Look beyond your own walls: Experts told us what to ask about condos after Surfside | Editorial

Before the tragedy at the Champlain Towers South Condo, South Florida was experiencing a boom in condo sales, partially fueled by the ridiculously high cost of single-family homes.

Condominium living has been pitched for decades as a cheaper and more hassle-free alternative to owning a house. But the collapse has changed the way people look at condos. Though we don’t know yet whether delayed maintenance played any role in the disaster, the way condos are run — through condo boards and management companies — is now the focus of much greater scrutiny.

That’s an important shift for condo owners and buyers after one of the worst and saddest disasters in South Florida’s history, which left dozens dead and countless others grieving.

All the investigations and task forces and legislative solutions getting under way now will help to ensure that condos are safe. But owners, too, will have to change their mindsets. They’ll need to embrace the idea they are buying into a communal living situation. They’ll need to understand and take responsibility for what’s happening beyond their own unit walls.

That starts with digging in to what the condo board and management company are doing, something that isn’t always easy. Condo boards may not welcome the attention, and would-be buyers often have to rely on the sellers for full disclosures of things like potential assessments for major repairs. Many condo buyers don’t know what questions to ask.

The Herald Editorial Board spoke to experts who shared what they would want to know as a buyer or owner.

Follow the money

Florida law requires that condo associations maintain reserves for deferred maintenance costing at least $10,000. However, the law also allows those reserves to be waived if a majority of owners attending a meeting votes to do so — and, unfortunately, many condos do that to save money.

A fully funded reserve is no guarantee you won’t be assessed for big-ticket repairs anyway, but it’s one indication of the way the condo association is run.

Under Florida law, when you purchase a condo, you’re entitled to a copy of the most recent year-end financial information, as well as a declaration of condominium, articles of incorporation, bylaws and rules. You have three business days to cancel a purchase after receiving those documents. It’s wise to try to obtain that information before executing a contract.

Make sure the association has enough reserves and a “positive working capital” — more assets than liabilities — Paul Kaplan, founder of KW Property Management & Consulting, told the Herald Editorial Board.

Ryan Poliakoff, a lawyer who serves as counsel to condo associations, said he’d ask for the last set of financial audit documents.

“If the condominium is required to prepare audited financial statements but the members are waiving that requirement, I would be concerned,” he said. “You’re not going to uncover all aspects of fraud but it gives you some comfort on how they are spending money on maintenance, on management, or other things. You can get an idea of how the association is operated.”

Unless you have expertise dealing with budgets, you could consider hiring an accountant or expert to help you. That might save you money, and a headache, in the long run.

Look for special assessments

Owners at the Champlain had been assessed $80,000 to $336,000 per unit for the repairs associated with its 40-year recertification process, which is required in Miami-Dade and Broward counties. Checking the age of the condo building — as so many people did after the collapse — will let you know if that process is looming in the near future. Zero maintenance may be a red flag, the Herald reported.

It’s not possible to anticipate every expense. But that’s the same with any real estate purchase.

Check the condo board bylaws. What percentage of the board or owners must approve an assessment? That gives you an idea of how difficult it is to win approval for an expensive but needed improvement. Buyers may want to avoid condos that keep pushing maintenance down the road.

When you buy property that’s governed by a homeowners’ or condo association, lenders request an “estoppel letter,” which must include an itemized list of all assessments, special assessments and other money owed by the seller. Florida law also requires that condo associations provide a “Frequently Asked Questions and Answers” sheet, which must be updated every 12 months and include owners’ voting rights, pending court cases in which the association may face liability in excess of $100,000 and information on assessments.

Buyers can request, as part of contract negotiations, that the seller provide association meeting minutes in which future assessments were discussed but might not have been approved, Kaplan said.

Engineering reports

In 2018, an engineering firm produced an inspection report that flagged a “major error” in the Champlain’s pool deck design that caused “major structural damage” to the building.

That’s the kind of information owners should make sure they understand, but even the seller might not know it exists if they don’t keep up with what the condo board is doing. Buyers may want to consider making their purchase contingent on the seller requesting any engineering reports and inspections from the board. These documents are normally produced as part of the 40-year recertification process.

Walk-through

While inspections are a given in any real estate transaction, for condos, they’re normally limited to the actual living unit. After the Champlain’s collapse, that has to change.

Experts told the Editorial Board it’s worth walking through the building to see how attentive the association is to maintenance. Look for warning signs, such as uneven or bowing floor, diagonal cracks at the corner of windows or doors and cracked or crumbling concrete, the Sun Sentinel reported.

“Use your eyes,” Poliakoff said. “When you’re looking at the unit, look at the condition of the pool deck, the stairwell, the back hallways, the garage. If there’s a pool over garage — you see that very frequently — go into garage and see if you can see any leaks from the deck.”

But any walk-through has its limitations. Many of those defects are likely to be superficial. It’s also impossible to know what you can’t see.

“I have been in many buildings that aesthetically look fantastic but when you get behind the aesthetics… you would be surprised at some of the buildings’ actual conditions from the internal perspective,” Kaplan said.

The bottom line

Condo owners and buyers need new and better tools to make informed decisions. Condo boards need to be completely transparent about maintenance and responsible about setting money aside for future needs. Lawmakers need to set standards for the safe operation of high-rises.

And those who live in condos need to get involved in the operation of the building. That may mean condo life isn’t as care-free as before.

In the end, it’s hard to know how worried — and how diligent — you should be.

“This is a scary and horrible event but it also really never happens,” Poliakoff said. “I think it’s a leap to say whatever it was is systemic — I have a very difficult time believing it.”

For all of our sakes, we hope that’s true.

This story was originally published July 9, 2021 at 9:30 AM.