With the recent collapse of the condo complex outside of Miami, attention is being drawn to condo HOAs, deferred maintenance, and how far behind the eight ball many of these associations find themselves in:
I owned a townhome for roughly 10 years. It was my starter home before I married and we decided to get a larger place on acreage. I served on the board for about a year. A couple of observations:
Our HOA was financially healthy - our reserves were roughly 90% of expected expenses which is very abnormal. This was due to a lawsuit brought against the builder for shoddy construction. The builder originally put the HOA in a terrible financial hole - initially setting dues to a ridiculously low amount to attract buyers and then putting the board in the position of having to raise fees significantly to a more realistic level. Had we not had that lawsuit cash, we’d have been in big trouble to cover things unaffected by the construction defects - stuff like roof replacement and the like.
I can’t tell you how critical it is to have someone on the board that has basic knowledge of how to fix things and keep a house maintained. Condos attract people who don’t want to deal with things like maintenance and so the pool of qualified candidates is quite small. We were lucky enough to have a retired guy as president who was constantly in his garage puttering around with DIY projects. He knew the importance of keeping the community well maintained, but was also miserly and did a good job of avoiding overpaying for bids.
Without a good board, you are at the mercy of a group of idiots to make your major financial decisions for things like structural repair and roof replacement. Would you want to be legally obligated to give your neighbor a blank check to hire a contractor for a major repair on your house?
Condos in this region (around Seattle) attract first-time buyers who cannot afford a house. Many of these folks do not have the financial capability of absorbing a $10k special assessment to pay for something like a new roof. This puts the HOA in a position of having to take a loan or deferring the maintenance. The former significantly increases dues, the later obviously has consequences like what occurred in Florida last week.
I would never buy into a multi-level apartment style condo complex, as was the case in Florida. The townhome-style complex I previously lived in was a good stepping stone, and I was lucky to have a competent board, but I am glad I got out when I did.