Condos and Special Assessments

[twinmomma]

Does anyone have experience with living in a condo and dealing with a special assessment for maintenance? 

We are looking at purchasing a townhouse in a condo association, but our realtor has cautioned us about the special assessments that are in the works for new siding on all the units. From what we can see in the paperwork and notes they've released to us, it would be an additional $100 or so each month, for the next 5 years, on top of the condo fee to cover the cost of the siding. 

I've never lived in a condo before. I've owned my single family home for 11 years but the condo gives us a lot more space in a cost effective way. Unless of course these special assessments and fees are going to screw us over. 

Just looking for thoughts/opinions/experience!

[purplepenguin7]

My mom owns a condo and get these special assessments constantly. Sometimes its for maitenance things (such as siding you mentioned), or sometimes it was for excessive snow removal and I think one time for increased heating costs (the HOA pays for gas). They aren't really "screwing you over" but residents do have to pay for costs that exceed the HOA balance.

In her case it seems there is always something. On the other hand, I lived in a new construction townhouse with an HOA for 12 years and we never once had a special assesment.

Can you ask them historically how many times they have needed to add the increased special assements? Also, I would take into consideration how much your maitenance/common charges are. If you have to pay $1k monthly and they aren't budgeting enough that could mean the HOA is more incompentent or doesn't spend money well. If you HOA fee is a modest $200 or so and they have a one time assesment for $100, that sounds not so bad.

[ny96]

My concern with Special Assessments is that either the buildings and grounds are at an age where extra upkeep will continue to be the norm or the condo association is at a major deficit and they are not budgeting for future expenses. I would ask for more balance and budget info from the board.

[janegold]

Yes, when we bought our condo, we knew the HOA was planning special assessments to cover the cost of repointing the building. They did it similarly to what your board has planned - increased condo fees over time (every few years would be a bigger increase). The Board stuck to their plan and it was very manageable.

We also own cottages in a condo community and have paid some lump sum special assessments for special projects (like new beach stairs). Also fairly manageable, as we haven't had any huge expenses in any given year.

In contrast, my friend lives in a huge old brick building that also needed to be repointed, needed a new roof, etc., to the tune of millions of dollars. The HOA in her building decided to do a lump sum assessment, which ended up being six figures for each unit. It was a huge problem, as not all of the tenants could afford to pay but it was nearly impossible to sell with a huge unpaid assessment.

If you don't already have the budget and financials for the HOA, request those and make sure they have sufficient reserves. Also check to see whether they have any special reserve funds for specific projects that they know will need to be done in the future (like we had one going for years for an eventual new roof).

[twinmomma]

Thank you all for the insight! @kar, the reserves are not great, I think that's what is making our real estate agent pause. We are digging through the financials that they provided us to try and figure it all out. As for the cost, these are 3 story townhouses with a garage, so there's a lot of building to side. It's not apartment style.

[mccallister84]

Jan 26, 2023 15:57:16 GMT -5 twinmomma said:

Thank you all for the insight! @kar, the reserves are not great, I think that's what is making our real estate agent pause. We are digging through the financials that they provided us to try and figure it all out. As for the cost, these are 3 story townhouses with a garage, so there's a lot of building to side. It's not apartment style.

Honestly if the reserves aren’t great I’d walk away.

[bee20]

The issue with reserves is sort of the inverse of what PurplePenguin is saying. When a complex is new, they advertise very low monthly HOA dues because there is no maintenance and that gets buyers in the door. Those initial buyers then don't make any repairs or updates for 10 years, sell, and move on. Now you come in, and as the owner from year 10-20, things start breaking down. In a "healthy" HOA they would have been collecting money from the people who lived there years 1-10 to help pay for the repairs that are coming up now. Most of the time though, that doesn't happen.

It's basically a "fixer upper" of a condo instead of a house. It might be right for you if you are up for it, but since condos generally contract out work instead of performing sweat equity it can put you in a pinch if you didn't realize there would be all this maintenance to pay for.

It's problematic if it's gone beyond typical fixes coming due and into dysfunction. For instance, it's a 40-year old condo and the HOA still hasn't been able to get enough votes pay for roof replacement. So now there are leaks and even more money will be needed to replace the whole roof instead of just reshingle. Things like that can be hard to tell from the outside, but they should show up in the HOA minutes. You should be able to get a record of the minutes, and review those as well as the financial report.

ETA: Also read the documents to understand where the lines are between HOA-paid repairs and repairs that are the responsibility of the unit.  A friend in an attached townhome is responsible for replacing the roof, and it had to be a very expensive style to fit in with the community aesthetics.  Similarly she had to pay for repainting the exterior but had to buy the paint from the HOA's contracted supplier so it would match. 

[melmel48]

Here is my experience!

We had siding done last year on my condo building. We took out a loan to cover the siding, as nobody could come up with their portion of the siding up front. We all pay additional $ on top of our condo fee to pay for the loan. My portion is $107/month on top of my condo fee.

The loan conditions are as such: If you sell before the loan is paid off; you are responsible for the remainder of your portion of the loan including interest. You may do this in 3 different ways.

1. You work it out with your buyer and they agree to pay the remainder of the loan
2. You pay a lump sum at closing for your remainder of the loan
3. You continue to make the loan payment for the remainder of the loan and your buyer is only responsible for their condo fee.

[twinmomma]

bee20, That makes a lot of sense and sounds like exactly what is happening here. We actually know two people who currently live in the development and they said that they're really good at regular maintenance, but the big projects like siding have been kicked down the road for awhile.

[georgeharrison]

We lived in a condo for 10 years. The reserves were not good. The siding and decks were in bad shape. We sold and less than 6 months later, they put a $35k special assessment on our unit. It could be paid as additional per month to the dues, but that is a massive special assessment and we dodged a bullet there for sure. Not that we rejoiced that our buyers had to pay it, but that would have killed us.

[twinmomma]

Thank you for all the advice and insight! We did end up putting in an offer, but below asking given the special assessment. They got an over asking offer, so we didn't get it. I'm sure it's for the best in the long run!