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Condominium Unit Owner Insurance The Risks of Not Purchasing Insurance For Your Condominium Unit

Condominium Unit Owner Insurance The Risks of Not Purchasing Insurance For Your Condominium Unit

Condominium Unit Owner Insurance

The Risks of Not Purchasing Insurance For Your Condominium Unit

Do you think you do not need condominium insurance because your condominium association has it? You would be so very wrong if you do! It has happened more times than I can count—the supply line that feeds the toilet ruptures in the upstairs unit while the owner of the unit is out of town, the upstairs unit owner forgot that he or she started to fill the tub and it overflows, or the upstairs unit owner ignores a broken toilet, all of which result in water flowing down into the unit below. Next thing you know, the remediation workers arrive and start ripping out the soaked, damaged drywall in the units below and after cutting holes in the drywall use their industrial-sized blowers to dry things out to prevent mold.

Meanwhile, the downstairs unit owners want to have a “word” with the upstairs unit owner to discuss who is going to pay for the repairs. They demand a copy of the upstairs unit owner’s insurance policy. The owner of the upstairs unit where the leak occurred smiles and explains, “The condominium association has insurance. They’ll take care of it.” Right? Wrong! Even if the condominium association has the duty of repair to portions of the damaged property, typically the damaged common elements, the upstairs unit owner is not off the hook because both the condominium association and its insurance company can often “subrogate” their financial damages against the upstairs unit owner and so, too, can the downstairs unit owners and their insurance companies. At the end of the day, the upstairs owner who caused the damages could have significant financial liability. (In plain English, to “subrogate” a claim means that one party goes after the other for their financial damages for having caused the damage in the first place.)

So, now that I have your attention, most especially if you are a unit owner who does not have insurance for your unit—in the example described above, not only can the upstairs unit owner bear significant financial liability, but even their condominium unit is at risk of being foreclosed to satisfy a judgment against them—and there is no homestead protection! Because the upstairs unit owner decided not to purchase insurance, he could actually lose his unit in a foreclosure. The following explanation is why:

By way of oversimplification, the Condominium Act, more specifically, §718.111(11)(f), Florida Statutes, requires the condominium association to insure everything that the unit owner is not responsible to insure. The unit owner is responsible to insure

all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit…  the association is not obligated to pay for any reconstruction or repair expenses due to property loss to any improvements installed by a current or former owner of the unit or by the developer if the improvement benefits only the unit for which it was installed and is not part of the standard improvements installed by the developer on all units as part of original construction, whether or not such improvement is located within the unit.

But, however, the unit owner’s insurance policy, typically referred to as an “HO-6 policy,” not only includes coverage for the items set forth above plus other personal items, but also includes liability coverage for having caused damages to the condominium property.

§718.111(11)(j)1–2, Florida Statutes, makes patently clear that

A unit owner is responsible for the costs of repair or replacement of any portion of the condominium property not paid by insurance proceeds if such damage is caused by intentional conduct, negligence, or failure to comply with the terms of the declaration or the rules of the association by a unit owner, the members of his or her family, unit occupants, tenants, guests, or invitees, without compromise of the subrogation rights of the insurer.

The provisions… regarding the financial responsibility of a unit owner for the costs of repairing or replacing other portions of the condominium property also apply to the costs of repair or replacement of personal property of other unit owners or the association, as well as other property, whether real or personal, which the unit owners are required to insure. (emphasis added.)

Furthermore, also pursuant to §718.111(11)(g)2, Florida Statutes

unit owners are responsible for the cost of reconstruction of any portions of the condominium property for which the unit owner is required to carry property insurance [set out above], or for which the unit owner is responsible, and the cost of any such reconstruction work undertaken by the association is chargeable to the unit owner and enforceable as an assessment and may be collected in the manner provided for the collection of assessments pursuant to § 718.116, Fla. Stat. (emphasis added.)

§718.116, Florida Statutes, is the unit fore-closure section of the Condominium Act which explains the steps necessary to foreclose against an owner’s unit for failing to pay assessments.

In condominium living, the general rule is that the party who has the duty of purchasing insurance for a particular portion of the condominium property also has the primary duty to repair the damages to such portion regardless of fault (unless the condominium association has opted out of that regime by a vote of the unit owners, which is a rarity). But, simply because the condominium association has insurance and may have that primary duty of repair after the insurable casualty event, that does not mean that the negligent unit owner that caused the damage will not be the primary target for reimbursement for expenses incurred by the condominium association’s insurance company or by the condominium association for its deductible and related expenses. The same concept applies for the downstairs unit owners, who could seek reimbursement from the upstairs unit owner for any necessary expense incurred because the upstairs unit owner was negligent.

There are typically two parts to the HO-6 insurance policy, the primary coverage for personal losses and the other for liability coverage. Condominium associations should consider amending their declaration to require every unit owner to have both personal and liability coverage, and at a minimum, liability coverage. Your condominium association should discuss this requirement with the condominium association’s insurance agent as well as review the possibility of amending the declaration of condominium with legal counsel.

Anytime a condominium association experiences a casualty event, in addition to reporting the claim to the insurance carrier, usually through the condominium association’s insurance agent, the condominium association should be in touch with its legal counsel to explore all the different aspects necessary to both repair and reimburse the condominium association for its financial losses. At the end of the day, owning a condominium unit and not having purchased insurance is similar to taking a rowboat out on a rough sea day without life preservers.

Kaye Bender Rembaum, Attorneys at Law

The law firm of Kaye Bender Rembaum, with its 20 lawyers and offices in Broward, Palm Beach and Hillsborough Counties, is a full service law firm devoted to the representation of more than 1,200 community and commercial associations, developers, and their members throughout the State of Florida. Under the direction of attorneys Robert L. Kaye, Michael S. Bender and Jeffrey A. Rembaum, the law firm of Kaye Bender Rembaum strives to provide its clients with an unparalleled level of personalized and professional service that takes into account their clients’ individual needs and financial concerns.
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10 Tips to Maximize Your Property Insurance Claim by The Maus Law Firm

10 Tips to Maximize Your Property Insurance Claim by The Maus Law Firm

  • Posted: Nov 03, 2022
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10 Tips to Maximize Your Property Insurance Claim

by The Maus Law Firm  / Call (954) 784-6310  now for a free consultation.

 

#1). Take photos of the damage, right away.

#2 Don’t Let the Problem get Worse.

If you have roof damage, add a tarp to cover the damage. Your insurer will not cover you for damage that you could have prevented. You will be able to claim reimbursement for these temporary repairs

#3) Save your receipts

#4) Preserve or Save Damaged Items.

You will want to clean up and throw out items that are beyond repair – They are evidence, so show your insurance adjuster.

#5) If damage affects your neighbor, do not communicate or argue with them. Too many neighbors start disputes without realizing that their own insurance companies have a different views.

#6) Prepare a complete home inventory. Plan ahead of time. It will save you time and money.

#7) Your home inventory may include more items than you think.
Did you know interior AND exterior and landscaping items might be covered by your policy? Check to see if your policy covers food and sundries. Add up how much it will cost to restock the pantry and freezer.

#8) Examine the damage before the adjuster arrives.
You know your home better than anyone. Point out cracks, or breakage, indicating structural or related damage.

#9) Get your own repair estimates from contractors.

#10) Keep a log of all communications regarding your claim.
Include written correspondence, phone calls, voice mails, and email messages with your insurance company, contractors.
Be vigilant in monitoring bills and receipts.

 

The reality of the insurance business is that companies exist to make money. They need to minimize the amount of claims it pays out; while, maximizing the premiums that it collects.

Hiring the best Fort Lauderdale property damage insurance claims lawyer you can find, will save you the headache later. We will competently and aggressively represent you in your homeowner property damage insurance claim, or commercial business insurance claim.

 

Local: 954.784.6310

Email: Jmaus@mauslawfirm.com

 

 

 

 

 

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1st Choice Restoration Consultant Inc./dba Roofing Team. An SFPMA Member, Licensed and Insured Roofing Contractor in the State of Florida.

1st Choice Restoration Consultant Inc./dba Roofing Team. An SFPMA Member, Licensed and Insured Roofing Contractor in the State of Florida.

  • Posted: Nov 03, 2022
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Meet Eduardo Mondragon, the President of 1st Choice Restoration Consultant Inc./dba Roofing Team. An SFPMA Member and Licensed and Insured Roofing Contractor in the State of Florida.

This introduction is to let you learn more about our goal to working with the property management, condo and hoa’s to provide you our services.

We have a lot of experience accumulated over 30 years in the construction sector and specialized in Roofing. My crews are bilingual. I am located on Palm Beach, We do all phases of roofing like repairs, re-roofing, new construction roofing and roof maintenance.

1 Choice Restoration Consultant Inc

Roofing, Waterproofing & Stone and Building Restoration

Our corporate experience and the individual skill of our superintendents and tradesmen are keys to a successful job. We know what materials and techniques will yield the highest performance for your specific conditions and budgets. We advise clients on the methods most appropriate for cost and time savings. The best evidence of our successful craftsmanship is the long list of repeat customers, owners, contractors and construction managers who invite us to work on their projects.

Our strength is in our ability to address any situation presented. Whether it is development and completion of yearly maintenance plans, or the complete structural restoration of a structure, we have the knowledge, ability, and manpower required. Our knowledge and experience allows us to work hand in hand with owners, operators, and engineers in the development and implication of project budgets, repair techniques, and high-quality on-time repairs.

Learn more and please contact us for your roofing projects.

 

Eduardo Mondragon
Roofing Team dba 1st Choice Restoration Consultant Inc.
561-929-4329 Office
561-889-6520 Cell
407-779-8306 Cell
561-258-8205 Fax
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HOA Statement of Receivables

HOA Statement of Receivables

HOA Statement of Receivables

A statement of receivables, or accounts receivable statement, is a document that details the outstanding charges owed to the community association. This can be from sources such as overdue dues, vendor credits, late fees, or any other outstanding source of income. It is essentially a list of every account that still owes the HOA money.

 

What is in a Statement of Receivables

These statements should contain all accounts that owe money, along with the grand total of overdue funds. The total will help with budgeting purposes. Knowing how much money is available, if collections are being handled properly, can help with financial planning. The list of all overdue accounts can act as a checklist for anyone working in collections to ensure that no account is missed.

Some associations prefer to go one step further and detail which accounts are 30 days, 60 days, and over 90 days past due. For example, if a homeowner has missed their dues in March, April, and May; they will have money in the 30, 60, and 90-day categories. This way, collections agents will know to put more pressure on collecting the April dues versus following up on another account that is only 30 days behind. Just like with all financial statements, the more detail you provide, the easier it is to plan and manage.

 

How Often Should They be Prepared

While the HOA statement of receivables should be prepared at the same frequency as all other financial statements, it is helpful for the accounts receivable statement to be released more frequently. There are even programs available to keep up with AR statements in real time and have them available on demand. This can be immensely helpful for collection purposes to make sure that everyone is on the same page.

 

Need More Information

Financial management can be one of the toughest aspects to operating a successful HOA. If you are having trouble with reviewing financial documents such as the HOA Bank Statements, contact the professionals at CSM. We have years of experience working with homeowner’s associations from all over the United States. Using state-of-the-art technology, we can provide financial management assistance while still allowing association directors to remain independent.

 

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SFPMA’s Maintaining an Condo & HOA General Ledger

SFPMA’s Maintaining an Condo & HOA General Ledger

  • Posted: Oct 31, 2022
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Maintaining an Condo & HOA General Ledger

The foundation of all  accounting is the general ledger. Much like your checkbook at home, the Condo & HOA general ledger keeps an ongoing record of all transactions made by the community association. All other financial statements such as the balance sheet, income statement, and statement of receivables are created based on the ledger.

Unlike all the other financial statements which are prepared on a monthly, quarterly, or annual basis, the general ledger should be continuously updated. Whenever a transaction is made or received, it needs to be accounted for. At any point in time, you should be able to look at the ledger and see how much money the association currently has in all accounts and where money has moved. If you need to go back and see how much the association spent on landscaping in August three years ago, you should be able to find it in the ledger records.

 

Accounting Approaches

There are three basic approaches to manage finances. There is no right method for every association. Each HOA is different and may find that one method of accounting works better for them than another.

  • Accrual – The most popular and preferred method. In an accrual approach, revenues and expenses are recorded when they are incurred instead of when money changes hands. This means that communities using this approach will need to maintain two other ledgers for payables and receivables. For example, when invoices are sent to homeowners for dues, that money is marked down in the receivables ledger. As community members pay their dues, the money in the receivables leger is moved to the general ledger. The same process is used for expenses in a payables ledger. While this may take more effort than other accounting methods, it provides much more detail.
  • Modified Accrual – A mixture of accrual and cash approaches. In modified accrual, revenues get recorded when they are earned while expenses get recorded as money changes hands. Condo & HOAs that use this approach will need a separate ledger for receivables but will document expenses as they are paid in the general ledger.
  • Cash – Transactions are documented on one ledger as money exchanges hands. This is the simplest approach but provides the least amount of detail.

Once you find the approach that works best for your community, stick with it. Switching between different approaches can make reviewing financial information in the future confusing and may hinder your board of directors’ ability to make well-informed decisions.

 

What Should be Included

Depending on the system of accounting, your HOA may have several ledgers running at all times. But no matter the approach, ledgers should include all transactions made by the community association in and out. Each account owned by the Condo & HOA should also have its own ledger. Most associations have at least an operational account and a reserve account.

Regularly checking bank statements is a good way to double check the accuracy of the general ledger. Sometimes transactions can accidentally go unreported or, in some cases, fraudulent activity may occur. Whenever you receive statements from the bank, make sure all transactions match up between them and the general ledger.

 

Need Help Maintaining an Condo & HOA General Ledger

Finances can be confusing. It is always helpful to have a professional on your side to make sure everything is being done properly. If you are having trouble keeping up with all the financial documents necessary to properly manage an HOA, call the experts at CSM. We have years of experience working with homeowner’s associations in almost every state in the US. We offer a wide variety of financial management solutions to give you all the assistance you need while still maintaining your independence.

 

Find top companies working in the Condo HOA and Management industry in Florid on our Directory!

 

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The mandatory funding of all the required reserve funds will make living in these hi-rises very interesting in the next two years

The mandatory funding of all the required reserve funds will make living in these hi-rises very interesting in the next two years

  • Posted: Oct 28, 2022
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MANDATORY RESERVES

By Jan Bergemann

Finally the Florida Legislature got the message they should have gotten 20 years ago: FULLY FUNDED RESERVES ARE MANDATORY!

And even if the legislature gave condo owners a reprieve until December 2025, condo owners should start now to consider their options:

Will they be able to afford the much higher maintenance fees they will have to pay monthly in the future or will these much higher fees break their household budget?

Let’s just face it: For most of the years past condo owners waived reserves in order to keep maintenance fees artificially low – meaning that many of the associations at this point don’t have any reserves worth talking about. Remember: According to media reports the Champlain Tower South had only $700,000 in reserves, but needed about $16M to pay for the necessary repairs.

That will have to change real fast and the fact that many of the required inspections will have to be followed up by costly repairs and maintenance high special assessments are on the horizon for many hi-rise buildings (buildings higher than three floors).

As much as this change to the Florida statutes was long overdue it will definitely price quite a few families out of their homes. But in all reality there is really no other way around it and the fact that many condo owners used the loophole in the statutes that allowed waiving the funding of reserves is now coming back to haunt the owners who in former times dismissed the idea of funding reserves.

We already see condo owners protesting against boards about the problems that are visible in these buildings. The big question in these cases: Does the association have the necessary funds to take care of the needed maintenance and repairs or are the owners willing and able to pay the special assessment the board might have to levy in order to pay for the contractor?

The mandatory funding of all the required reserve funds will make living in these hi-rises very interesting in the next two years – and we will have to see how strong the government agencies tasked with overseeing these new provisions in FS 718 are enforcing these provisions.

Our Blog ( Industry Articles ) can be found on SFPMA.com – between our writers and all members of sfpma we have been for over 15 years keeping our industry up to date with the right Legal, Business and Services Articles. SFPMA sends and publishes these and sends to over 230,000 emails keeping everyone informed.

Look for our article upcoming on Condo Funds and Investments, on SFPMA

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Guide to HOA Financial Statements

Guide to HOA Financial Statements

  • Posted: Oct 28, 2022
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HOA Financial Statements

Managing the finances of a community association is one of the most difficult, and most important, responsibilities of an HOA board of directors. Preparing detailed HOA Financial Statements on a regular basis serves a multitude of purposes from providing insight for financial planning, promoting transparency between the board and residents, as well as being a requirement by law in some instances. The frequency of preparation may vary depending on state laws, community bylaws, and the size of the association.

If you are having trouble preparing community financial statements, the professionals at CSM are standing by to answer all your questions. We have years of experience working with thousands of residents across the United States.

 

What is an HOA Financial Statement?

Simply put, an HOA Financial Statement is an official record that details all the financial activities of the community association. Specific details that must be included depends on state regulations and community bylaws, but there are some basic details that should be included regardless of size or location:

The most common mistake that people make when preparing HOA financial statements is not adding enough detail. Every detail that can be added, no matter how small, can provide a more thorough insight and lead to better decision making. When in doubt, include it.

It should also be put into an easy to read format. These documents will be available to everyone in the community, most of which do not have advanced accounting degrees. For an HOA financial statement to be effective, it needs to be prepared so that anyone can understand the content. Making it too complicated alienates people and hinders community relations.

 

How Often Do Financial Statements Need to be Prepared?

There is no standard frequency that HOA financial statements must be prepared. It will depend on state regulations, community goals, and the size of the community. Of course, the more frequently statements can be prepared, the more helpful they will be for the board of directors. Smaller HOAs with simpler budgets can prepare monthly without much problem. Larger associations with more complicated budgets may opt to prepare statements quarterly or annually.

No matter what decision is made regarding frequency, it must be maintained. Straying from the regular schedule only causes issues between the board members and homeowners. It leads to a feeling of distrust. When dealing with financial information, it is best to be open and honest in as much detail as is appropriate.

For smaller, self-managed associations, if there is trouble getting financial statements completed on time, it is relatively inexpensive to hire an accountant as needed to prepare balance sheets. This ensures that all the information will be completed in a timely manner without taking time out of community volunteer’s busy schedules. It also means that the statements have been professionally checked and relieves some of that stress from the board members as well.

There are also a multitude of services available from CSM to help homeowner’s associations get organized and prepare their own financial statements. With the professional support of an experienced team along with state-of-the-art technology, even the most inexperienced association members will be able to navigate the complicated waters that is HOA financial management with ease.

 

What is a Financial Statement Used For?

The obvious answer is that detailed HOA financial statements can be used by the community association board of directors to adjust budgets, dues, and allocate money for maintenance and projects. The more detailed the statement, the more effective the HOA.

It is a requirement for any sort of financial planning. For starters, if records are kept consistently, association directors can look back on previous financial years to identify patterns that could affect the current budget and adjust accordingly. It is also imperative to keep track of money owed. If detailed records are not kept, it can be near-impossible to keep track of delinquent dues or know how much money is available to budget for community maintenance and new projects.

In some states, it is a legal requirement for HOAs to maintain and submit regular financial statements. Even if it is not required in your state, it is a good idea to keep detailed records anyways as they will be extremely beneficial for all other aspects of homeowner’s association management.

Most importantly, having detailed financial statements readily available to all HOA members can promote transparency between the board and the community. If the homeowners can see what their money is going towards, they will be more agreeable and open with the board of directors. It promotes teamwork throughout the community.

 

Where Should the HOA Financial Statements Go?

As with most things regarding HOA financial statements, it depends on state laws and community bylaws. Generally, there are three places that they need to be turned in:

  1. The HOA Board of Directors – the board of directors should receive a full, unedited report. They will need all available financial details in order to make informed decisions and plans regarding community maintenance and future projects.
  2. Community Members – to foster an open and transparent relationship, homeowners should also receive copies of HOA financial statements. These statements, however, should be altered to exclude sensitive information such as delinquent accounts. There is a difference between being sensitive and being secretive. If it will not cause an issue between community members, it should be included in the documents sent to community members. All HOA financial statements should be available upon request.
  3. State Department – if a homeowner’s association is organized as non-profit, an annual report must be filed with the Secretary of State. Failure to do so could result in losing their “Good Standing” status. This may not be applicable to all HOAs.

The more accessible financial statements are, the better. Some community associations even opt to put their financial information on their website to allow homeowners to view it at any time. Of course, not all information needs to be publicly accessible, but everything that can be included should be included. Transparent financial processes help to promote teamwork and positive community relations between homeowners and association board members.

 

Who Should Prepare Financial Statements?

This answer depends on the size of the community. Smaller, self-managed associations may have an elected treasurer, financial officer, or president that is responsible for compiling financial documents. In such cases, it is a good idea to use a professional accountant to ensure that HOA financial statements are prepared correctly before releasing them to board and community members. Remember, just because someone was elected treasurer, does not necessarily mean they have accounting experience. It is always best to hire a professional. Large homeowner’s associations have more complex budgets and will usually have a management company, such as CSM, that handles all financial data.

If statements are self-prepared by an elected community member, make sure that there is a backup of all financial records. In the unfortunate event that something happens and the preparer is no longer able to maintain their responsibilities, it can be difficult for the next person to learn their accounting methods or sometimes even gain access to the records.

Whether an HOA is made up of ten units or ten thousand units, it could be beneficial to hire a management company to ensure that everything is being run as efficiently and effectively as possible. When looking into property management companies, it is important to look for a company with a strong financial background. If the finances are not well kept, the entire community association becomes ineffective. Hiring a company such as CSM to provide financial management assistance not only makes life easier for the board of directors but can also give community members peace of mind knowing that all finances are being managed accurately and efficiently.

 

The Importance of HOA Financial Statements

To make a great plan, it is important to have all the information possible. Reliable, consistent, and transparent financial statements not only help the HOA board of directors make well-informed decisions but also support community health by allowing all community residents and stakeholders to be a part of the team. Keeping members in the dark only promotes mistrust and working with inadequate or no financial information can lead to dwindling reserves for community upkeep and new projects.

Creating an effective HOA is as simple as choosing an accounting process that works for your team, keeping detailed records, and communicating openly and freely with the community about all financial information.

 

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We are Valcourt Building Services, the premier provider for waterproofing, window cleaning, and restoration services.

We are Valcourt Building Services, the premier provider for waterproofing, window cleaning, and restoration services.

  • Posted: Oct 28, 2022
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Valcourt Building Services

863-244-3495

We are Valcourt Building Services, the premier provider for waterproofing, window cleaning, and restoration services. With over 30 years of experience, we’ve performed tens of thousands of repairs and maintenance on the complete building envelope. So no matter what your building requires, we have the knowledge and expertise for all of your exterior maintenance needs.

Founded in 1986, we have grown from a single-operating company serving the Washington, D.C. area into one of the largest exterior maintenance companies in the nation. We maintain offices in Virginia, Maryland, New Jersey, Georgia, Florida, and Texas. Each of our offices has a strong local staff with decades of experience in the industry — and our corporate team backs them all with resources and best practices to ensure we’re operating at the highest level in every market.

 

The Leader in Building Envelope Solutions

If you have a commercial property in the Florida/Southeast US market, Valcourt is the premier provider for all your restoration needs. As a specialty contractor that has been waterproofing and restoring commercial building exteriors for over 30 years, we know the issues inside and out.

We specialize in servicing the complete building envelope with a full range of services, including facade restoration and repair, garage restoration and repair, plaza deck restoration and repair, and more.

President Paul Alliston leads a full-service team with departments dedicated to operations, safety, sales, administration, and customer service. Our team is composed of employees at all levels of our organization who are experts in the building restoration and waterproofing industries; from management to our field superintendents, many of whom have been with Valcourt for over 10 years.

So give us a call and experience firsthand why thousands of property managers and building owners choose Valcourt Building Services every year.

 

“We have been able to partner with Valcourt on exterior restoration and enhancement projects at multiple locations around the country. Their organization, professionalism, and communication has been spot on for each project. I especially appreciate their team approach to business and attention to detail. We’ve been able to work hand in hand seamlessly to provide an end product for facility owners that meets their goals of improving their facility image.”
 -John Ketenbrink, LMH Architecture

Antonio Posadas
863-244-3495
aposadas@valcourt.net
Valcourt Building Services
Business Development Manager
Florida Office: 941-747-7277

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Join Lisa Magill & others | DBPR webinar on Senate Bill 4-D and Building Safety

Join Lisa Magill & others | DBPR webinar on Senate Bill 4-D and Building Safety

Join Lisa Magill & others | DBPR webinar on

Senate Bill 4-D and Building Safety Part II

October 26, 2022 /12:00 – 1:00 Pm

Register Now

The Florida Condominium Initiative: Senate Bill 4-D – Condominium & Cooperative Building Safety: Part II

Wed, Oct 26, 2022 12:00 PM – 1:00 PM EDT
Show in My Time Zone
This is a FREE and virtual event hosted by the Education Section of the Division of Condominiums, Timeshares, and Mobile Homes. This special event is a webinar series called the “The Florida Condo Education Initiative”. The Education Initiative is a partnership between the Division of Condominiums, Timeshares and Mobile Homes’, Office of the Florida Condominium Ombudsman, and the Condominium and Planned Development Committee of The Real Property, Probate and Trust Law Section of The Florida Bar. This presentation will contain comments and viewpoints from attorneys which will be provided for informational purposes only. The comments and viewpoints should not be construed as legal advice. Registration will only allow one user to enter. Please individually register to attend event. Please test system requirements per your confirmation emails. Please note that this is NOT a CEU (Continuing Education Unit) course and does not satisfy any professional licensing requirements, nor does this course satisfy the statutory requirements for Board Member Certification. Please also note that registering for this event may subject the information submitted in this form to a chapter 119, Florida Statutes, request. See bottom of this form for a link with further description.
Condo Deconversion: The Good, The Bad, and the Reality

Condo Deconversion: The Good, The Bad, and the Reality

  • Posted: Oct 21, 2022
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Condo Deconversion: The Good, The Bad, and the Reality

There’s a lot of turmoil in the housing industry today, and it’s hitting community associations hard. New restrictions from Fannie and Freddie are dark clouds full of special assessments looming on the horizon, and the housing bubble is growing rapidly with no real signs of stopping, inviting investors and tempting homeowners to sell. Because of all of this, a lot of condominium associations are considering a tactic called “condo deconversion.”

A condo deconversion is basically a bulk sale and process by which all units in a condominium building are sold in one transaction to a real estate investor, who will then turn the property into rental apartments. (Its counterpart is “conversion” which is when an apartment community is converted into a condominium or co-operative and sold off. Even though the terms are connected, there’s no requirement that a condo building was previously converted in order to be deconverted.)

Deconversion might sound like an extreme option, but it’s quickly becoming a sought-after fix for communities struggling with expensive deferred maintenance issues.

Why Condo Deconversion Is Gaining Popularity

There are a lot of reasons why this trend is taking off. Those FNMA and FHLMC restrictions, for example, are about to start causing some serious problems for condo boards. Requiring that the condo buildings meet a specific level of health by withholding approval for any future purchase loans for units in the community is stressful for everyone involved, and can often only be

Buildings get old and need repairs.

Building repairs are time-consuming and costly, and only get more expensive as buildings start hitting 30 and 40 years old. Communities with underfunded reserves will likely be subjected to overwhelming special assessments to catch up on the deferred capital improvements and maintenance over the years. The current real estate market means that deconverting could offer an alternative where unit owners get out with a profit rather than pouring money into special assessment costs.

New special inspections being ordered by local municipalities, state statutes, or federal restrictions.

The condominium lobby and real estate lobby will go kicking and screaming, fighting new inspection and reserve laws. Yet eventually condominiums are going to be forced to do the right thing and keep up with maintenance, capital improvements, reserve studies, and funding. It’s the right way to govern a condominium, but very infrequently is the right way the cheap way. These new inspections will be costly and time-consuming, and will likely expose more problems that only money can solve, exposing an underfunded community for the money-pit that it has slowly become. Selling in bulk to an investor pushes that responsibility onto someone else while pocketing a bit of profit.

There aren’t enough rental properties.

Condominiums have been popular in the last 20 years but there is a tremendous supply gap in rental properties, and this is a way for real estate investors and developers to acquire properties without having to build them. With the cost of construction, it makes more sense to take an old building, even an old building with long-deferred maintenances and problems, rather than invest in wholly new construction. It saves time and allows for a far quicker return on investment. It’s a sound move to buy them out and rehab the structure.

The price of real estate has skyrocketed.

The housing market is experiencing yet another quickly-growing bubble. Condo deconversions would typically start at 9x rent roll (the cumulative value of projected monthly rents for all of the units in the building), but some communities are seeing negotiations beginning as high as 20x rent roll! As Don Corleone would say “it’s an offer they cannot refuse.” For a condominium facing a $150,000 special assessment, they may feel that it would be foolish to refuse such a lucrative offer. Why pay a special assessment when you can ride the high of the real estate bubble?

What Does Condo Deconversion Mean For Owners and Board Members?

Condo deconversion is not a cut-and-dry good or bad decision. It’s a complicated process and has pros and cons on every side.

The good is that it can offer hefty profits and a get-out-of-jail-free card in a way. For some owners, it can mean a massive profit and an incredible opportunity to escape a very expensive, long-term situation. For board members who are stuck with the neglect from previous board decisions, it can mean walking away from a series of problems for which you would have been unfairly blamed.

The downsides, however, can be drastic and dangerous for owners:

Loss of Guaranteed Residence

For some, it means being forced out of their homes, into an increasingly hostile real estate landscape with no time to accommodate a drastic life change. Some states, like Florida, are experiencing the lowest housing inventory in the state’s history, meaning some may make a fortune over what they paid for their condo unit only to have to pay that fortune forward, and then some, just to find a new roof to put over their heads. Or, they could get stuck renting the home they previously owned at a severely increased monthly payment.

Loss of Long-Term Equity For Short-Term Gains

Homeownership provides security for yourself and your future generations. For those stuck renting from their new landlord, you lose the ability to pass on equity to your heirs. Unit owners can also no longer get a loan based on mortgage equity or use their home to guarantee a large purchase or supplement legal aid.

Loss of Influence in Your Community

As a member of a community association, you have power. You have a say in every issue that the community faces. You can determine who represents you on the board. You can even run to be part of that board! By deconverting your condo association, those residents that remain forfeit their power to the new landlord. The landlord decides what will and will not be repaired, and when. Once the landlord takes control, they can raise rents as high as they want, regardless of the negotiated rent roll they purchased the property for. There is no requirement to seek approval from residents the way an association board is required to seek approval for the annual budget.

Requirements For Deconverting Your Condo Association

Depending on the state, you do not need a unanimous vote to terminate an HOA or a condominium association, so even if there are objections it can happen to most condominium associations. In Florida, for example, if an investor buys 80% of the condo units, the last 20% can be compelled to sell if the condo has been deconverted. In fact, as of 2007, 80% of owners can allow for a Florida condo deconversion if more than 10% of the total ownership did not object. Other states will have their own provisions for condo association termination, so be sure to check your state’s legislation.

Some owners may argue that the association’s board needs owner approval before it can even begin looking into the possibility of a sale. In reality, the board has a fiduciary duty to bring all the best value and opportunity to the owners they represent, meaning that they can and should be researching opportunities like deconversion if the benefit is great enough.

Can the board sell out the condominium from under the owners? No. They will still be required to get the state’s minimum approval percentage within the community. And if there are condo deconversion negotiations going on, the board has an obligation to keep the membership informed and should provide full transparency.

Revitalizing Your Condo Community

Deconversion is an enticing opportunity for condo communities facing mounting special assessments or dues increases to confront long-term deferred maintenance. And while it might be the right choice for your condo building, it is not as simple as just pushing a button and making everything disappear. It’s a decision that requires a lot of thought, due diligence, and communication with your community.

While you can’t go back in time and undo the maintenance deferment of boards past, you can do the right thing for your community today and start a conversation about the importance of building integrity and health, and how the benefits will always outweigh the cost. Your condominium building needs a diligent board of directors working for the good of the community. It requires regular maintenance, capital improvements, fully-funded reserves, good cash flow, and a proper delinquency and ethical collections solution. Call Axela to let us help you recover some of those missing funds by collecting on your delinquent assessments, and avoid deconverting your condo association.

 

4 Signs It’s Time to Consider a Security System Upgrade

4 Signs It’s Time to Consider a Security System Upgrade

  • Posted: Oct 17, 2022
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4 Signs It’s Time to Consider a Security System Upgrade

 

Is your security system equipped to help you monitor your property on a 24/7 basis? If you are fortunate enough that your facility still has the same security needs as when you initially installed your security system, and that system hasn’t been rendered obsolete in recent years, it could still cause issues in the future.

Consider your computer— a five year old PC is likely to experience issues such as freezing, crashing programs, or slow operation. Your business’s security system can develop similar issues over time, and if your system experiences a major error and needs to be rebooted, your property may be left defenseless.

Security technicians may be able to help maintain older systems, yet there may come a time when it is more cost effective to invest in a full system upgrade.

Older security systems are tied to a variety of issues that prevent property owners from efficiently securing the building; however, modern security systems offer exclusive benefits and new features. Security technology has developed exponentially in the past decade, enabling users to add more effective features like access control, HD security cameras,  automated alerts and schedules and other remote monitoring features.

Installing a new system that incorporates these features will bring efficiency to security management, helping to increase productivity and improve your bottom line.

Remember: your business security system isn’t a “set it and forget it” tool; rather, it’s crucial to keep up with routine maintenance and stay up to date on the latest trends and innovations.

This post examines four factors that signal it may be time to begin researching a security system upgrade. 

Your Security Camera System Can’t Accommodate Change

Older security camera systems were not built to accommodate change. If you find yourself struggling to try and make angles or shots work for your surveillance needs instead of adding additional devices, it may be time to upgrade your basic system. Modern IP based system hooked up to commercial grade servers can allow you to expand as your needs grow to add cameras and additional monitoring devices.

 

Alarm System Doesn’t Allow for Remote Control

As we mentioned earlier, security technology is rapidly evolving: products that were considered “top-of-the-line” five years ago are now obsolete. If you purchased a hard-wired alarm system years ago, you may not be able to control it remotely, meaning that it doesn’t have access or sensors for the locks, leaving your property vulnerable.

Large security software and hardware manufacturers continuously release updates that are designed to make the system more efficient and burglar proof.

Smart locks are a great modern tool to improve security, as users can access them remotely without the use of a key. Smart locks work even when the power is out and they cannot be jammed

 

Property Features Low-Resolution Security Cameras

Camera quality is imperative for efficient property surveillance, making the difference between catching the criminals and losing all the evidence. Many property owners initially install security cameras to recognize and deter potential criminals, so if you have a low-resolution camera that produces grainy images, you’re sabotaging your chances of apprehending the criminals.

High-definition video quality isn’t just important for your home entertainment system: the same technology comes is incredibly useful for surveillance. With the availability of the high-resolution cameras, there’s little you reason to hold on to your old system.

 

Surveillance System Is Lacking Remote Monitoring Capabilities

In recent years smart phones and tablets have advanced to be able to track your workouts, diet, and finances, so why shouldn’t you be able to track your building’s security as well? Having a video management system that you can access and control remotely not only reduces response times in the event of a break-in but also helps to eliminate the need for around-the-clock security officers.

From an operations standpoint, having 24/7 access to view your business allows you to plan around weather conditions, monitor traffic patterns, and assess employee efficiency. Frankly, not having that option puts your business at a disadvantage in the competitive marketplace.

Is your building’s security hinged on outdated security technology? Schedule a no-cost property evaluation and we’ll assess how an updated system can improve your property’s security.