The Deferred Maintenance Alarm is Sounding

Deferred Maintenance Triggers Catastrophic Building Failure

It may be too late for Champlain Towers, it’s never too late to begin addressing the deferred maintenance problem
It may be too late for Champlain Towers, but it’s never too late to begin addressing the deferred maintenance problem.

Deferred maintenance and repairs are major contributing causes of catastrophic building failure. Experts agree these are the leading causes of the The Champlain Tower 2 tragedy. Failure occurs when structural deterioration and delayed action collide. This exemplifies a failure and building collapse we more commonly expect to see in third world countries.

It’s no surprise that deferred maintenance is a major contributor at the very top of Florida officials’ list. Cause and effect is pretty simple here. These are, the Champlain Board’s failure to take action, and resident and Board inability to collaborate on repairs in a timely fashion. Other defects accelerated a progression of structural weaknesses that triggered premature collapse.

Champlain Tower 2 is a resounding alarm to the HOA industry. A proactive, consistent, and scheduled approach to maintenance can prevent future loss and damage.

The Significant Scope of Deferred Maintenance

Champlain Towers catastrophic building failure began four decades earlier, but as a smaller and much less expensive concern. Suspicious symptoms surfaced over the years that finally resulted in an inspection in 2018. The buildings were nearing 40 years of age, but officials suspect the compromise actually began during the initial building phase.

It’s never too late for HOA properties to begin addressing a deferred maintenance problem.

California’s 3,427 miles of coastline is home to thousands of mid-rise and high-rise condo buildings. The number one concern for condos here is fire, followed closely by flooding from plumbing system failures, and earthquakes.

In San Diego County there are over 14,000 condo communities at an average age of 30 years. Building structures and mechanical systems begin to require maintenance as soon as they’re put into use. Coastal structures exposed to a saltwater environment experience an increased rate of degradation in wood, concrete, and steel.

Stages of Decline in a Building’s Life Cycle

RDH Building Science, Inc., an expert in building research and forensics, tracked 1,651 buildings over a 20-year period. The RDH study explains five life cycles of buildings. Notably, the need to address maintenance begins within the first year of being built. Presumably, regular maintenance can reduce and/or eliminate the likelihood of catastrophic building failure.

Most of San Diego’s condominium structures are in Stage 4 (30-49 years) of their life cycle, the “Adulthood” stage.

“The largest and most expensive of all asset renewal projects tend to occur during the 4th life stage. As a result, significant funds will need to be reinvested in the building and the standard operating and maintenance budgets will need to be revisited.”

RDH Building Science, Inc., Study How Long do Buildings Last?, 2015

As a consultant, RDH lists the same stories as to why maintenance is deferred:

1 It’s unnecessary.

2 We’ll worry about it later.

3 We don’t really care what happens.

4 We don’t know what’s expected of us.

5 We thought it was being maintained.

6 We don’t have enough money to do it.

7 We don’t have someone in charge to help us.

The financial trap that associations fall into is a costly mistake. Deferring maintenance ultimately costs more than regular, preventative repairs. The top ten consequences of deferring maintenance include:

  1. Deferred maintenance compounds at 7% a year
  2. More extensive, long-term costs
  3. Reduced equipment efficiency
  4. Entire system failure
  5. Safety and Health Risk to All Occupants
  6. Possibility of fines from a regulatory agency
  7. One problem can escalate into larger problems
  8. Less preventive maintenance equals shorter life cycle
  9. Emergency repairs are more costly than planned repairs
  10. Deferred maintenance can cause more downtime

State and Local Safety Protections for California HOAs

State and local regulations establish parameters and best practices that guide associations in keeping communities safe. Some of these protections include:

  • Health and safety repairs to prevent insurance claims
  • Vertical balcony and walkway inspections, enacted in 2020 as Senate Bill 326
  • Brush management to prevent fire, per City and County regulations
  • Annual reserve studies, per the Davis-Stirling Act (Civil Code §5550, et seq.)
  • Increasing member dues to manage regular maintenance
  • Special assessments to pay for special maintenance projects or fund reserves
  • Bank loans for larger deferred maintenance projects
  • Using industry experts such as architects, engineers, and general contractors to create solutions

Insurance Exclusions for Poor Maintenance or Delayed Repairs

While California insurers don’t use credit scoring, deferred maintenance and a property’s condition are factors that may hamper access to coverage or include more exclusions.

The Policy Research Division of the California Department of Insurance produced a study in August 2004 titled, Underwriting Guidelines and Access to Homeowners Insurance. The Study found that various factors besides claims history can result in non-renewal or application refusal. Some factors are company limits. Others are strict exclusionary criteria.

At least one half of the insurance companies surveyed refuse applications based on vacant properties, signs of poor maintenance, proximity to brush areas, buildings located on hillsides, slope or piling over water.

Twenty five percent of insurance companies ask about water losses in their applications, and 41 percent put limitations or exclusions on water damages.

Management Can Help HOA Boards with Deferred Maintenance

Keeping people safe in their homes is the primary goal. Boards that act with the determination to confront maintenance and make tough decisions are the very Boards that associations need.

Regular maintenance is an ongoing financial imperative, regardless of how resistant residents may be to increased dues, a special assessment, or the HOA obtaining a loan. Loans are used to fund low reserves or to address overdue repairs. The potential cost can be significant if reserves are funded at the recommended 70% or higher of the property’s calculated deterioration. Regular inspections and repairs are a critical necessity to protect the investment.

“Although 2020 presented challenges in unique and unexpected ways, the Board continued to work closely with its property management team as an invaluable part of preserving the safety and sustainability of our community into the future. We feel a great job was done in making sure deferred maintenance was taken care of.”

Board Member Kathy W. of The Summit of Rancho Bernardo, a 360-unit luxury complex in north inland San Diego, states that,

For the last several years ASPM has been among HOA attorneys and insurance experts in publishing articles and writing blog posts about the physical and financial dangers of gambling with deferred maintenance. We constantly work with our Boards to address overdue repairs to ensure resident safety, to control repair costs, and to increase residents’ property values.

Our Board Members are fully committed to this endeavor, and this collaboration makes it possible for us to successfully implement our deferred maintenance program throughout our management portfolio.

“We found that keeping up with the maintenance of the buildings and property was a better strategy, as we weren’t stuck having to do everything at one time. We were able to maintain a safe environment by maintaining things as they came up.”

Dennis R., former Board President of Adobe Falls HOA, a 272-unit condo complex in San Diego’s Allied Gardens community

In addition to resident safety, the ancillary benefits of a proactive deferred maintenance program are higher quality of life for all residents, and ultimately maximizing real estate return on their investment.

Most Boards agree that taking on maintenance as it comes up is the most feasible way of confronting an ongoing concern.

Wake Up Call for HOAs

For a few fleeting moments in digital space, the deferred maintenance distress signal is reverberating through HOA community associations and their service providers.

So that we never forget our priority of safety first, it’s critical that HOA industry partners use this momentum to act now. If we consistently and properly manage deferred maintenance in these next decades we can ensure a tragedy like Champlain Tower 2 never occurs again.