Post: #1

I'm going through a special assessment in my 80 unit condo building that was built in 2011, the builder used some shitty contractors and there's been some water damage and mold in some units, although mine wasn't affected. Renovations are already underway and the expected cost to repair all of this is about $3 million dollars, I have to pay $37,000 so its a big hit, so far the worst financial kick in the nuts I've ever had. There is a law suit ongoing and hopefully the condo board is able to sue the developer and I'll get some of my money back in a couple of years.

I'm just wondering if anyone has gone through this before and if they have any advice? Also, I hope this is a warning to other guys on here about the risks of condo ownership, I did my due diligence (or so I thought!) by going with a developer that is well established in my city and has many different buildings. Also, my unit never had any issues at all but it was other condos that were affected, so we all have to pay. Once this nightmare is done with and I sell my condo, I will likely buy a house.

Post: #2

Lurker here.

Yeah I've been in my condo for about 5 years. It's on the ocean so we get a ton of corrosion. The building is older so it's overengineered so no issues with workmanship.

We've been assessed for painting, rails, pool work etc.

And it's about $5k each. I bet you could have some owners saying screw it and could decide to short sale to foreclose depending on equity and the market.

Post: #3

Do you have insurance? Are special assessment s covered?

I've dealt with this, and shouldn't your association just be responsible for the buildings deductible and not the whole three million smackaroos?

Also, they should let you make payments, not whole thing at once.

And finally, can you sell while waiting for the work to happen, then pay nothing?

Aloha!

Post: #4

You have to disclose it when you sell.

Had a friend who picked up a condo on the beach for a good price when the condo had a $20,000 assessment. Seller used the sale to pay half and my friend paid half. Seller wouldn't have sold but for the assessment.

I have never heard of the condo's insurance covering construction flaws.

The condo may have a good lawsuit but it will take years to collect and in the meantime the mold grows. Sounds like the HOA is fixing the problem asap and then going after those responsible, which makes sense but creates a liquidity problem for current owners.

Post: #5

I had a similar issue and still continue to make payments on a special assessment. Also, same type of deal, water damage due to weak contractors.

Now, I'm not sure what I can do to assist. All I can do is provide perspective.

I realized one thing, which is that it doesn't matter how good developers are. Contractors apparently slip shit by them and they know this. Due to this understood possibility, the developer will screw you through contract language which is somewhat airtight in their favor usually. Remember it is the association that decides how to deal with this and you don't have much say. That said, I would still talk to a good lawyer.

Speaking of associations, this also isn't the most favorable setup for a condo owner. I assume none of the condo association board officers get paid for what they do? At least in my case it is. That serves people fine in routine situations but in a more complex one such as this, they could be a fish out of water like ours is.

The best thing I can suggest is to meet with the president of the board and see what the options are for yourself. Maybe you can even offer help if you can contribute a skill.

I unfortunately got this condo before the 2008 real estate crisis and saw myself going underwater by 40% of the property value. So it's hard to sell it without taking a loss. Additionally, as a landlord I need the association's approval before taking tenants because too many tenants deteriorate property value. A lot of owners have moved out and have tenants still. So we're still screwed. Short story: I hate the arrangement and will never get into a similar situation again.

Post: #6

(08-20-2017 02:29 PM)Hypno Wrote:  You have to disclose it when you sell.

Had a friend who picked up a condo on the beach for a good price when the condo had a $20,000 assessment. Seller used the sale to pay half and my friend paid half. Seller wouldn't have sold but for the assessment.

I have never heard of the condo's insurance covering construction flaws.

The condo may have a good lawsuit but it will take years to collect and in the meantime the mold grows. Sounds like the HOA is fixing the problem asap and then going after those responsible, which makes sense but creates a liquidity problem for current owners.

As a real estate agent, I've dealt with a few condos that had previous special assessments and ongoing suits with developers. As you generally hand over the condo docs upon a pending offer, you don't need to disclose a special assessment that has been paid out. If you are making payments on it though, this is good practice. Upon review of the documents, it's in black and white when assessments were levied and how much was collected.

If your condo board sues the developer for deficiencies (as they should), I'd recommend going to board meetings to keep yourself in the loop. However, these lawsuits get dragged out as all hell. I know of condos that have been in consistent lawsuit scenarios since the building was sold, some in excess of a decade.

As an aside, a word of caution to those that would buy a condo unit either as an investment or to live in: You are also responsible for damage that you or your tenant cause in units around or below you. I've seen a tenant get pissed off at his landlord, decide to abandon his unit, and in the process throw a bunch of clothes into his shower to plug the drain, and flood out his unit as well as two below him. Landlord was responsible for 280k in damages.

I've seen some 80k+ special assessments before that have totally fucked people over, and 37k is nothing to sneeze at either. Feel for you Scotian.

Post: #7

Were you given a copy of the community's reserve study when you bought?

A properly managed condominium development should have regular reserve studies done. A reserve study is done by specialized firms that evaluate a development and then how much funds should be held for projected maintenance, repairs etc.

A lot people buying a condo are never even aware of this. but rule of thumb is HOA reserve should maintain a minimum of 80% of the study's recommended reserves. The RE agents often arent even aware either...though they should be. If they didn't disclose everything and provide you with a copy of the reserve study you may have legal recourse against the seller, seller's brokerage, and even your agent / brokerage

Additionally I'd ask for a copy of the construction defect report (s) that the assessment is based on. HOA's are often managed by inept, inexperienced and even stupid, people that are gullible.

Dont assume that you have to pay this until you've at least looked into it thoroughly and explored your options

You may want to consult a real estate attorney experienced with HOA matters as to what your recourses if any might be.

Post: #8

A good lesson to be learned here: buying new condos, is a real risk.

I for example bought an apartment in a building constructed when the world was a decent, serious place (before the nineties) and buildings were built to last 2 or 3 centuries... I have therefore had no problem in or with the building, everything constructed by good engineers and workers, heavy, comforting walls, wide pipes that don't leak.

But in the same city, I visited (with a friend who's an engineer) new condos, and lol, we found lots of malpractice, defects, in the electricity, water, even structure of the inside communal corridor walls... Don't buy new, buy in buildings thirty years old, made during the golden time of Western world.

I mean, ask local people or engineers about all the shortcuts developers use nowadays to build their shitty buildings...

One tip: if you buy new, check that the developer has kept a condo for himself or his own family in the very same building he's making.

Only buy new if the builder's family will live in an apartment (usually the best, on top floor) in the building. Only guarantee there is that the communal parts and pipe works will be correctly done.

Post: #9

I agree with other posts. Buying really new condos and buying really old condos is a huge risk. I was looking into buying a "co op" and the monthly payment was crazy high because the board took out a loan for millions and everyone had to pay extra until the loan was paid off. I skipped buying it.

Post: #10

When you own apartments (or condos as you yanks and Canadians call them) all sorts of nasty surprises can happen. One apartment I own in Australia recently had the body corporate (equivalent to HOA) including me vote down a proposal to redistribute/change the existing ownership entitlements and fees that go along with it (some owners thought it was arguably unbalanced/unfair).

Then one owner (a bitch) challenged it by making a submission to the government (the relevant state land department) who ruled in her favour. The bitch has her apartment on the market up for sale and did this to lower her high annual strata fee (which she knew was high when she bought it) to get a better sale price. Long story short the strata fees (condo fees) will get redistributed and my annual fee will increase by 130% (albeit off a low base). There is zero I can do about it (already appealed the decision but doubt my appeal will be successful).

I have also had too many other nasty surprises owning apartments. I am 100% with you Scotian. If I ever buy another property it will be vacant land or an independent house. There are just too many factors you do not have control of when you own an apartment.

I agree with Going Strong new buildings are usually shit. The construction industry has prostituted itself to make a quick buck. Also as a general rule I always stick to old buildings. Building quality on older buildings is usually much better than newer buildings. Just make sure its from solid materials e.g. brick, double brick or stone, or concrete or cement. Ignore the other stuff like weatherboard, fiber cement sheeting, Hebel blocks, etc.

Also when you buy an older building you are getting more land value for your buck (less dollars spent on building and more on land value) if you invest the same amount of dollars (land value is what generates your capital gains not buildings). Never buy a new building. The properties I own are all old buildings and are double brick or concrete.

Post: #11

I agree with Going Strong, plus another benefit to buying old is it's cheaper! I got my condo for less than $40,000. The only downside is old buildings might not have a lot of insulation if they're more than 40 years old, so you might want to ask if they did any upgrades to that regard.

You can get a copy of the HOA budget before you buy also and see if they're wasting money on stupid shit.

Buying a used RV is a good idea too, since there are sometimes lots of construction "bugs" that the factory has to fix.

Post: #12

(08-21-2017 11:19 AM)DJ-Matt Wrote:  You can get a copy of the HOA budget before you buy also and see if they're wasting money on stupid shit.

I forgot about this as well. Another thing that you can ask for (in the US at least) is the balance often called "reserves". If they are taking in a certain amount each motnh but do not spend it sometimes there might be an account with $500k-1mil in it for a larger building. Sometimes association fees can even be lowered when this happens.

Post: #13

Thanks for the input guys, there's some really solid information here and I appreciate it, I'll keep you guys posted on this.

Post: #14

(08-20-2017 04:09 PM)TheFinalEpic Wrote:  

(08-20-2017 02:29 PM)Hypno Wrote:  You have to disclose it when you sell.

Had a friend who picked up a condo on the beach for a good price when the condo had a $20,000 assessment. Seller used the sale to pay half and my friend paid half. Seller wouldn't have sold but for the assessment.

I have never heard of the condo's insurance covering construction flaws.

The condo may have a good lawsuit but it will take years to collect and in the meantime the mold grows. Sounds like the HOA is fixing the problem asap and then going after those responsible, which makes sense but creates a liquidity problem for current owners.

As a real estate agent, I've dealt with a few condos that had previous special assessments and ongoing suits with developers. As you generally hand over the condo docs upon a pending offer, you don't need to disclose a special assessment that has been paid out. If you are making payments on it though, this is good practice. Upon review of the documents, it's in black and white when assessments were levied and how much was collected.
.
.
.

But you generally do have to disclose any current or pending legal action (how current or pending legal action is defined varies by state) by, for or against the condo association.

Having been in and out of several condos over the years I can say the boards or the HOA directors can swing both ways, i.e., be either very good or very bad (the very bad can take on all kinds of ruses and tricks*.) And can change from one to the other on short notice, i.e., one annual election changes everything. The good ones are pretty good, using consensus and vetting typically the right decisions are made.

My experience with special assessments is they do happen, for new roofs, for foundation repair work, stucco repairs, etc., etc, etc. Your (the OP) explanation doesn't sound that far off base. With mold you most definitely need to address it sooner rather than later. With a $3 MM job on an 80 unit complex I'd guess the work has been estimated and vetted thoroughly, and if there were a better way to address it someone would have found that better way before committing to $ 3 MM.

*Ruses and tricks: Just one from the recent past, a 60 unit complex, three buildings. Two of the four officers, have held office long term, for 10+ years, are RE agents, both of whom own rental units in the complex but do not live in the complex. That is one or two big red flags. When word gets out someone is selling these two RE agents -- think seemingly well to do 50-ish matronly ladies -- are all over the seller/unit owner to get the listing. I don't know the exact spiel but it has something to do with position as officer, long term owner, knows the complex, blah blah blah. Loads of conflict of interest in that situation, but yet it goes unchallenged by the universe of current owners.