The Honest Broker: The Effect of Poor Association Building Maintenance on Buying & Selling
BY: Diane Lott, Broker
Paradise Found Realty
Building and Safety issues are being discovered during the mandated Milestone Inspection occurring for condominiums that are 3 stories and higher throughout Florida. Continued lack of maintenance, deferring or delaying maintenance over many years, has caused a ripple effect for the buyer and seller alike.
In the desire to keep HOA dues low or even reduce it, certain association Boards have unwittingly ignored issues that can create safety concerns and structural hazards that could be catastrophic for the occupants. Perhaps “Boards” thought that they were doing a good job by not increasing dues assessments and felt pressured by the ownership to not increase their monthly assessments. Taking on large projects’ costs money. Completing the project correctly, not just placing “band-aids” on the issue, can be expensive. In any case, a lack of maintenance might have occurred.
Buyers should be made aware and inquire about the current Milestone Inspection requirements of the Association and if it has been completed. Has the Inspection occurred or when is it scheduled? If completed, has the report been made available to the owners. If the report has been issued, the buyer has the right to demand access to the report and the subsequent potential estimated costs for repairs as prepared by the engineer or architect that has performed the inspection. The Board then takes the results of the report stating the repairs that need to be made and will seek proposals from a minimum of three contractors to select the bid and cost for them.
Some associations are undergoing a lack of funds for these repair costs and are seeking loans or special assessments to conduct the repairs. This will affect and raise your dues assessment if the association borrows the money in the way of a loan or it could mean a lump sum payment in the way of a special assessment to the owners. Buyers who are aware of the association’s lack of financial capabilities for these unexpected or state required repairs can negotiate a preferable purchase price. Other buyers are avoiding older communities altogether in favor of more recently built buildings/developments.
A potential effect to the sale of a property that has documented, and significant safety or structural problems could be that mortgage companies refuse to finance loans to buyers looking in that community. This can set up sales that become strictly a “cash only” basis. If purchases are restricted to cash only, it can significantly affect the number of people capable of buying and might cause the lowering of property values in the long run. Sellers should be aware that they, and/or their representatives, are required to disclose the status of the milestone inspection and its results to subsequent buyers. They are also required to disclose the possibility of an anticipated loan or special assessment by the association if needed.
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