The Aging Condominium Infrastructure Demands on Boards and Owners
3 min read, By May Galan, SVP Association Management
Buildings and their internal systems and physical components are aging and often need costly maintenance, repairs, and replacements. Board members need to prepare to meet the unexpected, necessary financial demands of keeping their condominiums safe. Despite required inspections and regularly scheduled reserve studies, associations fail to recognize severe structural and system failures until the damage becomes so evident that it cannot be ignored. The tendency is to make superficial or temporary repairs and postpone costly in-depth restoration as needed.
Issues Faced With Aging Infrastructures
So many components of buildings need regular, ongoing costly maintenance and periodic replacements at the end of their useful lives. Roofs, windows, heating, cooling, balconies, elevators, piping, and pools, to name a few, have to be maintained and or replaced on a regular schedule. Unfortunately, deferred maintenance is often ignored until it can't be ignored anymore. The decision-makers, i.e., board members, are often ill-equipped to understand the ramifications of delaying action to address their aging infrastructures. Association homeowners and boards often focus on keeping regular assessments low and only investing in visible, immediate outcomes. While homeowners will tolerate a modest special assessment in an emergency, it is often harder to convince them to contribute to long-term maintenance, i.e., higher regular assessments. Condominium associations face challenges recruiting volunteers for the association board, convincing homeowners to accept and contribute to cost, and understanding the full ramifications of not acting in the best interest of the association as a whole for the long term.
Getting Old is Expensive and Cannot Be Avoided
Every condominium association is facing this issue. The older the association, the more they need to be ready for higher expenses, higher reserve contributions, special assessments, and possibly loan repayments. Therefore, board members should educate themselves on planning and executing reserve studies, evaluating and hiring qualified engineers, architects, and contractors, and implementing comprehensive inspection and maintenance programs.
Reserve Studies Can Help Associations Plan For The Future
Associations need to plan for and conduct regular and comprehensive reserve studies to prevent costly events. Reserve Studies analyze actual or projected funds required at a particular time to defray the cost to repair or replace major components the association is obligated to maintain. Careful planning for future repairs and replacements is not only in the best interest of the community association but is also required by law in many states. Maintaining adequate reserve funds not only meets the association's legal, fiduciary, and professional requirements but also minimizes the need for special assessments.
Federal Regulations for Condominiums
Many states have laws requiring community associations to conduct reserve studies. In addition to National Standards, federal regulatory agencies, including the Federal Housing Administration (FHA), the Federal Mortgage Loan Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae), established reserve requirements for condominium associations where homeowner financing is provided through banks regulated by those agencies. The current requirement for lenders governed by FHA, Fannie Mae, and Freddie Mac are: Condominium Associations must provide for funding of replacement reserves and deferred maintenance in an account representing at least 10% of the budget or have in place a current (not more than 24 months old) reserve study prepared by a qualified, independent professional company.
The Future of Aging Condominiums
Educating boards and homeowners about these federal requirements and their community's financial and maintenance needs is essential. Lawmakers and federal agencies must address these issues to ensure the safety of the lives living in these condominiums. In response to the Surfside building collapse that killed 98, Florida has enacted laws requiring building recertifications to be completed every ten years, but is that enough? More is needed to avoid another catastrophe happening. Aging condominiums face expensive insurance premiums and increasing deferred maintenance, all with a looming recession and high inflation. Condominium Associations must have a sound financial plan to keep their communities safe or face financial ruin or even a catastrophe that could have been prevented.