The tragic disaster and loss of life at the Champlain Towers South in Seaside, FL brings to the forefront the challenge of special assessments for condominiums and attached homes. Much remains to be investigated in that case; but at this point it’s clear that major structural problems were known to have existed for several years. The current repair estimate was $15M; with 135 units in the building, that special assessment would be a staggering $111K+- each. The calamity however, is a vivid reminder of the cost of not doing required work. It’s also a warning to any buyer considering units in “apartment style” buildings and even town homes; it is critical to evaluate the health of the community.
How Does the HOA Function?
Being a board member of any homeowner’s association is a thankless job; role and responsibility can vary greatly. In many cases, there is a “community” HOA of residents that work with and through either a community management company or a master association. It’s common for resident board members to be voted in, that can get contentious and polarizing as priorities and objectives may differ. All groups have input on management of the complex but when it comes to rule changes or special assessments, things can vary. Some communities may include residents in votes, some only board members, some only the master management group. Consider getting any group of people to agree when potentially massive fees are to be levied – like $111K for structural repairs. Sometimes the process can remain unresolved for years...and end in tragedy.
Balance Sheet, Minutes & CCRs
Very few home buyers do a deep dive into the minutia of a complex as part of their due diligence prior to purchase. Yet, this is where the most relevant information is found. Is there a master association? If so, what rules, policies and procedures are in place? How are rule changes and special assessments proposed and considered? How is the local HOA run? Are members voted in, for how long? What are the roles for each member? How often do meetings take place, are there minutes from them? Is the community fiscally sound? Anticipated major expenses? How much is the reserve fund, what’s the maintenance schedule? What’s the plan if funds need to be procured? All rather mundane questions and easily blown off, but all are critical to the overall health of the community and value and appeal of each unit.
Carrying Costs, Resale & Appeal
The tragedy in FL resulted from many things; the cost of repair and financial burden to residents likely a main one. Those issues didn’t sneak up on anyone; apparently they simply couldn’t get agreement to fund the work and disaster struck. Special assessments are a burden, some may not be able to afford them. Those may also deter a buyer; walking in and immediately writing a check can be a deal breaker. Residents in a common building or attached homes are inextricably woven together; the complex has to be kept up for everyone’s sake. When dues are not paid, maintenance slips and everyone suffers. Special assessments can destroy equity and market appeal; but so can neglect. Attached homes are akin to an airplane flight; a big, diverse group of folks, all with the same objective that depends on that crew and maintenance team to get them from A to B. If one aspect of the mission fails, everyone is impacted.
The Bottom Line
Buying an attached home, in a single building or town home community, is a collective effort; everyone is connected on many levels. As a seller, it’s important to stay engaged; know what’s going on and stay involved. The reputation and appearance of the complex has a direct impact on the marketability and value of every unit. As a buyer it’s absolutely critical to dig into the resources; there are many layers to explore. Be aware of any initiation fees, special assessments or underlying problems. Believe your eyes; it’s pretty easy to get a feel for how the community is managed just by looking around. As always, work only with a seasoned professional agent; this stuff isn’t foreign to a pro.
The Hank Miller Team puts 30+ years of full time sales & appraisal experience to work for you. Act with complete confidence & make sound, decisive real estate decisions. 678-428-8276 and firstname.lastname@example.org
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