Don’t get us wrong, we’re still fans of San Francisco’s Bellaire Tower (1101 Green Street). But what happens when residents rally together for years to resist any major increases in monthly HOA dues (and investment in the building)? It’s called deferred maintenance.
And now all of those residents (and any new ones) are getting hit with a significant special assessment (and according to a plugged-in tipster, a multi-year resurfacing and window replacement project) to right the wrongs. It’s a good thing the Mayor still has his day job.
well what are the monthly HOA’s here and how much was the special assessment?
Doesn’t surprise me that the building has deferred maintenance, it’s just like most of San Francisco. Newsom doesn’t really seem to care much.
I sold my last condo because I had a very bad feeling about how the HOA was handling the operating budget and maintenance issues. Homeowners who were completely uninvolved and out of touch with the state of things would complain about increasing dues, and the board members were swayed by the pressure despite the writing on the wall. A few board members themselves seemed interesting only in serving their own desire to keep dues down, even though evidence suggested huge maintenance issues were developing–not to mention that the 150+ unit building looked grungy overall. The building had a severe water-intrusion problem (windows, which the board turned a blind eye toward) an outdated non-functioning jacuzzi and host of other deferred maintenance issues. I’d finally had enough when the board declared they could handle all of this without a substantial dues increase or special assessment. I sold and got out, right before the s**t hit the fan. Just over a year later, that building is now undergoing a major (near million-dollar) window-repair effort and owners are facing a special assessment and big dues increase, and that jacuzzi is still broken. And, they’re facing other big systems upgrades and replacements they’re not prepared to pay for. The appearance of the building is bringing down property values and deterring buyers. I’m now in a building with higher dues, but which is perfectly maintained, many major systems have been recently upgraded, funds are available for upcoming scheduled improvements, and reserves are healthy. You simply don’t win when you put off inevitable.
Deferred maintenance in high rise buildings like this one is very common. Especially when you have people who have been in the building for 25+ years, are now retired and on fixed incomes. Since they aren’t working full time, they are also the ones who usually serve on the condo assocation’s Board and are the ones who make the decisions to defer costly maintenance. They do this because they do not want to raise the monthly dues. However, like this situation suggests, the repairs become absolutely necessary and then require an assessment.
I would also have to assume that the Board doesn’t have a large amount in their reserve fund, which they could have used for these repairs. Again, this is common in buildings like this.
GH, I would bet that Gavin is not on the condo’s Board in this building, therefore he has no authority whether to make the repairs or not. It has nothing to do with whether or not he cares.
You’re right…but it does irk me that this City has gotten so dirty.
seehee – do you mind revealing which building you were in before you got out?
Lori: You are spot on. Aside from fixed income issues…
–Longer-term owners and usually more concerned about affordability than marketability because they are usually not as interested in selling in the foreseeable future. They don’t care as much what a prospective buyer might think of the common areas, etc.
–You’re right, my former building was reserves “challenged”.
–Another problem is too many non-owner-occupied units. Owners who are keeping units as rentals tend to overlook maintenance needs in favor of keeping costs down (and their profit up!).
Before purchasing in the the building I left, my agent had steered me away from another one where the deferred maintenance problems had already become more evident (and which also had suspiciously low dues). Ultimately, that building underwent a costly overhaul, owners paid out a huge assessment, and dues are now in line with other similar types of properties. And, the buidling looks great and values have improved because of it.
(Anon: prefer not to disclose the property. But clearly, everyone should do their research before buying!)
The Davis-Stirling Act requires that HOAs perform a reserve study every 3 years. The reserve study will show the projected funds (to be held in a reserve account) required each year to fund future maintenance obligations. The HOAs can’t really be forced to be fully funded at every point in time – which is why big special assessments are the norm. I would bet that most established HOAs have a reserve account that is only 30% or less funded – which means that special assessments will be needed in the future.
This is one of the many disadvantages to buying a condo. All maintenance work ends up costing more. Contractors must charge more to cover the insurance premiums associated with condo work. Everything is management (or mismanagement) by committee. DBI hurdles are higher. As noted by seehsee and others, do your homework before buying a condo. Read the minutes of the HOA meetings. Review the financials and reserve studies. You’re not just buying property – you are joining a bureaucratic organization whether you like it or not. Read the Davis-Stirling Act if you have the stomach for it. And remember that the Davis of the D-S Act is none other than our infamous ex-governor Gray Davis.
Hi–
Diamond Heights Village in the 90’s had no increase in monthly assesments for 10 years. The place went to Hell in a handbasket and it took a substantial special assesment in 2000 to bring it back up to snuff and that didn’t cover hallway renovation, which is being voted on now.
I agree with earlier posts in this thread about retired people getting on the board and then refusing to raise dues. They are often on fixed incomes and do not see themselves ever selling, so they are not thinking about resale. The Davis-Sterling Act does have strong language about reserves and budgets but enforecement is spotty at best.
Good Luck,
M.R.
Despite my postings and the some cautions others have communicated here, I do want to say that I’m in my sixth Bay Area condo ownership situation (1 peninsula, 1 East Bay, 4 San Francisco) and have never be subject to a special assessment or a dues increase of over 5% per year. However, that good fortune is partly due to doing heavy research and reading HOA meeting minutes before purchasing (as suggested by anon) and trusting my gut when it was time to move on. Some associations are very well run and have great financials. To discount condos as an ownership option in a city like SF really isn’t realistic. And for many people like me, the negatives outweigh the positives. For example, my lifestyle, business travel schedule, etc. make a full-service building a near necessity. I’ve considered SFHs at times, but when doing research on structural issues and other related problems (and time to deal with them) more anxiety-producing and risk-adverse than condo ownership. To each his/her own, and no situation is necessarily better or worse than the other. Whatever your course, do your research!
seehsee — you completed my thought process on this topic. Doing research is critical, as is reading HOA docs prior to buying into any condo association. If there isn’t enough in reserve, and if the association meeting notes are grumbling about repairs that need to be done, watch out.
Also, know your residents of the building and who is making the decisions. I am not prejudiced against the elderly/retired (in fact the last building I was in was mostly retirees and I loved it because it was so quiet) but keep in mind that this group of people will in many cases want to put off repairs until the 11th hour.
I have a different view on how much the HOA’s reserve should be: while the article implies that it’s better to raise monthly HAO fee so high to build up a huge reserve, I am skeptical of such approach. The board can easily mismanage the money, or even worse, embezzle it. I remember reading about the news in NYC where co-op board members have gone to jail for embezzling millions of dollars.
BTW I also have noticed 1201 California had similar work done last year, so did 2222 Hyde. I wonder if they’re also hit with special assessment, or if their reserves were high enough for it.
Cati: You definitely seem like someone who should stay away from condos, for your own sake and that of other HOA members. Condos and co-ops are quite different. 1201 California is a co-op and underwent earthquake retrofit work and extensive exterior work after that. I’m almost certain a fairly large special assessment resulted. Dues in that building are around $1000/month for a one-bedroom, and an additional $240/month for (valet-only) parking. Oddly (and unlike NYC) monthly co-op fees in SF typically don’t include property taxes. So, with 1201 California, I believe you’d have to save money for taxes on top of your $1240+/- monthly fees.
Adequate reserve funds are critical to condo complexes. They are the building’s emergency fund. Monthly dues are used for the general maintenance of the building, and the reserves are used in emergency.
As many of the condo buildings in SF are large, if they were to require significant repair, that’s what the reserves would be for. Otherwise, the residents would be hit with huge assessments and in many cases they might not be able to afford those assessments.
It is just plain common sense for these buildings to have large reserve funds. Unfortunately, as they are mostly self-regulated they do not follow this advice. Which again is why it is so important to read condo docs before you buy.
like 1201 California, 2222 Hyde is also a Co-op. Stunning units. The exterior renovation is costing each unit 100-150K and this is after a major interior renovation not too long ago. Needless to say, assessments are not much of an issue to those owners.
Proper reserve management is a big deal for small buildings. A lot of these newer smallish buildings have elevators and other building systems that will be expensive to replace if they break.
I think 2222 Hyde only has 8 units, they are full floor, huge apartments ( ~3000 sq sf ) on top of Russian Hill with fab views. Most recently the lowest floor was sold for ~$2.5M.
Therefore $150k, though a big number, is small compare to how much these homes are worth.
Is the scope of work on 2222 Hyde more extensive? I saw many exposed pipes ( which were buried in the walls ) and guessed maybe they have hard to find water leaks somewhere.
Seehsee:
Just to clarify, I do believe HOA should build a reserve to pay for scheduled maintenance with some emergency fund.
Sometimes when there’s too much money in the reserve, all sorts of weird agendas come out of nowhere. They might blow it on frivolous things like remodeling the entire lobby (with some board member’s sister-in-law being the designer/decorator) instead of investing it wisely for the real rainy days.
The reserve need to be in the right amount to operate, but no more. It’s too tempting.
I am in total agreement with cati. A big reserve fund is a honey pot just asking to be raided by the spendaholic-types. What is the problem with special assessments? I mean we’re talking maybe $10K once every decade, right? Why not just put a $100/month into your own reserve fund, so you’re ready for the assessment? Seehsee says people who are against reserves aren’t cut out for condos. I say people who don’t have an adequate cash cushion to afford a special assessment or other major expense now and then aren’t cut out for owning any sort of property.
Frank, Cati: I stick to my original position on this one. When a condo HOA doesn’t work, it can go very, very wrong. But when it does work, it can do so quite well. If you don’t trust it in concept or principal and aren’t willing to participate and remain informed to ensure that it does, it’s not the right kind of ownership situation for you.
Frank: Your $10k personal reserves aren’t going to help you much if your first or second year into an ill-managed HOA, you’re hit with a $40k special assessment. If people could predict the amount and frequency of special assessments, we wouldn’t even be having this exchange.
I realize I’m at risk for beating a dead horse here, but I will continue to back seehsee. I feel semi-qualified to do so because I served on the Board of my last condo association. Cati mentions that there has to be “the right amount to operate” but again, the reserve funds are not meant for operating expenses. They are put there so that the association can avoid unforseen circumstances.
I went over my building’s reserve study in detail for planned maintenance. It detailed repairs up to 20 years ahead. Every detail, down to replacing carpet in common areas, was noted. So it is much harder than one might think to blow it on frivolous things like redecorating (which is completely subjective depending on whose opinion you seek).
Fred, to your point, I’d love to see how elderly tenants on a fixed income react when you tell them that they need to come up with $10K for a special assessment within 30 days. Is that when you tell them they’re not cut out to own any sort of property?
I would like to comment on 1101 Green. I was on the board and we did NOT keep dues down. They were quite high for the city at the time. A lot of repairs came up all at once some of which were unexpected. As well, you significantly devalue your property if you have dues that are out of sync with what is around you. You are then better off with an assessment should you need it. I do not agree that enormous reserves should exist as it is very difficult to invest it well for all sorts of reasons. With low risk needed, the rate of return is not good. It is all a balance. Dues, assessments and repairs.