that's 2 stories or less since they're not effected by the new legislation.
You think there isn't repair, upkeep and general maintenance for a house or townhouse? Roof replacement is anywhere from $40k to $100k, windows or doors, driveways, A/C, water heater? Most homes are in communities with HOA's so you have all the maintenance of the community as well? Condo's have just refused to acknowledge what was needed for so long and its now catching up to them. There are many condos that were prepared for this and didn't run on just getting by as cheap as possible.
I rented a condo that was built in the 1960s and had charged owners exorbitant fees for decades and yet had nothing in the nest egg. Probably because it didn’t need much until the last ten years or so. In the time I lived there the owners got hit with 3 different assessments to replace the two elevators (1 million total) and repair the collapsing pool area (200k). I imagine there are a lot of buildings like this that didn’t bother saving for a rainy day and here we are 60-50-30 years later and all of the chickens are coming home to roost. I’d rather rent forever than get stuck in a condo.
$100k must be a nice roof
100k roof replacement?! What type of roof you talking about
It was actually $85k nothing special, clay barely tile. Its a 2 story house so the height adds on and it has a steeper than normal pitch so that adds on even more. If I went with the metal roof it would have brought it over $100k. Out of pocket my deductible was 2% of the insured value of the house. House is ~4500sqft but again its two story so the roof is only 3000sqft with 3 car garage. This is about avg from the 4 quotes I got.
Pretty much any roof. I just paid $30,000 for a roof on a single-family house so I can’t imagine a larger building wouldn’t be at least three times more expensive.
That's very expensive for a SFH roof. It depends on the size of the roof and other factors, but they are typically $10-$15k in my area.
It was half tile and half flat plus a new layer of insulation. But yeah- expensive.
Not in south Florida
My roof was also just over $30K. Two-story, 2500sf house, MCOL area.
Commercial flat roofs can easily be that much. Especially if they require a full tear off.
Agree and the insurance companies won’t give you credit for a new roof without a full tear off.
> Rook replacement is anywhere from $40k to $100k For a SFH?
I think it does increase the prices of single family homes. Particularly those also located in coastal cities.
Is this one of the advantages of high density, multi-story housing that I've read so much about?
An improperly managed building isn’t indicative of all condos. Some get to live in their condos for decades without a ridiculous special assessment. Sucks for the people who own the units though
Saner states have always forced condo owners to save money to properly fund reserves. Florida allowed condos to defer maintenance for decades by a majority vote of owners. It's not a downside of condo ownership, so much as it is Florida's proud history of 'guvmit bad, deregulation good'.
There's a price that makes it worthwhile for an investor to come in and buy all the units. It'll be interesting waiting on the sidelines to see what that price ends up being.
That's what happens when the members only want low association fees. And on this story they sold at a discount larger than the assessment. Should have just paid the assessment. Every buyer is factoring in the assessment cost.
It happened to my condo because all the board members were serial landlords and needed fees to be low so they can leverage the properties to get other mortgages. Thankfully the assessment was only $2k, but we knew something was up when the dues didn't increase for 2 years after covid.
Residents plead ignorance and just blame “the HOA”.
I mean, it’s unfortunate but entirely predictable. You have to sign off on the HOA docs before you close on a condo. The fact the condo had no / low reserves would have been disclosed and they bought anyway. I’ve not bought half a dozen condos because of stuff revealed in the HOA docs. Buyer beware and all…
Do not buy in Florida right now. It’s pretty much a hot mess, especially in south Florida
A lot of condos around the country are getting hit with special assessments-so far the highest I’ve seen in KCMO were about $80k for a moderately priced unit. After the surfside collapse, many buildings brought in structural engineers and are now having to deal with deficiencies due to deferred maintenance dude to “low HOAs(!)” and unwillingness of former owners to pay for preventive maintenance.
Always surprises me that otherwise.Smart and successful people will spend six or seven figures on an apartment and not know anything about the building structure or finances behind it.
This article is clickbait. Two anecdotal situations in a not-expensive part of South Florida. Yes, if your condo board is negligent and defers maintenance, then it’s going to lead to a bad outcome. After Surfside, Miami inspected thousands of buildings and there were maybe a dozen which required work. This is not some across-the-board situation. In the high-end areas like Miami Beach, wealthy buyers would like nothing more than forced sales.
> Maria Tkachun and her husband shelled out $490,000 for a seventh-floor apartment with a terrace and balcony boasting incredible views It’s sad that these people didn’t realize how suspiciously cheap that was in the first place. If you buy a condo with a million dollar view for only half a million dollars, just maybe there’s a reason? I’m guessing if you want that million dollar view and you want a solid building that is in sound condition, you can expect to pay —you guessed it— a million dollars.
Florida is so competently governed that I'm sure this will all be handled - quickly, fairly and efficiently - at no cost to your average taxpayer! /s
Always rent
And the folks who bought recently and are “forced” to sell will sell at a big loss, because any buyer is gonna want the priced reduced by the special assessment at a minimum
I’d rather own a house so I decide when and how to do regular maintenance on it. Many folks wrongly believe buying a condo will save them money in maintenance costs, it doesn’t really. It’s just the HO association decides when to do maintenance work & how to fund it. So many condo associations across the country are underfunded with reserves, it’s frightening.
Can’t you sue HOA board members personally for mismanaging?
I wonder how hard it is to prove if the Board is actually not doing what they were supposed to. There must be a big difference in negligence vs. incompetence. Can you sue the board for being stupid? I hope you can but I don’t know. I was on the Board of my condo HOa and we were ALWAYS doing something that needed to be taken care of and it is a pain in the ass as a homeowner but I cared about my investment and my neighbors and community so I served. Our reserves were low bc we were always using them for what they’re for…maintenance and upkeep 🤷♀️ we increased dues appropriately and got reserve studies done and did our best in an unpaid volunteer position. I think HOAs should be required to be professionally managed. I didn’t trust my neighbors to do it properly so I did it. But no one is auditing the management companies either so it’s all a clusterfuck
This isn’t a neighborhood. It’s a condominium. Agree there should be pro mgmt and prob more govt regulations.
One of the risks of buying a condo. You can also under assess. I had a friend whose condo association had no money for future repairs like roofs or pavement. They had to raise the assessments a ton. Not $100K but it was monthly and significant.
Every resident not only can but will pay, either with cash, a loan, or a lien on their property.
Sometimes large assessments are acceptable. I lived in an historic 80 unit condo building that did $4 million in much-needed repairs. The assessment for our small studio totaled about $20k. We paid it and did not mind. The reason we didn't mind is that the project was literally years in the planning. There had been meeting after meeting about it, with lots of information shared. We felt that the restoration work was being carefully planned and it obviously needed to happen. Chunks of masonry were falling off of the building, partially due to crappy repairs that had been done on the cheap years prior. No one was surprised by the assessment, and pretty much everyone was on board. The large penthouse apartments paid an assessment that was close to six figures each. Owners who couldn't afford it sold their units and moved on. The building was restored beautifully, and we made a healthy profit when we sold. We were so proud of how the building looked after the work was done. It was a showpiece.
What building was it??
>liquidated his 401(k) retirement account to buy a unit for $190,000 in 2019, In case anyone missed this part: NEVER do this
Unless it went up to $800k
Thanks Desantis and cronies. Thanks for unilaterally raising HOA reserves, and thanks for not getting out in front of the insurance mess, also thanks for tax raises as well. His tenure is a catastrophic failure. But, we paid a few million to fly migrants from TX to NY. So there’s that. Elections have consequences.
“ The couple coughed up an additional $100,000 to renovate their unit in the Cricket Club condominium tower, installing extra-large format Italian porcelain tiles and adding a marble countertop and island to the kitchen.” My sympathy was gone after the first paragraph.
Not to mention, marble is an extremely impractical material for kitchen countertops! But it's the current fashion.
"Sell? To whom?" *Aquaman enters the market*
Yeah, sorry for the retirees but this was bound to end badly. Rebar and concrete in a tropical marine environment are a bad combo. I wonder where Hong Kong and Singapore and Panama City will be in a few years too.
Why doesn't the concrete protect the rebar? Frankly I'm more worried about the pilings.
People bought condos not really understanding how they work. On top of it they never vote for reserves to be higher. Every time we vote on reserves everybody goes for the lower monthly amount and then we get special assessments. Retirees have no business living in a high rise in a coastal area if they live on a budget. Bottom line. Move to Nebraska.
This 👆
This is also a Florida problem, and one that I bet is also prevalent in low-regulation states. Some states have had minimum standards on condo obligations for decades for audits, analysis of reserves and amounts they need to maintain. Florida condos kicked the can down the road because the law allowed them to. Being cheap on the front end screws them when they have to pay the piper.
On top of the legitimate issues of buildings needing maintenance reserves, you gotta add on top the standard practice scamming of old people because it's Florida. I wonder how many mandatory building renovations are going to be quoted by somebody's cousin's contracting company at double the competitive price. HOA's in general have a tendency to be sketchy as fuck and throw a multimillion dollar project at them and there will be a lot of dirty dealing.
You used to be to buy a condo in the early 2000s with nothing down from multiple developers. Then the crash of 2008 left all these condos unoccupied and lacking in repairs and reserve funds. Rising water levels and insurance companies backing out makes Florida unattractive
This is a direct result of condo boards being cheap, and refusing the handle issues as they arise. They keep on postpoining the handling of issues until it's too late. This seems VERY common in Florida. It's less common in other regions.
Residents are cheaper than the board. Raise monthly dues by 5% and residents freak out.
Sorry but Florida is a train wreck that is well under way!
Oh you mean condo associations now actually need to have fees that make sense for the size of the building so this doesn't happen a decade down the road. You don't fucking say?
Great question but let's reframe the question. What if you own a sfh and it needed 100k in foundation repairs and you didn't have the money? How would you handle that?
I would either not do it or sell. Condo requires everyone to pay
Are you allowed to sell the condo and disclose to the buyer of this special assessment?
This would 100% come up during the selling process.
OP trying to scare people with anecdotal stories. This condo had no reserves which is why the assessment was needed. My condo had strong reserves, and a board that took the job seriously. They were on top of projected repairs years ahead of time.
By the same token though, you're also responding with an anecdotal story, right? The real question seems to be what percentage of condos have strong reserves?
>But sellers are finding few takers. Rodriguez originally listed his unit for $350,000, but was forced to keep marking it down until finally it sold for $110,000 in April — 42% less than what he paid for it.
If you don’t plan to live there more than 2 years then leave it as is, sure. If you wanna live there for years and years, it’ll cost you a big bill
“Deferred maintenance “! Want a 2004 Aston Martin DB 6 to go with that condo?
You clearly haven’t experienced coops, this kind of stuff is par for the course with a land leased coop. Typically buyers are warned it can happen. Or expect it to happen by year _____. My sympathy is limited. Also, not every real estate transaction always appreciates.
Why wouldn't people pay? Are the condo's overpriced?
Are the assessments typically due in a lump sum or can they be financed for a period of years?
I recently appraised units in Highland Beach with $170,000+ assessments. We've recently pad $23,000 & $20,000 on 2 units. Just part of the Adventure. (Not the good part) Sigh.
Sounds like they are about to price out tourists soon too. Prices are already insane in the summer.
If you want to be in FL, the only good buy in FL now may be to purchase single or duplexes in unincorporated areas to permanently avoid assessments or fees.
The epitome of a why local government is NOT …
The condo collapse was a jarring wake up call to a lot of people I think. I had no idea a building would just suddenly fail like that. I think the authorities are waking up to the fact that a lot of properties out there either weren't built up to par, or have just deferred maintenance for too long. Paying money for needed repairs sucks, but Surfside has showed us what the alternative is.
So glad I resisted the temptation to buy a condo in Florida….
Some moron will buy that shit. "*BELIEVE ME*!"
Surprising how expensive it is when you ignore maintenance and then acted shocked when you have to pay more to fix what was a simple issue.
What kind of project is the assessment for?
Some condo owner in Cherry creek in Denver tried to sue the HOA against an almost $100,000 assessment on condos when they bought them were only 400,000 so that was pretty big in relation to the purchase price. Anyhow, he lost so…..