Long 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 the 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,” added Wodnicki.
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 one bedroom 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 across the nation, he said.
Roughly 30% of associations “have a weak reserve fund for dealing with major costs and emergencies, with less than 30% of the funds needed for such projects. That means they’re likely to need a special assessment to pay for big ticket expenses, said Nordlund. Another 40% 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 researched and 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. That meant 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 that was prepared for the Champlain Towers South’s May 28, 2020, board meeting.
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 Community Associations Institute. They include Connecticut; Delaware; Florida, Hawaii; Illinois; Massachusetts; Michigan; Minnesota; Nevada, Ohio; and Oregon.
However, Florida and Illinois, allow associations to waive the funding requirement based on the outcome a quorum of voters at an owners’ meeting, Bauman said.
The investigation of the Champlain Towers South condo collapse is expected to examine whether infighting-related delays in budgeting and funding structural work played any role in the tragedy.
In official reports as of Friday, the collapse had killed 78 and left 62 still unaccounted for while searching of the rubble continued.
Housing association experts and others said they could not recall a collapse with as many deaths and as much damage as the one in Florida, which has become one of the worst residential housing disasters in U.S. history.
“It’s an incredible outlier. We don’t see that,” said Nordlund.
Nonetheless, many types of residential associations across the nation have experienced some version of the squabbling and delayed planning that deviled Champlain Towers South.
Battling over dry rot
The Champlain Towers South tragedy triggered bad memories for Debra Corazzelli. She’s a former president of the Island J Condominium Association, a complex of 174 homes housed 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.
The association fired the first contractor hired for the job because the work wasn’t getting done, Corazzelli said.
A new contractor estimated that completing 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.
During a homeowners meeting that required private security, a majority of the condo owners voted the proposed assessment down.
However, Foster City officials declared the structural problems a life and safety risk. And an attorney for the association successfully petitioned a local 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. And homeowners agreed to new payments to repaint the complex, remodel the community’s clubhouse and other improvement projects. Inside the clubhouse is a large piece of dry rot, in plastic, “as a reminder,” said Corazzelli.
“It worked out for us in the end. I can’t even imagine what the people (in Champlain Towers South) are going through,” said Corazzelli. “My heart goes out to them.”
A near-miss collapse
In May 2005, part of a 65-foot-high stone retaining wall just north of the George Washington Bridge in northern Manhattan collapsed atop Riverside Drive and the Henry Hudson Parkway below. Miraculously, no one was killed or injured.
A board of inquiry report by the city Department of Buildings concluded that the wall had shifted, dropped stones and bulged for years, despite repair efforts by the Castle Village Owner’s Corporation, a five-building, 575-unit co-op atop the bluff behind the wall. The repairs were insufficient to deal with a buildup of groundwater behind the wall, the city inquiry concluded.
Although the co-op obtained 15 reports from engineering companies over the years, it did not do any substantial work after a 1985 repair with the exception of installing a failed drainage system, the board concluded. Those efforts “do not constitute effective repair and maintenance,” the board said.
Instead of notifying the Department of Buildings as the wall’s condition worsened, the co-op and an engineering firm it had hired “appeared to treat the situation as an ordinary problem, one that could be dealt with in the ordinary course of business,” the board concluded.
Shareholders in the co-op had to pay for a massive repair of the retaining wall, along with the monthly maintenance bills for their units, and the cost of litigation with an engineering firm.
Responding to the near tragedy, the city enacted a new law that required property owners to file inspection reports with the Department of Buildings every five years for any retaining wall on their holdings that are more than 10 feet high and face a public right of way.
Planning a better way
Shocked by the Champlain Towers South tragedy, board members and residents of condos, homeowner associations and co-ops are looking at their buildings, and making sure their homes are protected. There are alternatives to bickering and questionable planning decisions.
Community Associations Institute recommends that homeowners check whether their communities have conducted a reserve study to plan for repair and replacement of major items such as a roof or a building exterior surfaces. The advisory organization also urges owners to check whether their association has a sufficient reserve fund for emergencies and big-ticket costs.
Does the complex need a professional engineer to evaluate the building’s structural integrity, along with critical areas such as balconies and stairwells? Homeowners should read communications from association boards and attend board meetings where they can discuss financial reserves and financial planning.
For board members, the institute recommends determining whether any structural components might need repair or replacement, as well as whether an expert inspection is needed. Board members should also have regular communication with owners about structural issues, reserves and financial plans, the organization said.
Additionally, board members should be transparent with association members about estimated repair costs and whether a special assessment might be needed to pay for the job.
The Foundation for Community Association Research cited the Island J Condominium Association as a successful recovery from troubled condo status. “Get to know and understand your audience so you can educate them on the realities of their situation,” the organization advised. “Homeowners need a lot of data and information before trusting an outsider” such as an engineer or contractor.
Contributing: Romina Ruiz-Goiriena, Grace Hauck