I hate beating around the bush, so I want to get to
the point. A financial crisis is coming and itís going to be a
big one. Itís also going to hit those that can least afford
it. Itís going to result in massive amounts of foreclosures.
Itís going to result in countless cases of elderly persons being
displaced from their homes. The worst part is, itís absolutely
avoidable but I donít believe any legislator would ever have the
courage to float a bill to save the pending disaster.
My last 24 hours made it clear to me whatís on the
way. I was at a meeting last night in a 55 and over condominium
that is about 40 years old. Elderly unit owners were
complaining that the pipes are getting old, there are occasional
leaks, and they sometimes have to come out of pocket a few
hundred bucks in order to clean up the mess in their unit and/or
repair that broken pipe. They are complaining about bills for a
few hundred bucks and find it difficult to pay them because
their sole income is social security.
To state the obvious, there is no reserve account.
There never will be. Generally, senior citizens donít believe
in reserving funds for repairs that may be necessary a decade or
two from now because they believe they wonít be here anyway.
So, year after year goes by, decade after decade goes by and
there is never a reserve fund to fall back on should a major
repair become necessary. As I write this column, the seasonís
first storm is forming in the Gulf, and itís still May. We all
know what just one storm can do to the communityís finances.
Even if we are lucky to escape this year, next year and the
next five years without a hurricane or tropical storm coming,
there is another storm coming that is simply unavoidable and
definitely on its way.
Think of how much building has gone on in the past
50 years. It is staggering. But the buildings are getting
older. As the buildings start to approach the 40 year mark or
more, things start to break down and repairs become
unavoidable. Concrete restoration is incredibly expensive, and
unavoidable. Replacement of pipes is incredibly expensive, and
unavoidable. And the same goes for electrical renovations and
roof replacements. All unavoidable. Yet, so many people,
especially seniors, are rolling the dice thinking that none of
these repairs will be necessary while they own the property.
That may be true for now, but eventually, everyone rolls a 7.
If you roll a 7 at the craps table however, you get
up and go home. If you roll a 7 at the condo and all these
repairs are necessary while youíre the owner, you may lose your
home because year after year after year you decided to waive the
funding of reserves and now you have nothing to fall back on.
So whatís the answer? I know this is going to sound
unpopular, but if action is not taken now itís going to result
in much bigger problems of people losing their homes later on.
So, like it or not, some form of reserves should be mandatory
and not subject to being waived. There, I said it. Letís
streamline the way reserves are calculated. Letís get rid of
the ďlife expectancyĒ formula the state says you should follow
but nobody does. Itís a joke anyway. We all know the truth
that the life expectancy of the roof somehow gets longer, the
closer you get to the original estimate of how long it was going
to last. Five years ago it had a five year life expectancy.
Money is tight, so today it has a new 10 year life expectancy.
Somehow, like fine wine, the roof got better with age. We all
know that happens, and it happens every day. So how about we
make things simple. Letís just say every condominium must
contribute 10% of its annual budget to reserves for roof,
plumbing, electrical, structural and painting. It all goes into
one pot and it can be used for any repair necessary for those
categories. It canít be waived. If however an association
wants to contribute more, they can.
If we implemented this, Iím guessing the average
monthly increase for most condominiums that are not already
reserving funds would be anywhere from $25.00 to $75.00 per
month. I know that for some that increase is not easy.
However, itís going to be a lot more expensive if any one of
these inevitable repairs become necessary and itís time to pass
a special assessment because there are no reserve funds. God
forbid two of these items need repair. Sorry, but itís still
easier for a person on a fixed income to pay an extra 30 or 40
dollars per month than it is to come up with a special
assessment of a few grand.
Mandatory reserves, for even modest amounts, is a
necessary evil. I say so because I see the hand writing on the
wall. I see buildings getting older and unavoidable repairs
coming on strong. I also see hurricane seasons becoming active
with the potential to cause catastrophic results to our
communities. I see fear in the faces of senior citizens now
when faced with small special assessments. What I donít see is
sound financial planning for the inevitable, and I donít want to
see people, especially the elderly, losing their homes when they
donít have the money to pony up and fix up their homes when a
special assessment comes their way.
This year The Florida Legislature looked into the
future and envisioned that in the next decade or so, we will all
be driving electric cars. So, they bravely passed an electric
vehicle statute to deal with that issue right now, before the
issue got out of hand a decade from now. Iím asking them to do
the same thing now and protect people from losing their homes
over the next decade or two by ensuring the condo has a piggy
bank to shake lose when massive expensive repairs become
unavoidably necessary. Mandatory reserves are needed now.