Legal-Ease: New concerns with condominiums

Condominiums, like that which collapsed in Florida recently, are a type of shared ownership of property where individual “unit owners” only separately own space in what would typically be considered those people’s apartments and houses. Spaces other than inside traditional apartment units or houses (like hallways in multi-unit buildings, yards, driveways, alleys and ponds) are owned jointly by all of the unit owners in the condominium development.

Because all non-personal-living areas like yards are owned collectively in a condominium development, the condominium association can often negotiate better rates for upkeep, and individual unit owners need not worry about outside maintenance, because the condominium association will ensure that the grass is regularly mowed, and that the bushes are timely trimmed.

Condominium developments can be built in phases, but each phase may include multiple buildings built with the same materials at the same time. Therefore, this can mean that all of the buildings in a particular development phase will need new roofs at about the same time or need to have significant siding remediation at the same time.

Condominium associations finance their maintenance/improvements through “assessments” that fund operations and financial reserves, which assessments are facilitated through the association’s governing board, which board is composed of owners of units in the condominium development.

As is the case for governments that find it hard to raise taxes, condominium associations sometimes find it hard to raise assessments, particularly before improvements become absolutely necessary. This is particularly applicable in contemporary society where American consumers have been encouraged to avoid saving. Rather, society has trained many of us to spend and spend, and then, when repairs (like a new roof or a new foundation are needed for our home), to borrow that money.

Therefore, the basic structure of condominium ownership, which is efficient and positive in many ways, makes some larger aspects of building maintenance more difficult to facilitate in light of the group/collective mentality that is itself an essential part of joint/condominium ownership. Similarly, dictatorships are a lot more effective at disease eradication than democratic republics like our own government. Understandably then, condominium ownership is not to be eliminated. Rather, the recent, Florida condominium catastrophe should encourage some additional attention to some aspects of condominium ownership and operation.

First, condominium developers should ensure that condominium developments’ reserve/improvement/maintenance accounts are properly funded when the condominium is established. This makes the price of a condominium unit higher, but it also positions the condominium association to be more proactive rather than reactive when it comes to repairs.

Second, condominium boards should look at increasing their “officers and directors” insurance. In a particular condominium development, if it is almost impossible to fund sufficient building reserves, people on the boards of directors of those developments should receive additional protection from liability for not being able to do what cannot practically be done.

Third, buyers of condominium units should always investigate the financial state of the condominium association and the status of its obligations/reserves rather than just learning “what the monthly assessments have been.”

Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.