I do some work with attorneys who have a lot of experience in condominium law. One of them told me about a situation where a condo owner sued the association board and claimed that the financial records he had received were inaccurate and incomplete. What made the lawsuit ludicrous was that he had been given those records before he even bought his condo in the building ... which meant the guy simply didn't do any kind of due diligence before buying into the building and was trying to get out of a bad financial situation. The judge laughed his lawyer out of the courtroom on that one by pointing out that the guy had no standing to sue because he failed to take even the simplest steps necessary to cover his own ass.
“One of them told me about a situation where a condo owner sued the association board and claimed that the financial records he had received were inaccurate and incomplete. “
I reviewed the books when I bought the Florida condo and knew there were no reserves being accumulated. I anticipated when the developer turned over the building to the association the owners would vote to start accumulating reserves. I was surprised when they did not. After serving a year as treasurer for the board, and doing the research to determine the amount of reserves the association needed, and did not have, I sold my unit. Ten years later the current owners are experiencing significant repair costs and special assessments of as much as $12,000 per year for critical repair needs. One could certainly wonder if the board is deferring other maintenance and skimping on the quality of work, to keep assessments low.
Based on my experience I would not purchase condo in a muti-unit building in Florida or elsewhere. Condo boards often don’t have the knowledge and experience to properly oversee structures and properties of significant complexity. Humans inherently are biased in terms of minimizing economic cost to themselves. Democratic institutions make popular decision, not best decisions. Better to buy an individual housing unit and take care of the repairs and maintenance yourself.
Due to the age of the Florida population, residents have a bias toward short term solutions. Put to a vote, the homeowners will aways vote to pay $10,000 to “caulk” the building (a 3-5 year repair) versus $150,000 for a major stucco replacement and sealing job (a 15-20 year repair). When you are 80 years old, the 3 year repair is sufficient. Even if the board pays for the $150,000 repair there are plenty of unscrupulous contractors who will do a poor job that needs attention in 3-5 years.
In my state, a condo association or a homeowner’s association is required by statue to conduct a reserve/engineering study every five years and keep an adequate reserve fund. If it does not, any member has standing to sue the association to force it to do so, and if successful, the association must pay the owner’s attorney’s fees and costs.