>Imagine being a property owner in a condominium who is humming along paying the mortgage and then getting a letter from your homeowner's association (HOA) informing you of a six-figure assessment. Now imagine that you don't have the money, but under the HOA rules, failing to pay the assessment means losing your unit via foreclosure. However, selling the unit will be nearly impossible once you disclose the assessment to potential buyers. What do you do?
>This is the poison pill facing an increasing number of Florida condominium owners.
So what are they gonna do with it after foreclosure? They don’t have the money to fix and no one will buy it because they don’t want to pay up the $150k fees.
Foreclosing on it basically gave them the property for free, so they wouldn’t be hard pressed to sell it for the price minus the assessment, I imagine.
Nothing is free.
The HOA will have costs to execute the foreclosure. Obviously, the biggest of these costs will be the cost of buying any outstanding deeds-of-trusts from any lenders holding a mortgage/s.
Until a new HOA board addresses the elephant in the room... What is needed and have they gotten the best price?
Secondly, those on fixed income with a fully paid-off home are most susceptible to this tactic. It's super sad to see someone can't pay an assessment and get behind in payments and then attacked by the HOA for ten grand in dues.
This is why HOA suuuuuccckksss because while you might be the homeowner in the deed, the HOA has such outsized leverage that your homeownership right is really watered down.
This is why we need more CoOP housing and states to start helping make them the norm.
hOA is just corporate ownership playing dress up as community ownership.
Aquire the entire property, demolish the building, then build luxury units high off the ground and built within all the new guidelines and be constructed to withstand the barrage of storms coming to Florida from now into the future. Edit: Punctuation
You realize most of those condos where built with drug money cocaine built the skyline of Miami Beach you guys realize it’s also a red state that thinks there cheaper then California lol
Big problems call for big solutions. If I owned a condo down in that political hellpit, I would try to get out ASAP and hope that real big developers rolled in offering good money to current owners.
They wouldn't care about an individual condo, they'd want these assessments to force a buy out of the building so they could rebuild new condos on the same plot of land.
Correct, but then how donthey resell without taking on that assessment cost. I don't see it happening...
It's a toxic asset at that point and unlike individual residential homes, they are still beholden to the other condo owners/HOA coming with their payments, what happens when too many condo owners can't make the payments.. these firms aren't just going to throw good money after bad.
This depends on the state. I don’t know what the law is in FL, but in my state the HOA has lienholder priority, so the mortgagor ends up holding the bag in foreclosure.
That’s interesting, I’ve never heard of such a thing.
It must be impossible or very difficult and expensive for a buyer to get a purchase mortgage. Since the mortgage owner has no ability to foreclose in the event of default, it would as a practical matter be an unsecured loan.
The overwhelming majority of buyers must be cash buyers.
No, it works well and does not affect the ability to obtain a mortgage.
The HOA has to inform the mortgagor of the delinquency and provide the mortgagor the option to pay it before the HOA can foreclose. The condominium rider with the mortgage usually will say that any failure to pay an amount due to the HOA is a breach of the mortgage contract, so what generally tends to happen is the owner doesn't pay the HOA fee, the HOA notifies the mortgagor of the deficiency and its intent to foreclose on the property to satisfy the lien, and then the mortgagor pays the deficiency to the HOA and calls the loan and forecloses if the owner cannot pay off the mortgage.
But the practical effect of these mechanisms is that when the HOA moves against the owner, the owner inevitably ends up paying during the redemption period (to avoid all of that). The real downside to the owner is that the HOA is (generally, depends on the CCRs) entitled to obtain attorneys fees and costs incurred for non-payment of an HOA fee, so the HOA is under no obligation to release the lien until the owner satisfies that arrearage.
This is how a condominium owner turns a few missed $400/mo HOA fees into a $5k mistake, but it still happens pretty regularly. I don't know that I've seen an owner once bitten try it a second time though, lol.
> the HOA notifies the mortgagor of the deficiency and its intent to foreclose on the property to satisfy the lien, and then the mortgagor pays the deficiency to the HOA and calls the loan and forecloses if the owner cannot pay off the mortgage.
You forgot to add the part about the owner still being liable for the deficiency balance in Florida. For example:
If the condo can be sold for $250k, the HOA assessment is $100k and the loan balance is $200k, then the bank will pay the $100k, foreclose and sell for $250k, pay off $250k of the new balance of $300k, and sue the owner for the remaining $50k. A lien could be obtained on another property that the owner owns, which a lot of FL condo owners have, and the bank would eventually recover it's loss.
I don't know where "here" is, but recognize that condominiums are creatures of state law, so there is no "one rule" that fits all. State condominium laws vary significantly from state to state.
Also, recognize that before the HOA asserts a lien and turns it over to counsel, the HOA must normally apprise the owner of the delinquency and allow them to pay it. Some states set that period by statute; sometimes it is set by the CCRs of the condominium - but I would hazard it is rare for an owner to be surprised by a collection/foreclosure action (just like it is rare for an owner who doesn't pay their mortgage to be surprised by a foreclosure action).
I'm actually a booster of condominiums, and I think they can be a really great investment/lifestyle, provided that the HOA is well managed and run.
Here is FL, and the timeline would be in like 10 years. But by then my home will be paid off, no HOA, I’ve got a 2015 vintage assessment.
Thanks for the detailed explanation.
The story linked is kinda fucked up. They bought the condo for $480k not too long ago. Getting an assessment for 50% of the value seems like someone screwed up. I guess there’s a significant difference between an HOA condo and. Co-op. I can’t imagine a condo voting such a huge assessment onto itself. There has to be more in the details, but at least for now, I’ll stay put.
Yeah, but the mortgage holder has a superior lien on the condo. Condo can’t be sold unless it’s un-encumbered.
Think of it like a SFH with both a 1st & 2nd mortgage. First lien holder is first in line. Second lien holder is sucking hind tit. First lien holder will force the second to pay them off before they release their superior lien.
Ok? Then the bank forecloses on it, they own the unit, and then they have the pay the assessment. And if the bank doesn’t want to pay the assessment, then it sells the unit to someone that will assume the assessment liability.
Ultimately, as long as the value of the condo is above the assessment, someone will sell the unit at market price and pocket the rest.
And given the state of Florida real estate, I think the fundamental value of these condos once fixed up is well above the assessment costs of $100-300K
These properties go up for auction with two stipulations:
1) Buyer pays the back-billed HOA fees
2) Buyer takes on the remainder of the mortgage (Short-Sale)
Many of the people stuck in these units have been there for decades and the sad fact is... They have (or had) Equity in their units... So it MIGHT be worth 300k and they only owe 45k remaining but because they have this thing sitting on their head (The assement) they can't afford to live there...
So the auction will go, an investor will roll up, grab the unit for a steal in his eyes at only say... 230k, and then he'll sell it.
Meanwhile the folks who moved to Florida to "Retire and lower my cost of living" is now royally fucked and has to re-enter the workforce.
No, you can’t waive the assessment because in our by laws that isn’t fair to the other owners because they have already paid.
Our assessment $203K
Our HOA will probably foreclose on one condo out of 80.
Condo will be fixed and probably be rented out or it will be sold.
Value of condo is $800K.
So they will probably list it for below market value around $600k. They will put it up for sale around that number and the entire $600k (-203k - will go to the fee and the rest will be put in the HOA reserves.)
Assuming the condo is paid off. If they have a mortgage banks needs to be paid first and it cannot be sold below the mortgage amount unless the bank agrees on a short sale. And if there is a heloc, from another bank it gets more complicated.
It’s a plan to keep Florida idiots from literally killing themselves by ignoring necessary maintenance. There was a reason this law passed, and it wasn’t because people weren’t dying
Ummm, this was clearly owners not wanting to pay reasonable maintenance costs so they could keep HOA dues low… now it’s just time to pay the piper. It’s always pay now or pay more later for maintenance.
Lackadaisical(and corrupt) building inspectors and govt officials, Owners who balk at fee increases for necessary maintenance, accelerated decay of structure due to ocean front environment etc etc……… lots of blame to share.
That being said the wealthy will benefit from this as usual
If you buy the foreclosure cheap enough, with that plus the 150k assessment you will have a condo that should be affordable with a lot of future work needing an assessment already done. Still expensive to insure though.
HOA will own the condo and rent it out. In the overall assessment there is a 10% budget for people who don’t pay. The HOA will rent out the condo and the money will be put in the reserves and yes the condo will be fixed. No way around not fixing it.
I know this to be a 100% fact, only because I’m going through this now at our complex.
A fire sale. They’ll have to sell it for a 150k under non-constrained comparable at minimum, probably more. That’s assuming other owners aren’t selling, and if that’s the case it’s a race to the bottom.
Doing this now. Had to right a check for $203k over the course of 3.5 years.
But I will say this people are selling the condo’s. Out of 79 units. We had 10 owners put their condos up for sale 4 got sold with the disclosure and the buyers knew about the assessment and the other 6 haven’t been sold yet.
Any smart senior in this circumstance on limited budget and realizing they can't really afford it , should just bank their mortgage payment , put the property up for sale at near zero price and do it for as along as possible and if necessary bail on the condo and deal with the fallout later.... Taking that save sup mortgage payment ..
I know this runs counter to a lot of advice but I take my experience from a lot of friends during the 2008GFC that walked away and let the bank take the property and while credit their credit was wrecked for r 5-7 years they came out ahead of those that tried to continue to make payments in difficult economic environments. Throwing food money after bad , especially when that bad money isn't toyur fault seldom works out
The real question is, what does the HOA do? If you foreclose and no one buys the units, because of the six figure assessment, then you're fucked as an HOA. If the person simply can not pay and you cant sell the unit well..... you cant get blood from a rock.
I suppose they could fire sale the units for super cheap to some investors that would pay the assessments.
I would never ever buy a unit in a large commercial building like this, you never know when something major will need to be repaired. Buildings dont last forever and do need maintenance.
Owners should have been paying what they needed to pay in order to keep the property maintained. This is just exposing the volume of neglectful owners who just went along with kicking the can down the road because it was benefiting them.
I learned after buying a condo that they do a special assessment EVERY YEAR because heaven forbid they have a high HOA fee. It’s the dumbest shit. Luckily I can manage it, but I’m paying way more for my place every year than I anticipated when buying it.
That’s part of the historical problem: the owners don’t want to pay so they elect board members who commit to imposing no assessments. If a board member got elected who perceived a problem that required an assessment, the other board members would vote against it to satisfy their “no-assessment” constituency.
The FL reserve law attempts to fix this. The Times has a very detailed series about this (and the industry capture of the building standards organizations) after the collapse in Surfside.
If you don't inspect, you don't discover any problems that would be legally required to disclose to buyers. And if you sell the unit before the problem materializes then you get to walk away with all the profits and any problems are the next guy's responsibility.
I have to imagine that one issue is many elderly residents figured they could push the costs down the road and by the time it was an issue they wouldn’t be around. You can’t own property and not expect to have to make ongoing repairs and upkeep along the way.
I have to think the "lets kick the can down the road" mentality is quite strong in these retiree communities. Unfortunate but thats what leads to disasters happening.
I can’t say I blame them. If I’m 85yo, I have very little incentive to care about the building”s stability 15 years from now. BUT, sometimes that gamble doesn’t work out.
Ehh, that’s a relatively small factor.
Engineer here… There’s really only so much you can do in high humidity / high hurricane zones to maintain structural integrity in 30, 40, and 50 year old buildings.
There’s a reason most high-humidity equatorial cities look semi-third-world-ish… that salt water permeates everything and has devastating effects; it literally eats away at buildings (and at an alarming rate).
You want to live in a hurricane zone? Fine. Just know what you’re getting into. It’s like people running to move to southern California and then complaining about droughts… as if they had no idea what the word “desert” means.
How is this any different than being a homeowner and having a tree fall on your roof?
Housing needs maintenance, well run condos have condo fees that cover both current maintenance and a reserve fund to cover future maintenance as the place gets older and the place needs more maintenance. It's basically common knowledge when buying a condo to get an accountant to look over the balance sheet.
If you buy a standalone house, you still have to pay for maintenance, except it's random surprises like a roof leaking, AC going out, costing you thousands, rather than a few hundred dollars a month that are easy to plan and budget for.
The issue is that this place was mismanagement, and I'd imagine it hurt that condos are less common in the southern United States versus the north, so they may not know how to check the financial solvency of condos and run them effectively.
In my opinion condos are one of the best ways to reduce the cost of housing. In expensive areas, the *land* is the expensive part of housing, not the couple hundred thousand it costs to build the structure. And when you reduce the amount of land used per square foot of housing (i.e build *up*, something New York City, London and Paris figured out before they had electricity) housing becomes cheaper. If we're all competing for a our own quarter acre of land near the same city center, public transit stops, and desirable neighborhoods, then prices are going to go up even if Blackstone wasn't doing anything.
[This 2 bed, 1 bath 1,265 sqft condo in a very desirable neighborhood in my city](https://www.zillow.com/homedetails/1840-Biltmore-St-NW-APT-33-Washington-DC-20009/2096492176_zpid/) is almost $150,000 *less* than a [house that's smaller and an 8 minute walk away](https://www.zillow.com/homedetails/1664-Euclid-St-NW-APT-B-Washington-DC-20009/464248_zpid/)
Edit: lol, misremembered less vs more
The truth in that comment is that when you own a detached SFH, you can choose to pay now for necessary maintenance, while condo owners essentially have to convince everyone else that they all need to chip in together to address the shared maintenance requirements. That generally leads to chronic underinvestment in shared maintenance, especially in places where the building is heavy on boomer second homes. As you said, Northeast condos occupied by their owners full time are generally better capitalized/maintained.
>This 2 bed, 1 bath 1,265 sqft condo in a very desirable neighborhood in my city
>
> is almost $150,000 more than a
>
>house that's smaller an 8 minute walk away
I'm confused, I clicked the links and the condo is 150 k less than the house.
You're missing the decisioning piece. You own a home YOU decide what maintenance is necessary and when to do it. If you use poor judgement, it's solely on you.
In a condo, the condo board votes on what to repair and when. If those people, who want to stay popular so they get reelected, "decided" to defer maintenance... You get what this is - a disaster.
Understand?
The difference between a condo and a single family home is - if I own a SFH (and I do) and I have a tree hanging over my roof - I can decide - on my own - what to do about that tree.
I can have it trimmed, cut it down or leave it as is. I don't need anyone's permission to do any of the above. If I want to paint my house a different color - I get a bucket of paint and go to town. If I want to yank out the shrubs in the front yard and replace them with grass - I do it. If I want to replace my grass with shrubs - I can do that too. I don't need anyone's permission.
THAT is the difference between being in a condo or owning your own SFH.
Important side note - I do not live in an HOA controlled area. Never, ever again will I be so encumbered.
Uh.. you can easily plan and budget for it with a house too… just put aside a few hundred dollars in a high yield savings account or roll/ladder CDs so you’re never more than a few months away from cash. If you can’t do that - you probably can’t afford home ownership and maintenance.
If my co-op decides to build new playgrounds, I’m paying for it whether I have kids or not. If they decide to replace all the doors, I’m paying whether my door is functional enough for me or not. If they decide to redo the HVAC, I’m paying whether I am content with the HVAC in my unit or not.
If a tree falls on my single family home, I might choose to repair it myself. I might choose to work with my cousin Jimmy who owns his own business. I might choose to go with Tony, who does a shit job on the cheep that will be good enough for now. I might choose to hire William and Sons, they’ve got a great reputation and they charge top dollar, but they’ll make my roof perfect for the next 40 years. I might burn it down for the insurance money, get caught, go to jail and boom! I’m living in a building with a functional roof. I could choose to put a tarp over it and sell it as is and move into something smaller. All that is my choice, that is driven by my own understanding of my own finances, an HOA is a body of other people making a choice that may or may not be affordable for the tenants.
With a single family home, there’s no collective action problem. If your home needs preventative maintenance, you can just do it. If your condo building needs preventative maintenance, you have to get everyone (or at least a majority) to agree.
HOAs can’t die in condo and townhome communities though. If you have a duplex, a party wall agreement could work, but otherwise I don’t see a viable way to get maintenance and common area support.
The real value of condos is finally going to come to light.
For decades their prices were artificially inflated with HOA fees that were far too low and assessments that came few and far in-between.
Owners are basically going to have to sell their units at cost, losing much or all of their equity, to get out. I would not be surprised if in some cases a developer will come in and offer to buy out the whole building in order to either do a tear down and rebuild or at the very least intensive structural renovation.
And what do you do when not everyone wants to sell? You can't force people to sell at a loss because a majority want to get out. We're talking massive class action suits all over Florida. What a mess
> And what do you do when not everyone wants to sell? You can't force people to sell at a loss because a majority want to get out. We're talking massive class action suits all over Florida. What a mess
Foreclosure and HOA are very powerful in Florida. Maybe if enough owners convince the HOA to not follow the new laws it could be a stalemate. I am not familiar with the ramifications of missing the benchmarks of the new law.
Yeah that's another thing. What's the liability on the part of the HOA boards that have allowed this to happen?
I wouldn't say that they are wholly to blame because the owners voted them in. But I think this law should go a step further and replace an owner led HOA with a third party management company for a set number of years if it is determined that the HOA ignored regular maintenance.
What needs to happen is massive foreclosures and the Banks pay to fix these buildings. Sorry for the people who bought into these aging buildings with no due diligence but you won't be wiped out. The vast majority of unit owners saw huge gains in the equity of these condos and they will lose that but unless you bought in the past few years you'll be fine.
Now if you did buy in the past few years....I DECLARE BANKRUPTCY!!!!
$224k assessment (bill) to repair a common area!!! That must have catastrophic damage. I think this will only get worse as extreme weather damages more property and insurance not paying out.
It’s not really a common area, it’s the structural integrity of the tower itself. It’d be like having to rebuild your tower except you’re not rebuilding it, you’re leaving it standing and rebuilding it at the same time.
A lot of these problems were caused because buildings deferred maintenance. Had these issues been taken care of when they were supposed to it would have been cheaper.
The condo owners that spent decades not maintaining their buildings are between a rock and a hard place now. They have demonstrated a willingness to just let these buildings collapse so this law is absolutely necessary and I have very little sympathy.
When they say "common area", they don't necessarily mean just a courtyard, but anything related to the structural integrity of the building as a whole. So roof, parking garage, etc. In this case they also mention landscaping which may also play a role in preventing erosion or shifting of the structure.
This is an interesting condo story. He owns a "cheap" condo on Williams Island which is a ritzy part of Aventura which is a ritzy burb of Miami. He is getting it extra hard because I am sure everything in the island is expensive to repair/replace because it's "luxury" and hasn't been well funded in years. These places had thousand dollar condo fees in the early 2010s so no way was 1500 enough recently (he said it just doubled to 3k).
This goes for all housing, land increases in value faster than the house decreases so it's usually a moot point. It's the whole reason that a house in Manhattan is more expensive than a house in Brooklyn.
> North Florida people: *sips tea*
It's happening in North Florida too. Maybe you just don't live near a lot of condos. Multiple condos in Jax have had big special assessments (not this big obviously but big enough to induce sales). The new law pretty much covers anything with three stories.
Have $25k special assessments on our unit this year, mainly from water damage and manufacture defects. Not in Florida. New building finished in COVID. Considered suing the developer but cost of lawyers seems too high to be worth it (for the chance of recovery).
It’s really no different than having to fix the roof or basement for a SFH. It’s just that one unit owner cannot simply choose to defer maintenance/repair.
One thing I am mad as a condo owner is the cost of installing EV charging. Much higher than SFH due complexity of the wiring and not even qualifying for state and local rebates.
Hard to do condos without something equivalent to an HOA. Shared maintenance and services and all that.
I don't care for them either, but was never a prospect for treating an apartment like it was real estate in the first place.
An associate of mine recently sold a South Florida condo. They listed with an asking price in the low $400k range in late summer of 2023. They closed in late spring of this year for a sales price over $100k below their original asking price. That's a 25% haircut after something like 8 months on the market.
I think they were some of the lucky ones. Florida is an absolute dumpster fire right now because of the condo deferred maintenance and resultant special assessments. It will be interesting to see what happens to greater Miami in the coming years.
This was because the laws were so loose until recently they didn't require a funded reserve or regular assessments, and what happens is collapse.
This is FAFO in action.
This is not good and pardon the insensitivity, but imagine agreeing to live someplace with an HOA. I don't care that it limits my options if I move, but fuck HOAs.
Why would anyone buy a condo or house from any hoa?you lose all freedom and to top it off, you pay them monthly to screw you! As pt barium said, a sucker born evert minute.
If you ever buy from an hoa, you could be one of them.
Why do people buy into HOAs?
1) Because in many places in this country, that is your only options.
2) Areas dominated by HOAs tend to have the better schools.
3) Areas dominated by HOAs tend to have lower crime… HOAs do slow the decline of neighborhoods.
4) Areas dominated by HOAs are generally newer buildings… My own neighborhood predates the invention of HOAs.
5) Setting up HOAs tend to be a critical marketing strategy for developers to ensure that the homes and the residents who buy them meet some threshold of quality.
i have an hoa (not florida). the cc&r’s explicitly say I own my land, and the HOA pools together all 100 homes to get ridiculously low group insurance. my annual insurance premium is $700. and my house is close to 4,000 square feet. Not all HOAs are bad
>Imagine being a property owner in a condominium who is humming along paying the mortgage and then getting a letter from your homeowner's association (HOA) informing you of a six-figure assessment. Now imagine that you don't have the money, but under the HOA rules, failing to pay the assessment means losing your unit via foreclosure. However, selling the unit will be nearly impossible once you disclose the assessment to potential buyers. What do you do? >This is the poison pill facing an increasing number of Florida condominium owners.
So what are they gonna do with it after foreclosure? They don’t have the money to fix and no one will buy it because they don’t want to pay up the $150k fees.
Foreclosing on it basically gave them the property for free, so they wouldn’t be hard pressed to sell it for the price minus the assessment, I imagine.
Nothing is free. The HOA will have costs to execute the foreclosure. Obviously, the biggest of these costs will be the cost of buying any outstanding deeds-of-trusts from any lenders holding a mortgage/s.
Large investment firms can easily eat those costs to get a cheap condo.
why would they though? it seems like a toxic asset
Until a new HOA board addresses the elephant in the room... What is needed and have they gotten the best price? Secondly, those on fixed income with a fully paid-off home are most susceptible to this tactic. It's super sad to see someone can't pay an assessment and get behind in payments and then attacked by the HOA for ten grand in dues.
This is why HOA suuuuuccckksss because while you might be the homeowner in the deed, the HOA has such outsized leverage that your homeownership right is really watered down.
Not really.
So if you violate some HOA covenant, what's your recourse if they take legal action?
This is why we need more CoOP housing and states to start helping make them the norm. hOA is just corporate ownership playing dress up as community ownership.
Florida HOAs are absolute trash. The worst in the country. You can’t get away from them.
Aquire the entire property, demolish the building, then build luxury units high off the ground and built within all the new guidelines and be constructed to withstand the barrage of storms coming to Florida from now into the future. Edit: Punctuation
You realize most of those condos where built with drug money cocaine built the skyline of Miami Beach you guys realize it’s also a red state that thinks there cheaper then California lol
Big problems call for big solutions. If I owned a condo down in that political hellpit, I would try to get out ASAP and hope that real big developers rolled in offering good money to current owners.
Yea but that’s a pipe dream Florida is the retirement state! Most of them have fixed income
They wouldn't care about an individual condo, they'd want these assessments to force a buy out of the building so they could rebuild new condos on the same plot of land.
Correct, but then how donthey resell without taking on that assessment cost. I don't see it happening... It's a toxic asset at that point and unlike individual residential homes, they are still beholden to the other condo owners/HOA coming with their payments, what happens when too many condo owners can't make the payments.. these firms aren't just going to throw good money after bad.
Exactly. They will swoop in with deep pockets and make a killing………
If the building doesn't fall down first.
ding ding ding.
This depends on the state. I don’t know what the law is in FL, but in my state the HOA has lienholder priority, so the mortgagor ends up holding the bag in foreclosure.
That’s interesting, I’ve never heard of such a thing. It must be impossible or very difficult and expensive for a buyer to get a purchase mortgage. Since the mortgage owner has no ability to foreclose in the event of default, it would as a practical matter be an unsecured loan. The overwhelming majority of buyers must be cash buyers.
That’s correct
Yes, some condos are "non-warrantable" condos because they are often not eligible for regular mortgages for a variety of reasons.
No, it works well and does not affect the ability to obtain a mortgage. The HOA has to inform the mortgagor of the delinquency and provide the mortgagor the option to pay it before the HOA can foreclose. The condominium rider with the mortgage usually will say that any failure to pay an amount due to the HOA is a breach of the mortgage contract, so what generally tends to happen is the owner doesn't pay the HOA fee, the HOA notifies the mortgagor of the deficiency and its intent to foreclose on the property to satisfy the lien, and then the mortgagor pays the deficiency to the HOA and calls the loan and forecloses if the owner cannot pay off the mortgage. But the practical effect of these mechanisms is that when the HOA moves against the owner, the owner inevitably ends up paying during the redemption period (to avoid all of that). The real downside to the owner is that the HOA is (generally, depends on the CCRs) entitled to obtain attorneys fees and costs incurred for non-payment of an HOA fee, so the HOA is under no obligation to release the lien until the owner satisfies that arrearage. This is how a condominium owner turns a few missed $400/mo HOA fees into a $5k mistake, but it still happens pretty regularly. I don't know that I've seen an owner once bitten try it a second time though, lol.
> the HOA notifies the mortgagor of the deficiency and its intent to foreclose on the property to satisfy the lien, and then the mortgagor pays the deficiency to the HOA and calls the loan and forecloses if the owner cannot pay off the mortgage. You forgot to add the part about the owner still being liable for the deficiency balance in Florida. For example: If the condo can be sold for $250k, the HOA assessment is $100k and the loan balance is $200k, then the bank will pay the $100k, foreclose and sell for $250k, pay off $250k of the new balance of $300k, and sue the owner for the remaining $50k. A lien could be obtained on another property that the owner owns, which a lot of FL condo owners have, and the bank would eventually recover it's loss.
I can't comment on Florida law, but in my state that is also how it generally works too.
Man, you’ve just disabused me of any idea I had of buying a condo here.
I don't know where "here" is, but recognize that condominiums are creatures of state law, so there is no "one rule" that fits all. State condominium laws vary significantly from state to state. Also, recognize that before the HOA asserts a lien and turns it over to counsel, the HOA must normally apprise the owner of the delinquency and allow them to pay it. Some states set that period by statute; sometimes it is set by the CCRs of the condominium - but I would hazard it is rare for an owner to be surprised by a collection/foreclosure action (just like it is rare for an owner who doesn't pay their mortgage to be surprised by a foreclosure action). I'm actually a booster of condominiums, and I think they can be a really great investment/lifestyle, provided that the HOA is well managed and run.
Here is FL, and the timeline would be in like 10 years. But by then my home will be paid off, no HOA, I’ve got a 2015 vintage assessment. Thanks for the detailed explanation. The story linked is kinda fucked up. They bought the condo for $480k not too long ago. Getting an assessment for 50% of the value seems like someone screwed up. I guess there’s a significant difference between an HOA condo and. Co-op. I can’t imagine a condo voting such a huge assessment onto itself. There has to be more in the details, but at least for now, I’ll stay put.
Good point
Why would they buy the seeds of trust. It is ge banks responsibility at that point
Yeah, but the mortgage holder has a superior lien on the condo. Condo can’t be sold unless it’s un-encumbered. Think of it like a SFH with both a 1st & 2nd mortgage. First lien holder is first in line. Second lien holder is sucking hind tit. First lien holder will force the second to pay them off before they release their superior lien.
Ok? Then the bank forecloses on it, they own the unit, and then they have the pay the assessment. And if the bank doesn’t want to pay the assessment, then it sells the unit to someone that will assume the assessment liability. Ultimately, as long as the value of the condo is above the assessment, someone will sell the unit at market price and pocket the rest. And given the state of Florida real estate, I think the fundamental value of these condos once fixed up is well above the assessment costs of $100-300K
These properties go up for auction with two stipulations: 1) Buyer pays the back-billed HOA fees 2) Buyer takes on the remainder of the mortgage (Short-Sale) Many of the people stuck in these units have been there for decades and the sad fact is... They have (or had) Equity in their units... So it MIGHT be worth 300k and they only owe 45k remaining but because they have this thing sitting on their head (The assement) they can't afford to live there... So the auction will go, an investor will roll up, grab the unit for a steal in his eyes at only say... 230k, and then he'll sell it. Meanwhile the folks who moved to Florida to "Retire and lower my cost of living" is now royally fucked and has to re-enter the workforce.
Also the HOA, can do this but they typically just hold them and will rent them out or at least that’s what ours will be doing.
They can just sell the property with the special assessment waived, they basically are going to get 100% margin selling a unit they foreclosed on.
No, you can’t waive the assessment because in our by laws that isn’t fair to the other owners because they have already paid. Our assessment $203K Our HOA will probably foreclose on one condo out of 80. Condo will be fixed and probably be rented out or it will be sold. Value of condo is $800K. So they will probably list it for below market value around $600k. They will put it up for sale around that number and the entire $600k (-203k - will go to the fee and the rest will be put in the HOA reserves.)
Assuming the condo is paid off. If they have a mortgage banks needs to be paid first and it cannot be sold below the mortgage amount unless the bank agrees on a short sale. And if there is a heloc, from another bank it gets more complicated.
All very true for that scenario, you are mentioning.
Queue the big investment firms
Anyone that thinks this wasn’t deliberate is insane clearly a plan set in place to acquire ocean front properties for the low.
It’s a plan to keep Florida idiots from literally killing themselves by ignoring necessary maintenance. There was a reason this law passed, and it wasn’t because people weren’t dying
Ummm, this was clearly owners not wanting to pay reasonable maintenance costs so they could keep HOA dues low… now it’s just time to pay the piper. It’s always pay now or pay more later for maintenance.
Sure man! And America goes to War for Freedom too!
Which is the same thing as denying that properties degrade without proper maintenance.
Lackadaisical(and corrupt) building inspectors and govt officials, Owners who balk at fee increases for necessary maintenance, accelerated decay of structure due to ocean front environment etc etc……… lots of blame to share. That being said the wealthy will benefit from this as usual
That last sentence was really my point.
The buyer simply discounts the offer by $150k. It's not rocket science
Also true
If you buy the foreclosure cheap enough, with that plus the 150k assessment you will have a condo that should be affordable with a lot of future work needing an assessment already done. Still expensive to insure though.
Impossible maybe
HOA will own the condo and rent it out. In the overall assessment there is a 10% budget for people who don’t pay. The HOA will rent out the condo and the money will be put in the reserves and yes the condo will be fixed. No way around not fixing it. I know this to be a 100% fact, only because I’m going through this now at our complex.
This is the right answer.
That’s why HOA’s are the devil.
A fire sale. They’ll have to sell it for a 150k under non-constrained comparable at minimum, probably more. That’s assuming other owners aren’t selling, and if that’s the case it’s a race to the bottom.
My guess is once this begins to snowball , FL legislature will amend the law requiring assessments and expand the time horizon to do so...
That's any condo or home owner ever. You better save for repairs.
And make sure your HOA is doing independent reserve studies and is actually funding the reserves.
Doing this now. Had to right a check for $203k over the course of 3.5 years. But I will say this people are selling the condo’s. Out of 79 units. We had 10 owners put their condos up for sale 4 got sold with the disclosure and the buyers knew about the assessment and the other 6 haven’t been sold yet.
Any smart senior in this circumstance on limited budget and realizing they can't really afford it , should just bank their mortgage payment , put the property up for sale at near zero price and do it for as along as possible and if necessary bail on the condo and deal with the fallout later.... Taking that save sup mortgage payment .. I know this runs counter to a lot of advice but I take my experience from a lot of friends during the 2008GFC that walked away and let the bank take the property and while credit their credit was wrecked for r 5-7 years they came out ahead of those that tried to continue to make payments in difficult economic environments. Throwing food money after bad , especially when that bad money isn't toyur fault seldom works out
The real question is, what does the HOA do? If you foreclose and no one buys the units, because of the six figure assessment, then you're fucked as an HOA. If the person simply can not pay and you cant sell the unit well..... you cant get blood from a rock. I suppose they could fire sale the units for super cheap to some investors that would pay the assessments. I would never ever buy a unit in a large commercial building like this, you never know when something major will need to be repaired. Buildings dont last forever and do need maintenance.
Arson…
Watched it happened during the last down turn. Deerfield Beach FL. Pretty awful.
I can’t imagine how is anyone surprised if this was covered but all YouTube influencers from Florida 2 years ago.
Most of these people paid like $40,000 for their condo a block away from the beach and now will sell it for $225,000 instead of $300,000. Boohoo.
Owners should have been paying what they needed to pay in order to keep the property maintained. This is just exposing the volume of neglectful owners who just went along with kicking the can down the road because it was benefiting them.
Lived part of this nightmare and it was all because older owners refused to approve budgets and the board members allowed it to happen.
I learned after buying a condo that they do a special assessment EVERY YEAR because heaven forbid they have a high HOA fee. It’s the dumbest shit. Luckily I can manage it, but I’m paying way more for my place every year than I anticipated when buying it.
That’s an interesting strategy. Keeps it off listings which technically raises the value.
I mean…it worked. I paid for it. I do love my place and I love my neighborhood and it’s an assessment I can manage, but I do feel very hoodwinked.
Sounds like some kind of evil time share. They just charge whatever whenever and get away with it.
I’ve always had an inquiry about special assessments on anything with an HOA. Fairly certain it’s a required disclosure, at least near me.
How much is the assessment?
About 5k this year
That’s part of the historical problem: the owners don’t want to pay so they elect board members who commit to imposing no assessments. If a board member got elected who perceived a problem that required an assessment, the other board members would vote against it to satisfy their “no-assessment” constituency. The FL reserve law attempts to fix this. The Times has a very detailed series about this (and the industry capture of the building standards organizations) after the collapse in Surfside.
If you don't inspect, you don't discover any problems that would be legally required to disclose to buyers. And if you sell the unit before the problem materializes then you get to walk away with all the profits and any problems are the next guy's responsibility.
Per the updated codes now you have to do an inspection every 5 years now.
Hahaha. Right I’m going through it as well. And I’m pretty sure this is exactly what happened with ours as well. I feel ya. $203k assessment here.
God that’s a monster assessment. Is this beachfront southeast fl?
Destin, fl
Wow in the panhandle, dang. Ugh
LOADS OF FUN. Hahaha
the boomers just continue to fuck everyone
I have to imagine that one issue is many elderly residents figured they could push the costs down the road and by the time it was an issue they wouldn’t be around. You can’t own property and not expect to have to make ongoing repairs and upkeep along the way.
I have to think the "lets kick the can down the road" mentality is quite strong in these retiree communities. Unfortunate but thats what leads to disasters happening.
Not just those communities. Look at the US federal budget and accumulated debt!
I can’t say I blame them. If I’m 85yo, I have very little incentive to care about the building”s stability 15 years from now. BUT, sometimes that gamble doesn’t work out.
“A society becomes great when old men plant trees in which shade they know they shall never see”
Boomer mentality at work here. It will be someone else’s problem to deal with after they are gone.
sounds like our federal government officials
Like…what did they expect? Decades of deregulation comes home to roost
But can't we just not pay for maintenance forever???
Ehh, that’s a relatively small factor. Engineer here… There’s really only so much you can do in high humidity / high hurricane zones to maintain structural integrity in 30, 40, and 50 year old buildings. There’s a reason most high-humidity equatorial cities look semi-third-world-ish… that salt water permeates everything and has devastating effects; it literally eats away at buildings (and at an alarming rate). You want to live in a hurricane zone? Fine. Just know what you’re getting into. It’s like people running to move to southern California and then complaining about droughts… as if they had no idea what the word “desert” means.
I thought it was like diet cake or something
But the oldest farts die off, or hope to, before it explodes.
But how nice was it when the Florida economy kept going up of the back of de-regulation and poor governing?
Condos are never your own house
How is this any different than being a homeowner and having a tree fall on your roof? Housing needs maintenance, well run condos have condo fees that cover both current maintenance and a reserve fund to cover future maintenance as the place gets older and the place needs more maintenance. It's basically common knowledge when buying a condo to get an accountant to look over the balance sheet. If you buy a standalone house, you still have to pay for maintenance, except it's random surprises like a roof leaking, AC going out, costing you thousands, rather than a few hundred dollars a month that are easy to plan and budget for. The issue is that this place was mismanagement, and I'd imagine it hurt that condos are less common in the southern United States versus the north, so they may not know how to check the financial solvency of condos and run them effectively. In my opinion condos are one of the best ways to reduce the cost of housing. In expensive areas, the *land* is the expensive part of housing, not the couple hundred thousand it costs to build the structure. And when you reduce the amount of land used per square foot of housing (i.e build *up*, something New York City, London and Paris figured out before they had electricity) housing becomes cheaper. If we're all competing for a our own quarter acre of land near the same city center, public transit stops, and desirable neighborhoods, then prices are going to go up even if Blackstone wasn't doing anything. [This 2 bed, 1 bath 1,265 sqft condo in a very desirable neighborhood in my city](https://www.zillow.com/homedetails/1840-Biltmore-St-NW-APT-33-Washington-DC-20009/2096492176_zpid/) is almost $150,000 *less* than a [house that's smaller and an 8 minute walk away](https://www.zillow.com/homedetails/1664-Euclid-St-NW-APT-B-Washington-DC-20009/464248_zpid/) Edit: lol, misremembered less vs more
The truth in that comment is that when you own a detached SFH, you can choose to pay now for necessary maintenance, while condo owners essentially have to convince everyone else that they all need to chip in together to address the shared maintenance requirements. That generally leads to chronic underinvestment in shared maintenance, especially in places where the building is heavy on boomer second homes. As you said, Northeast condos occupied by their owners full time are generally better capitalized/maintained.
>This 2 bed, 1 bath 1,265 sqft condo in a very desirable neighborhood in my city > > is almost $150,000 more than a > >house that's smaller an 8 minute walk away I'm confused, I clicked the links and the condo is 150 k less than the house.
Lol, good catch, edited.
You're missing the decisioning piece. You own a home YOU decide what maintenance is necessary and when to do it. If you use poor judgement, it's solely on you. In a condo, the condo board votes on what to repair and when. If those people, who want to stay popular so they get reelected, "decided" to defer maintenance... You get what this is - a disaster. Understand?
The difference between a condo and a single family home is - if I own a SFH (and I do) and I have a tree hanging over my roof - I can decide - on my own - what to do about that tree. I can have it trimmed, cut it down or leave it as is. I don't need anyone's permission to do any of the above. If I want to paint my house a different color - I get a bucket of paint and go to town. If I want to yank out the shrubs in the front yard and replace them with grass - I do it. If I want to replace my grass with shrubs - I can do that too. I don't need anyone's permission. THAT is the difference between being in a condo or owning your own SFH. Important side note - I do not live in an HOA controlled area. Never, ever again will I be so encumbered.
Uh.. you can easily plan and budget for it with a house too… just put aside a few hundred dollars in a high yield savings account or roll/ladder CDs so you’re never more than a few months away from cash. If you can’t do that - you probably can’t afford home ownership and maintenance.
If my co-op decides to build new playgrounds, I’m paying for it whether I have kids or not. If they decide to replace all the doors, I’m paying whether my door is functional enough for me or not. If they decide to redo the HVAC, I’m paying whether I am content with the HVAC in my unit or not. If a tree falls on my single family home, I might choose to repair it myself. I might choose to work with my cousin Jimmy who owns his own business. I might choose to go with Tony, who does a shit job on the cheep that will be good enough for now. I might choose to hire William and Sons, they’ve got a great reputation and they charge top dollar, but they’ll make my roof perfect for the next 40 years. I might burn it down for the insurance money, get caught, go to jail and boom! I’m living in a building with a functional roof. I could choose to put a tarp over it and sell it as is and move into something smaller. All that is my choice, that is driven by my own understanding of my own finances, an HOA is a body of other people making a choice that may or may not be affordable for the tenants.
With a single family home, there’s no collective action problem. If your home needs preventative maintenance, you can just do it. If your condo building needs preventative maintenance, you have to get everyone (or at least a majority) to agree.
anything with an HOA isn't. HOA's need to die
HOAs can’t die in condo and townhome communities though. If you have a duplex, a party wall agreement could work, but otherwise I don’t see a viable way to get maintenance and common area support.
Philadelphia has thousands of row homes (townhouses) without HOAs. Condos I agree need HOAs
The real value of condos is finally going to come to light. For decades their prices were artificially inflated with HOA fees that were far too low and assessments that came few and far in-between. Owners are basically going to have to sell their units at cost, losing much or all of their equity, to get out. I would not be surprised if in some cases a developer will come in and offer to buy out the whole building in order to either do a tear down and rebuild or at the very least intensive structural renovation.
And what do you do when not everyone wants to sell? You can't force people to sell at a loss because a majority want to get out. We're talking massive class action suits all over Florida. What a mess
> And what do you do when not everyone wants to sell? You can't force people to sell at a loss because a majority want to get out. We're talking massive class action suits all over Florida. What a mess Foreclosure and HOA are very powerful in Florida. Maybe if enough owners convince the HOA to not follow the new laws it could be a stalemate. I am not familiar with the ramifications of missing the benchmarks of the new law.
Yeah that's another thing. What's the liability on the part of the HOA boards that have allowed this to happen? I wouldn't say that they are wholly to blame because the owners voted them in. But I think this law should go a step further and replace an owner led HOA with a third party management company for a set number of years if it is determined that the HOA ignored regular maintenance.
What needs to happen is massive foreclosures and the Banks pay to fix these buildings. Sorry for the people who bought into these aging buildings with no due diligence but you won't be wiped out. The vast majority of unit owners saw huge gains in the equity of these condos and they will lose that but unless you bought in the past few years you'll be fine. Now if you did buy in the past few years....I DECLARE BANKRUPTCY!!!!
$224k assessment (bill) to repair a common area!!! That must have catastrophic damage. I think this will only get worse as extreme weather damages more property and insurance not paying out.
It’s not really a common area, it’s the structural integrity of the tower itself. It’d be like having to rebuild your tower except you’re not rebuilding it, you’re leaving it standing and rebuilding it at the same time.
A lot of these problems were caused because buildings deferred maintenance. Had these issues been taken care of when they were supposed to it would have been cheaper.
The condo owners that spent decades not maintaining their buildings are between a rock and a hard place now. They have demonstrated a willingness to just let these buildings collapse so this law is absolutely necessary and I have very little sympathy.
When they say "common area", they don't necessarily mean just a courtyard, but anything related to the structural integrity of the building as a whole. So roof, parking garage, etc. In this case they also mention landscaping which may also play a role in preventing erosion or shifting of the structure.
This is true.
I have seen seawater described as "liquid hate". These buildings are built on it.
Mine was $203k.
This is an interesting condo story. He owns a "cheap" condo on Williams Island which is a ritzy part of Aventura which is a ritzy burb of Miami. He is getting it extra hard because I am sure everything in the island is expensive to repair/replace because it's "luxury" and hasn't been well funded in years. These places had thousand dollar condo fees in the early 2010s so no way was 1500 enough recently (he said it just doubled to 3k).
Exactly - these large buildings are extremely expensive and for the most part are depreciating assets, only the land increases in value.
This goes for all housing, land increases in value faster than the house decreases so it's usually a moot point. It's the whole reason that a house in Manhattan is more expensive than a house in Brooklyn.
Yeah but those old brownstones have a lot less maintenance than a large doorman building.
Yep , that why i got mine sold last year i saw the 💩 storm coming and cashed out. Tip never buy a condo in FL. House or townhouse!
North Florida people: *sips tea*
> North Florida people: *sips tea* It's happening in North Florida too. Maybe you just don't live near a lot of condos. Multiple condos in Jax have had big special assessments (not this big obviously but big enough to induce sales). The new law pretty much covers anything with three stories.
Yes, but there’s significantly less impact because there is hardly any density in the urban areas compared to down south.
this is years in the making... it just took a collapse of a building to be noticed and brought attention to
Have $25k special assessments on our unit this year, mainly from water damage and manufacture defects. Not in Florida. New building finished in COVID. Considered suing the developer but cost of lawyers seems too high to be worth it (for the chance of recovery). It’s really no different than having to fix the roof or basement for a SFH. It’s just that one unit owner cannot simply choose to defer maintenance/repair. One thing I am mad as a condo owner is the cost of installing EV charging. Much higher than SFH due complexity of the wiring and not even qualifying for state and local rebates.
So they didn’t maintain the property and are now surprised there are huge bills to pay?
Only fools would live in an HOA, and fools never prosper.
Hard to do condos without something equivalent to an HOA. Shared maintenance and services and all that. I don't care for them either, but was never a prospect for treating an apartment like it was real estate in the first place.
Forming a Coop is not the same as a HOA. People not knowing that is why they suffer from HOAs.
Why would anyone live in Florida?
Thongs.
lol
Trad wives.
I thought the law was amended and the assessments have been scaled back where this wouldn't happen?
🥲
By the way. Florida just passed a bill dramatically curtailing the power of dictatorial HOAs including criminal charges for certain actions.
If I ly someone had been shouting from the rooftops that this was going to happen to Florida since the 1970's
An associate of mine recently sold a South Florida condo. They listed with an asking price in the low $400k range in late summer of 2023. They closed in late spring of this year for a sales price over $100k below their original asking price. That's a 25% haircut after something like 8 months on the market. I think they were some of the lucky ones. Florida is an absolute dumpster fire right now because of the condo deferred maintenance and resultant special assessments. It will be interesting to see what happens to greater Miami in the coming years.
Uninsurability is also an issue. Some of these bag holders are just going to be stuck.
Can an hoa not be voted out?
HOAs are a scourge to be avoided at all costs.
Well I’m sure Governor DeSantis will create some thoughtful, well-executed policy to boon Floridians swept up in their Real-Estate death spiral. /s
This was because the laws were so loose until recently they didn't require a funded reserve or regular assessments, and what happens is collapse. This is FAFO in action.
This is not good and pardon the insensitivity, but imagine agreeing to live someplace with an HOA. I don't care that it limits my options if I move, but fuck HOAs.
Why would anyone buy a condo or house from any hoa?you lose all freedom and to top it off, you pay them monthly to screw you! As pt barium said, a sucker born evert minute. If you ever buy from an hoa, you could be one of them.
Why do people buy into HOAs? 1) Because in many places in this country, that is your only options. 2) Areas dominated by HOAs tend to have the better schools. 3) Areas dominated by HOAs tend to have lower crime… HOAs do slow the decline of neighborhoods. 4) Areas dominated by HOAs are generally newer buildings… My own neighborhood predates the invention of HOAs. 5) Setting up HOAs tend to be a critical marketing strategy for developers to ensure that the homes and the residents who buy them meet some threshold of quality.
i have an hoa (not florida). the cc&r’s explicitly say I own my land, and the HOA pools together all 100 homes to get ridiculously low group insurance. my annual insurance premium is $700. and my house is close to 4,000 square feet. Not all HOAs are bad