‘Condo wars’
Surfside collapse sheds light on associations
Infighting, financial battles play out in condos, HOAs across the U.S.
Before the Champlain Towers South Condominium collapsed, the owners and the complex’s board of directors spent years clashing over the cost and extent of safety and structural repairs for the 12-story building near Miami.
“Why is all of this so complicated and expensive?” read a question that topped the board’s meeting minutes over a list of major structural problems last October as the deadline for a state-required recertification of the Surfside, Florida, building approached.
On April 9, Jean Wodnicki, president of the Champlain Towers South board, warned in a letter to owners that the problems had worsened. “We have discussed, debated, and argued for years now, and will continue to do so for years to come as different items come into play,” she wrote.
“A lot of the work could have been done or planned for in years gone by. But this is where we are now,” Wodnicki said.
The disagreements represent an extreme but familiar version of the infighting and financial planning battles that play out across the nation in condos, homeowner associations and co-ops – roughly 380,000 community associations in all. Owners or shareholders of the associations square off with volunteer and sometimes inexperienced board members elected to oversee the complexes in a struggle to maintain aging buildings while keeping monthly fees low and enticing new buyers.
“There’s always pressure to put off costs for the future that might be better allocated today,” said Thomas Skiba, chief executive officer of Community Associations Institute, a Virginia-based membership organization focused on building better residential communities. “Some boards are better than others. Some communities are better than others.”
One of the most financially and emotionally fraught battle lines is special assessments. They represent levies that may total tens of thousands of dollars to pay for such things as a new roof, major plumbing problems or extensive repairs to exterior walls. A Champlain Towers South special assessment, with payments that were to have been due this month, ranged from $80,000 for a onebedroom unit to $336,000 for a penthouse.
Special assessments are often necessary because the financial reserve accounts for many condos, homeowner associations and co-ops fall well short of covering the costs.
Robert Nordlund, a registered professional engineer, is a founder and the chief executive officer of Association Reserves, a consulting company that advises board members of condos, home associations and other organizations on the size of reserve funds for major and long-term expenses. The firm has more than 60,000 clients, he said.
He said roughly 30% of associations have a weak reserve fund for dealing with major costs and emergencies – less than 30% of the funds needed for such projects. They’re likely to need a special assessment to pay for big-ticket expenses, Nordlund said. Forty percent of associations rate “fair” for the financial reserves, and 30% have strong financial positions for major expenses and emergencies, Nordlund said.
“A fair percentage follow our recommendations” about how much income from common charges and other fees should be set aside for long-term maintenance and emergencies, he said. “But it’s unfortunately common that organizations don’t follow our recommendations fully.”
Champlain Towers South was among those that rated in the weak category, based on the report that Association Reserves prepared for the condo in 2020. It showed that the complex had an available reserve of $706,460. The complex’s projected costs at the time totaled nearly $10.3 million, the report said. The condo had just 6.9% of the funding needed for major repairs.
“We should have started saving at least five years ago,” said a slide prepared for the Champlain Towers South board’s meeting May 28, 2020.
Nordlund said he could not comment on reports and recommendations that his company submitted to any client. However, he said the Champlain Towers South Board “was struggling and struggling and struggling” for years to gain approval from unit owners to fund costly repair work, and “finally got it over the line” shortly before the collapse.
Only 11 states require condos and homeowner associations to fund reserves for major costs, said Dawn Bauman, senior vice president for government and public affairs of the Community Associations Institute. They are Connecticut, Delaware, Florida, Hawaii, Illinois, Massachusetts, Michigan, Minnesota, Nevada, Ohio and Oregon.
Florida and Illinois allow associations to waive the funding requirement based on the outcome of a quorum at an owners’ meeting, Bauman said.
Many types of residential associations have experienced some version of the squabbling and delayed planning that deviled Champlain Towers South.
The Champlain Towers South tragedy triggered bad memories for Debra Corazzelli, former president of the Island J Condominium Association, a complex of 174 homes in 29 buildings in Foster City, California.
She and other association leaders went through a similar battle with homeowners over efforts in 2012-2014 to repair extensive dry rotting found in the wood beneath the concrete that covered the condo balconies and stairs.
A contractor estimated the job would cost $7 million, or $40,000 for each unit in the complex. Many homeowners got angry.
“It was condo wars. I said you should make a reality TV show about it,” recalled Corazzelli, who said her role was a lost cause – trying to keep peace among battling neighbors.
Foster City officials declared the structural problems a life and safety risk. An attorney for the association successfully petitioned a court to impose an assessment for roughly half the required $7 million, equivalent to $20,000 from each homeowner. Corazzelli said homeowners were able to pay the assessment over 10 years with their monthly common charges.
The repair work turned the tide. The complex was no longer structurally unsafe. Home values increased.