2021 Jul 1st

It Could Happen in Hoboken

The collapse of the Champlain Towers South condo in Miami is a tragedy.  I can’t help but think of the many posts I’ve written over the years explaining why low condo maintenance fees are not necessarily a good thing.  See, for example:

The 3 Most Important Reasons to Pay Condo Maintenance Fees

and

Think Your Condo is In Good Financial Shape? Think Again.

The situation in Florida really hit me.  There was an excellent article in today’s NY Times about the situation as it relates to condos.  How many times over the years have buyers told me they don’t want to buy a condo with maintenance fees over $200 a month?  Too many to count.  There is a very good reason, as everyone can now see, why building maintenance is crucial – to the point of life and death.  Inadequate reserves were a problem for lenders for a long time but few condo associations have adequate reserves to truly deal with long-term maintenance issue.  Lenders selling mortgage loans to Fannie Mae require 10% of the operating expenses of the association to be a line item identified to replenish reserves.  That is just an arbitrary number.  No real analysis of the state of the physical building is required.

I’ve been a realtor for over 15 years, owned property for over 25 and have been involved with hundreds and hundreds of Hoboken condo associations during transactions.  Hardly any of them ever conduct an engineering audit to assess the state of the building, the expected life of the components, and the proper financing to pay for ongoing maintenance and repairs.  Let’s kick it down the road and let the owners worry about it in the future is a common refrain.  I just rent my condo out so I don’t care as long as my tenants are happy.  I want to sell and get out so let’s keep the fees low!  If we don’t investigate to find out if there are any problems, we won’t have to disclose them to prospective buyers!  Everything about the current system conspires to avoid addressing long-term problems, preventative maintenance and repairs.

I have served on several condo boards.  It is truly a thankless job.  Many Hoboken buildings are older and require extensive maintenance work to keep them sound.  Even newly constructed condo buildings often have flaws that require major repairs.  (Fortunately, the developer may be on the hook for these during the New Home Warranty 10-year period).  It’s always the same story – unit owners don’t want their monthly obligation to be increased, whether due to an increase in maintenance fee or via special assessment.  As a result, there is infighting, disagreement and hostility between unit owners, among the board members, and between the board and the owners.  Board members are unpaid volunteers who usually have full-time jobs.  Few have any real training or experience in building management.  Some condos hire a management company to run the day-to-day but these companies are notoriously inept.  So the problems get pushed into the future when someone else can deal with it – until a crisis develops as has happened in Surfside.

I can’t imagine the anguish the board members of that condo association must be going through right now.  They knew there were serious issues, they tried to address them and implement an assessment to pay for them, and they were fought by their friends and neighbors every step of the way.  Now many of those folks are sadly gone.  This event ought to be a wake up call for all condo owners and associations.  Yes, it could very easily happen here in Hoboken.

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