While many of the co-ops, condos, and HOAs that struggled to stay solvent during the Great Recession of the mid-aughts have largely recovered, the truth is that regardless of the overall economic climate, there will always be buildings and associations that fall on hard times, or find themselves in financial distress.
Tanks a Lot
When Joseph Balzamo, President of Alliance Property Management in Morristown, began managing an old converted garden apartment property in North Jersey, the old oil tanks that were buried in the yard weren’t a problem. That is, until the tanks ruptured. “The board said the tanks were 2,000 gallon oil tanks,” says Balzamo, “but it turned out that they were not one, but two 4,000 gallon tanks.”
This underground spill caused a major environmental issue that needed to be cleaned up – on the association’s dime. “To get EPA clearance, they had to clean out everything,” Balzamo continues. The problem was massive, the stakes were high, and there was no way the community could afford to undertake the project without emptying its reserves and leveling a ruinous assessment on every unit owner in the building.
To make matters worse, no bank would approve a loan to fund the clean-up project. “For what amount?” asks Balzamo. “Who knew how much money it was going to ultimately cost for all of the repairs? You have to keep receding the earth until it gets to a certain parts-per-whatever reading that the EPA says is acceptable.”
While all this was going on, most of the 35 unit owners were still living on the property – but eight owners simply walked away from their homes. Another six stayed on the property, but refused to pay maintenance fees. The problem was quickly spiraling.