The financial perils of buying a condo

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.


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My best friend lives in a condo in Seattle.

The HOA rules don’t allow air conditioning.

So they had a fun weekend. :frowning:


I would never buy anything in Florida. It’s gonna be under water soon enough – rising sea level + porous rock = no way to stop the ocean. Can’t use levees and pumps like in Netherlands and New Orleans. Also, sinkholes. Also, Florida.

Some HOAs are better than others. The fewer things the fee covers the better, Ideally no more than garbage, landscaping, and fire insurance.


It makes sense to prohibit protruding window A/C, but it should be illegal to prohibit in-unit A/C with a flush (non-protruding) window exhaust. Especially with this weather.


And only use special assessments to fund building maintenance? That’s a good deal for original owners, not so much for those who buy in later on.

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I think that’s the root of the problem. HOAs that are made up of SFH can get away with covering the bare minimum, leaving maintenance to the individual homeowners and are generally just there to act as busybody rule enforcers. Sometimes they take care of stuff like drainage ponds and small neighborhood parks. Condo HOAs, on the other hand, have to go beyond that since the buildings themselves are almost always shared. They can fund major expenses to the structures via one-time special assessment or over time with dues.

As you mention, if an original owner gets out at the right time, then special assessments are great. Dues are the “fairer” way to fund, but nobody likes seeing that huge monthly hit to their checking account, funneling money over to HOA president Agnes in unit 406 who will get to decide how the roof is replaced and whether her grandson Johnny will get the job. In many cases the HOA fees are higher than property taxes.

Speaking to the problem more generally, nothing compels these condo HOA boards to do anything to fix major problems like the Florida high-rise had. In fact, I’d argue that the current system promotes a do nothing approach, as broaching the topic just leads you as a board member to get a lot of grief from your community.

As far as I know, condos really didn’t become popular in the US until the 1970s or so… which makes me wonder how many more of these we’re going to see as the infrastructure from that era begins to fall apart. Government regulation is rarely the correct answer, but given that these HOAs function as mini governments anyway, it makes me wonder what kind of checks need to be placed on these associations.


No, ideally the owner is responsible for building maintenance, not HOA. As could be the case in a community of SFHs or townhouses.

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I assumed you were talking about condos/places with shared common areas, since you put fire insurance on the HOA. Of course if there is no shared building, there would be no shared building maintenance costs being paid by the HOA. But in those cases you’ll also have individual insurance as well.


Pretty thorough observations.

Looking through the HOA’s financials knocked out two of the condo’s we wanted in Toronto. They had almost no reserves.

Reviewing the HOA’s financials should not be limited to high-rises, either. I am aware of an HOA of modestly priced SFHs which will be facing a special assessment of well over $25k per lot.

Sadly, if the insurance companies deny liability claims due to negligence, that will only serve to further limit the pool of potential candidates to more “unaware” residents. I wonder if we will see a move where the professional HOA management companies try to take advantage of the situation and “for a fee” offer to handle all aspects of the HOA.


What’s wrong with FL?

Huh? What about roof, windows, a/c, furnace, parking lots, garage, inspections, et al.?

My experience with HOA management companies was not good - they could reliably collect monthly dues and that’s about it. Attendance at board meetings was spotty. Financial reports were slow to be distributed and often miscalculated. We fired our original management company and our second company wasn’t much better. And this was in a well run HOA… I can’t imagine how poorly management companies behave with an indifferent board.

LOL, where do I begin with this one? I’m with Scripta - you constantly hear about crazy things happening down there (the “Florida Man” news stories, for instance) and that state attracts a certain kind of person who puts the pleasant winter climate above every other factor in determining where to live. The humidity and hurricanes in the summer almost require you to be a bit crazy to want to live down there year round :).

That’s what I assumed as well - HOAs are more a nuisance for SFH or other detached housing. They become a lot more critical in proper condominiums when they become responsible for building maintenance - e.g. all the stuff Goose just outlined above.


It can be a minefield, especially in really small historic buildings. The least reluctant owner ends up doing all the work. I had a close friend get stuck with this, and he ended up selling since none of the other 6 absentee owners would ever step up.


… or proximity to the Gulf Stream. Give me a mile, Vasili - one mile only. :sunny:

I certainly agree with your thinking.

Yeah I’m pretty sure the rule is meant to apply to window units but its apparently written so it prohibits any individual unit or something and would read to include the portable hose indoor ones.
Seattle is mild and has the least AC in the USA (AFAIK) so its not been a problem and my friends have only been living there a few years. AC is not a legal habitability requirement in the Northwest.

My friend did go ahead and buy a portablbe indoor unit and they plan to discuss the AC rule with the other HOA owners to amend it to allow AC other than window units, or possibly get a central system installed for the entire building.

That’s not quite accurate. Look at what China is doing building island out of nothing. There are several ways to stabilize porous soil using piles, impregnation of slaked lime, cement, bitumens, addition of geotextile reinforcement, etc.

The issues are that it’s not cheap and it’s way more difficult to retrofit soils with existing constructions on them. But nothing that cannot be done with enough foresight, investment and smart long term infrastructure planning. Since global warming and rising sea levels are obvious scams/fake news though, the chances of this happening in Florida are, to be kind, rather slim IMO.

Why the fire insurance in HOA fees though? Shouldn’t that be left to each individual homeowner? Relative in FL don’t seem to have that in their HOA dues but they’re in individual homes, not condos. For their community, it’s just garbage, landscaping and fees for the pools, events and various clubs. Maintenance of their home is definitely 100% theirs - for having helped them with some.


Almost all condo developments that I’m familar with (at least around here) are not detached units.

If the condos are detached / SFH then yeah I wouldn’t think HOA would handle fire. But here at least ‘condo’ is almost synonymous with multi-unit / row housing. Makes more sense for fire to be handled by HOA if you all share roofs and walls and common building infrastructure.


Hahaha! You forgot to note the sarcasm :wink: .

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I missed this in my first response. Don’t know how I overlooked it … Regardless, you don’t have to worry about it being under water soon - I was a devout follower of Algore, and according to him, FL has been under water since the mid-teens. No wonder buildings are collapsing. :upside_down_face: :roll_eyes: :thinking:

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HOAs come in every shape and size and for every purpose some useful some not.

I am curious how insurance will pay (or not) these owners of condos condemned for poor maintenance. Has anyone heard of any reports? I have considered purchasing a coastal Florida condo in the past this sad event makes me think it may not be such a great idea.