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Disputes and poor planning leave condominiums in disrepair

For years before the partial collapse of the Champlain Towers South complex near Miami, the Housing Council struggled to raise the $ 15 million it needed to repair the building’s ramshackle roof, poorly designed pool deck, and crumbling support columns.

Problem: The homeowners association only had $ 800,000 in reserves, and to get the job done, residents had to take huge special audits ranging from $ 80,000 to $ 200,000 for each home. Nobody wanted to pay.

“The dirtiest words in the community-association industry are ‘special evaluation’,” said Donna DiMaggio Berger, attorney on the board of directors, of efforts to get 135 homeowners – of various resources and nationalities – to agree on a plan to make repairs.

During the ongoing turmoil over the necessary renovation work, several board members had resigned in frustration.

“People quit and new people came in and there were all sorts of things that weren’t pleasant,” said Max Friedman, a former board member. “I think part of it was because of the project. Personalities may have been involved. There were all kinds of ugly things. “

The delayed maintenance and inadequate savings in the Champlain Towers building are common dilemmas among condominium associations across the country, where honorary board members, sometimes with little experience in financing or maintenance, face vicious power struggles with their neighbors and pressure to pay fees to keep it low.

Only about 10 states require homeowners associations to assess how much money they will need for major repairs in the future, and the vast majority of states do not require condominium authorities to hold solid reserves to pay for these items when they are due.

About a third of the clubs are well behind in their savings, with 30 percent or less of the money needed to prepare for major future projects, said Robert Nordlund, whose company, Association Reserves, has studied tens of thousands of condominium groups and other homeowner associations in all 50 states. He said some boards focus on the regular maintenance costs – utilities, gardeners, and pool cleaning – but don’t think about the even bigger bills that could come in with sudden urgency.

“Just because the roof doesn’t send an invoice every month doesn’t mean it doesn’t have to be paid,” said Nordlund. “It’s getting worse at a certain rate, a certain number of dollars per month, so you have to put that money aside every month.”

Investigators this week tried to find out if late maintenance, faulty design or construction, or some other unknown factor were responsible for the failure of the 13-story building in Surfside, Florida, where the death toll rose to 18 on Wednesday, with an increase to 145 still missing.

City officials in Doral reviewed the work of Ross Prieto, the former Surfside site manager, who in 2018 reassured homeowners in Champlain Towers South that their building was safe despite the many problems identified in an engineering report.

Unresponsive to requests for comment, Mr Prieto had left Surfside before the collapse to work as a construction clerk in Doral and to review projects. There the city officials said he was on leave.

“We will check everything he has done with great caution,” said Rey Valdes, a spokesman for the city of Doral, on Wednesday. “We don’t suspect that he did anything wrong. However, given the circumstances we are facing, we will review everything he has done to make sure it complies with state and local law. “

The debates about deferred maintenance, money management, and rising homeowner association fees that have played out at Surfside are little unknown to homeowners across the country, who often find themselves in political drama with their neighbors whose outcome can dictate anything from the color of their garages on the resale value of their homes.

In Burnsville, Minn., A sprawling condominium across from City Hall has long needed what one city councilor called a “major HGTV remodel”.

Built in 1970, the Ridgeview Condominiums site has crumbling roads, cracked siding, and failing retaining walls. The complex will take at least $ 12 million to complete the repairs, which means homeowners would have to pay about $ 30,000 per unit – in a complex where the average condo sells for about $ 100,000.

Raising the money to start building is a separate issue. With little money to spend on renovations and two banks that have refused to grant loans, the complex turns to the city for a loan that will be repaid through taxpayer money imposed on homeowners as a special assessment.

Elizabeth Kautz, Burnsville Mayor, said the Surfside disaster showed city officials need to pay attention to such issues.

“It is in urgent need of renovation,” said Ms. Kautz. “If you look at what happened in Florida, we want to help.”

Jennifer Macabeo, a member of a Seattle condominium board, said the board worked for years to build the association’s reserve fund from a modest $ 200,000 to $ 1 million. But that was still not enough to solve a growing problem of faulty exterior cladding on the buildings of the 104-unit complex, built in 1979.

The board proposed a $ 10 million plan that would require homeowners to pay about $ 100,000 each, but there was a huge outcry, Ms. Macabeo said. Some residents started a petition to dismiss the board.

“There has been a lot of negative backlash,” she said. The callback has failed and the plan is now moving forward, she said, although the delay will likely add further cost to the project.

The debate at Surfside had clearly strained relations within the complex, where apartments ranged from $ 600,000 to over $ 1 million. As efforts continued to make a costly renovation this year, Jean Wodnicki, the chairman of the board, wrote that executives heard questions from residents about why the work was required, what financial oversight would be in place, the amount of contingency fees, and more. Ms. Wodnicki argued that the ratings may not be high enough.

“We have discussed, debated and argued for years and will continue to do so in the years to come when different things come into play,” wrote Ms. Wodnicki.

Roof repairs on the building had begun in the past few weeks, and the rest of the renovation should begin soon; they never got going.

Industry leaders and some states have long urged condominiums and other homeowner associations to have robust reserve funds to avoid dismay and procrastination when a large bill comes due. But with little voluntary progress, a move to reshape state laws has gained momentum in recent months, attracting support from some homeowners, community managers, and engineers in the industry.

A committee of the Community Associations Institute, which advocates for homeowner associations, is considering a proposal that the homeowner associations should commission expert studies to determine the need for reserves. Dawn M. Bauman, senior vice president of the Institute for Government and Public Affairs, said the committee is also reviewing reserve requirements, although the proposal has been more heatedly debated.

The committee had scheduled a special session this week to speed up the issue, Ms. Bauman said, pending lawmakers nationwide to look more closely in the coming months.

“That will probably be our top priority,” she said.

Condominium reviews across the country have revealed many safety concerns, Nordlund said, including roofs that cannot support weight and pool equipment rooms with standing water.

He said his group advised condominium administrations that spending on maintaining their communities would pay off in better property values ​​later.

Florida state law requires condominium companies to hold reserve accounts for components with deferred costs or replacement costs greater than $ 10,000, including a number of large items such as rooftops and swimming pools. The provision amount is calculated using a formula based on the remaining useful life of a building and the estimated cost of replacement or accrued maintenance for each item covered.

But there is a loophole. Associations can waive the provision of these reserves if the majority of the quorum, which could be less than a third of the homeowners, so decides. The law allows some flexibility by stating that funds reserved for one purpose can be used or pooled for an alternative project.

“While that flexibility could help an association, it can be a double-edged sword,” said Jonathan Goldstein, a Miami-based condo attorney. “The problem arises where associations have contradicting incentives. Association members always have an incentive to throw the can to another owner in the future and therefore take the side of waiving or partially financing reserves, which will lead to a large special valuation across the board. “

The next support is the local government, which may determine that a lack of repair is a violation of the code that could trigger an enforcement process to enforce compliance.

On the Champlain Towers South project, the condominium association worked with an engineer to prepare for a government-required 40-year recertification process. A letter written in April by the condominium’s president, Ms. Wodnicki, showed the association did not have enough reserves or cash to fund the $ 15 million repairs that residents had to pay. And she warned that conditions in the building had “deteriorated significantly” since a technical review in 2018 revealed problems running into the millions.

“Much of this work could have been done or planned in the past few years,” wrote Ms. Wodnicki. “But here we are now.”

Financial records show that in 2020, much of the roughly $ 800,000 the association had on hand was earmarked for insurance deductibles.

Brian McLean, who runs a Bellevue, Washington-based company that helps manage 80 homeowner associations, said some of the boards he worked with had fully funded reserve accounts but others were depleted. Last year, his company recommended a community to increase their fees by 40 percent.

“When we do something like this, we know it will be very difficult, if not impossible, to get the community through,” said McLean. “We’re trying to force this conversation.”

He said the board eventually approved a 12 percent increase. “It will make some residents go ballistic,” he said.

Patricia Mazzei Reporting from Miami contributed. Nicholas Bogel-Burroughs also contributed to reporting.

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