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Friday, November 10, 2006

The Joys Of Condo Ownership

Once in a while, I used to get the crazy idea that it would be fun to own a condo. I was probably attracted to the relatively low price tag (compared to SFHs). However, whenever I looked into it, I was always turned off by the ridiculously expensive Home Owner's Association fees, usually ranging from $250 to as much as $500 per month. "What could be that expensive," I thought... Well, here's a good example of why condo associations frequently have to stockpile so much money: leaky condos and MIA builders.

The owners of 20 Ballard condominiums have fallen victim to the Legislature's good intentions.

The Ballard Square Condominium Owners Association sued the building's developer, Dynasty Construction Co., in 2002, claiming that their recently built homes were riddled with leaks that had caused extensive building damage and asserting that Dynasty failed to meet construction standards.

The problem was, Dynasty was dissolved in 1995, and superior and appeals courts said the owners could not sue a corporation after its demise. But the owners appealed to the state Supreme Court, which heard the case earlier this year.
...
Ballard Square had missed its opportunity. The Supreme Court unanimously dismissed the case.
...
Lara Stack moved into Ballard Square 4 1/2 years ago, several years after leaks were discovered and repaired, and a month before owners found more extensive problems.

"Water was seeping inside the stucco of the building through many different entry points," said Stack, who is the vice president of the association.

Deck structures and wood framing also were starting to rot, she said.
...
In 2000, state Sen. Jeanne Kohl-Welles, D-Seattle, proposed requiring certain guarantees from homebuilders, including five-year protection from defects resulting in water penetration. The bill never got a vote.
...
"I had just been thinking about reintroducing this bill again," she said.

But this is all too late for the residents of Ballard Square, who are spending $1.8 million to fix their building (not to mention legal fees), and are living through renovations that are now halfway done.

"We don't have privacy. There's dust everywhere," Stack said. "We just want to move on and have it complete."
The article discusses the builder tactic of forming an LLC, building the condos, then dissolving the LLC. Apparently this tactic has increased in the past "as the boom hit and [the builders] built so many of the darned things." Under a new state law, condo owners can still sue the LLC for up to three years, but after that you're pretty much out of luck.

Food for thought if you're looking at condos as a way to save you from being priced out forever.

(Aubrey Cohen, Seattle P-I, 11.10.2006)

8 comments:

Grivetti said...

Not sure what's worse.... getting 'priced out forever' or getting 'nickel and dimed forever'... probably a zero sum game if you happen to reside in a 'cardboard condo'.

Peter Taylor said...

I know I've posted this before, but I owned a leaky condo in Victoria, B.C. - took a $60k haircut on that place. Whenever anyone tells me they're planning on purchasing a condo, I try to warn them off the idea with my tale of woe. Unfortunately, few are willing to listen. They're too eager to get on the "equity train".

john_law_the_II said...

if I have a condo and they did those tactics(bad construction and purposely desolving the LLC) and I couldn't sue, I'd protest outside of their homes and outside of whatever new buildings they were building.

wreckingbull said...

I will never own a condo. My brother is writing an assessment check for $65K this week for his place. Standard water intrusion problems.

What often gets overlooked is the years of misery (fights within the HOA, some owners can't afford assessment, etc...) that takes place before the assessment even materializes. I feel real bad for him. Luckily, he has owned it long enough that he won't lose money, but that is often not the case.

Paul said...

To be sure, condo ownership has risks and costs unique to that type of ownership (regular dues, special assessments, being financially tied to other residents in the complex, etc). Anyone buying into a condo would do well to do more fine-print-reading than the typical home-buyer.

However, I would argue that these risks and costs don't necessarily tip the balance wholly towards free-standing single family residences. I live in a condo complex that was built in 1970 and was actually the first in Seattle. As expected, it has got its fair share of maintenance issues. Nevertheless, our dues are currently situated at around $275 per month (depending on a particular unit's percentage of ownership of the whole). That figure includes an ongoing special assessment to replace our very outdated and occasionally failing plumbing. So, my wife and I pay about $3300 in dues per year; regular dues cover: water, sewer, trash, basic cable, pool/spa maintenance, and ALL maintenance outside the inner walls of our unit. We did the math on these services; and while they are still a bit more than what a single homeowner would pay for annual upkeep, when you factor in emergencies (and the fact that I have had to purchase exactly 0 lawn, garden, and home exterior upkeep tools), the annual cost differences look closer to a wash.

Soon after we moved in, a water line burst in between the walls of our two bathrooms. The plumbing in that wall had to be completely removed and replaced, along with the drywall; replace, patch, texture, paint. Total cost to us: $0. Contrast that with a friend of mine who owns freestanding home who had a water line break under his lawn. For whatever reasons, insurance didn't cover it, nor did the city. Boom - $4000. Yes, that's one piece of anecdotal, and totally unscientific evidence. However, on the whole, I believe that yes, shared living has its potential downfalls but, it's also got benefits like when many units pool their resources to fix a few units' issues. Obviously, like insurance, this model breaks down when everyone in the system requires a large amount of resources from the system (such as when an entire complex is built poorly). However, a given family's individual responsibility in a poorly built condo is unlikely to be drastically more than that family's responsibility in an equally shoddy single-unit home.

apologies for the couple deleted posts. Blogger's preview feature is broken for me.

wreckingbull said...

To be fair, I should note that most of the water intrusion problems seem to happen in buildings which were built in boom times, where the motto is get 'em up fast and cheap. There is no reason a condo cannot be as well-built as a single family home, and I am sure many are.

What spooks me is that loss of control. In my brother's situation, he had a owner who simply did not have the means to pay for the extensive repairs. This complicated things and talk of a lawsuit against that owner started. With a single family home, one at least gets to decide how and when the repair will take place. (within reason). Sometimes this does mean the SFH owner pays more, as paul pointed out.

Paul said...

Yep, wreckingbull definitely gets to the heart of the issue. There are always people who buy into a shared system when they probably shouldn't, and negatively impact the rest. Our condo has 90ish units; 4 or 5 of those owners have issues paying dues, following rules, not affording special assessments, not annoying neighbors, etc.

ALL condos will have those types of people. The real key to this issue is the Home Owners Association. A good HOA can take care of those types of people in such a way that the average condo resident doesn't even really ever hear about it. A poor HOA can refuse to address issues until they reach the boiling point and you end up with situations like your brother's (although, I do understand that even a good HOA may have trouble dealing with some people).

Along with the usual home-buying fine print, a prospective condo purchaser MUST read the last year's worth of board meeting minutes. At least in WA, they are require by law to receive the minutes with the rest of the documentation from the selling agent. Additionally, if they can get their hands on any other documentation, letters to residents, etc., they will have a much better picture of how the community works.

A condo-buyer is not just buying a home, they are buying into a board of people who manage, to some degree, their home. That can be both good and bad.

dalas said...

I have not exactly verify this, but I was told that the procedure for repairs is to file litigations, and it is actually relatively common practice.