Condos vs Cooperatives

[Brat]

I read an interesting article about condos last night. It observed that laws permitting condos, actually permitting banks to offer mortgages to condos, passed in about 1969. The first condos constructed would have been finished in the early 70s. Many states did not require reserves for maintenance so each HOA had to convince owners to pay up as needed or deposit into a reserve account. Most owners wanted to keep their HOA payment low so many associations did neither. Now comes really expensive maintenance costs and many owners can't afford the charge.

Co-ops, on the other hand, are corporations where the Board can assess fees without shareholder approval. Many leases limit special assessments so there is an incentive for the Board to include payments into a reserve account on an ongoing basis. If there is a need for an expensive maintenance project not covered by reserves they can borrow, including the payments in the monthly "rent".

 

[mpeirce]

My observations (I've lived in two condos and co-own a co-op, and my brother owned a co-op).

My main take away is that co-op are harder to sell and seem to go for lower prices. Since the board has to approve new owners, selling/buying is a longer process. The board often does turn people down for a variety of reasons.

As to high vs low condo fees, I don't know what the percent breakdown is, but the two I've been in were "high" (not really that high), with sinking funds for maintenance. That's the only kind I'd want to live in.

 

[Brat]

I live in a coop and agree that they sell for less than comparable condos, in our area (because we are the only one in the state) banks do not loan on shares. Because they are all-cash transactions the buyer market is smaller. We haven't rejected any prospective buyer but, as a former Board member, we have discouraged at least one.

 

[pb4uski]

.... Many states did not require reserves for maintenance so each HOA had to convince owners to pay up as needed or deposit into a reserve account. Most owners wanted to keep their HOA payment low so many associations did neither. Now comes really expensive maintenance costs and many owners can't afford the charge. ...

I think that has changed over time. In Florida, an association must fully fund certain reserves (roof replacements, etc) unless the members vote to fund reserves at a lower level... in other words, 100% funding is the default option.

Some owners would rather keep the money and pay special assessments for such things as needed, but then there are members who don't have the money to pay a special assessment when it is due and risk foreclosure (association forecloses to recover the special assessment).

I favor 100% funding because less than 100% funding creates inequities between different generations of owners.

 

[Chuckanut]

. Most owners wanted to keep their HOA payment low so many associations did neither. Now comes really expensive maintenance costs and many owners can't afford the charge.

My HOA board is empowered to make a budget and set the fees for the next year. While homeowner input is always appreciated, it is the board that makes the decision. I imagine Condo and Coop laws often differ by state.

IMO, people worry too much about the amount of the dues and forget that the dues are driven by costs. Want low dues? Find a way to lower costs. Usually those who complain the loudest about the dues are unwilling to do much to see about reducing costs. Often they are sellers who simply want low dues so they can get a better price. Or rental owners who don't live on the property, and don't care if the grounds are poorly maintained, the paint is peeling, and the driveway has potholes.

I have never understood how somebody who can't afford an extra $40 a month, is going to afford a $5000 special assessment due in 6 months in order to pay for a desperately need new paint job.

 

[Chuckanut]

I favor 100% funding because less than 100% funding creates inequities between different generations of owners.

+1

It is the fairest way to handle wear and tear that occurs over time regardless of who owns the unit.

 

[ncbill]

My HOA board is empowered to make a budget and set the fees for the next year. While homeowner input is always appreciated, it is the board that makes the decision. I imagine Condo and Coop laws often differ by state.

IMO, people worry too much about the amount of the dues and forget that the dues are driven by costs. Want low dues? Find a way to lower costs. Usually those who complain the loudest about the dues are unwilling to do much to see about reducing costs. Often they are sellers who simply want low dues so they can get a better price. Or rental owners who don't live on the property, and don't care if the grounds are poorly maintained, the paint is peeling, and the driveway has potholes.

I have never understood how somebody who can't afford an extra $40 a month, is going to afford a $5000 special assessment due in 6 months in order to pay for a desperately need new paint job.

Our owners prefer lower monthly fees so major things get handled through special assessments.

E.g. roofs are being replaced on all our buildings...owners can pay the lump sum or an extra $100/month (interest-free) over 5 years.

 

[Sunset]

Our owners prefer lower monthly fees so major things get handled through special assessments.

E.g. roofs are being replaced on all our buildings...owners can pay the lump sum or an extra $100/month (interest-free) over 5 years.

Who is paying the interest cost , or is it not really interest-free as the lumpsum payment is less than the total 5 yr payments of $6,000

Or worse, the actual cost + interest is divided between all owners, and it's $6,000, so the lumpsum payers are paying the interest for the delayed payers

 

[ncbill]

Who is paying the interest cost , or is it not really interest-free as the lumpsum payment is less than the total 5 yr payments of $6,000

Or worse, the actual cost + interest is divided between all owners, and it's $6,000, so the lumpsum payers are paying the interest for the delayed payers

Lump sum is $6,000.

Buildings are just re-roofed in the order of which needs it the most, so pay-as-you-go.

We've not been paying the roofers until completion of each building.

Only one left to go...should have enough accumulated to finish in the next month or so.