HOA Funding For New Surfside Legislation

A slew of new legislation has recently come about surrounding condominium building maintenance. After the tragic collapse of Miami’s Champlain Towers South in 2021, lawmakers across the country have introduced new measures to attempt to avoid future disasters. Fannie Mae and Freddie Mac also set forth guidelines that will impact how condo buildings of a certain age and size are expected to maintain current and future problems related to aging infrastructure.

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For communities in states with this new legislation passing (FL, HI, CA to name a few), this casts a dark cloud on their existing finances. A 2023 State of the Industry Report for the community association management space highlighted a serious concern among HOAs and condo associations: it found that, although HOAs and condo associations have reserve funds they contribute to, many appear to be underfunded or funded incorrectly. This means most HOAs are prepared for things like planned capital improvements, let alone an extensive list of repairs they could potentially face with these new laws in place.

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Finding New Funding

Today, most communities rely on special assessments for unexpected financial burdens. Whether that’s a higher-than-expected delinquency or simply that the planned budget isn’t cutting it, HOAs tend to fall back on the tried-and-true special assessment. But, this hurts the community and, over time, creates distrust amongst homeowners.

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Although special assessments are ultimately the simplest solution to financial hiccups in an HOA, they pose a significant risk, especially considering how costly Surfside legislation is expected to be for coastal condo communities. Remember that Champlain Towers South II recognized the ballooning costs of repair they needed, and their membership was informed prior to the collapse that they would each need to pay a substantial amount of additional assessments (between $80k and $336k) either upfront or over a 15-year commitment to cover $15mil in repairs.

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The community was rightfully shocked. Those numbers are insurmountable for many, and while the hope is that other buildings won’t require such extensive repairs, the reality is that this is possible for any condominium building in existence today. It’s up to HOA and condo board members to consider new methods of funding that won’t put their membership into significant financial duress. HOA loans and lines of credit offer financial support without bankrupting homeowners or risking pushback that can delay time-sensitive repairs.

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Plan Ahead Now

While only a few states have passed these new laws, others are quickly following suit. It’s important to remember that Florida has the second-highest concentration of community associations in the country and is often the state that sets the legal curve for everyone else. Because this condo tragedy happened in such an influential state, it’s only a matter of time before every state has some kind of legal financial expectations for condo buildings. HOA Loan Services provides guidance and step-by-step assistance for HOAs seeking loans for their communities. Contact us today to schedule your free consultation and get started on your plan to meet future HOA law requirements.

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