Myrtle Beach condominium project evacuated

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Several news sources have reported that Renaissance Tower condominium project in Myrtle Beach was evacuated on October 7 because the building was deemed unsafe. The concern is apparently the structural foundation of the 22-story building which is located just north of Ocean Lakes Campground.

The Sun News reported on October 14 that Horry County Code Enforcement posted a sign outside the resort that the building is unsafe, and occupancy has been prohibited. The paper also reported that residents received an evacuation letter from the management company stating that the steel frame within the foundation is in substantially worse condition than previously believed. The damage was apparently discovered during a repair project that had just begun.

This blog has discussed unsafe condominium projects earlier, most recently in June.  

I have recommended previously that all South Carolina dirt lawyers subscribe to the DIRT listserv run by Professor Dale Whitman of the University of Missouri at Kansas City Law School. Two updates from that service in June relate to problem high-rise projects.

First, a 50-unit condominium building in Waukesha, Wisconsin, Horizon West, has been ordered to be demolished by the Waukesha City Council. Professor Whitman reports that the building’s steel structure has been compromised by water infiltration, much like the collapsed Surfside project near Miami, and is considered a risk for collapsing.

The residents don’t have the funds to pay for the demolition, and the insurance company is taking the position that the building should be repaired, not demolished. The cost of the demolition has skyrocketed because of the presence of asbestos.

The units were valued at $90,000 to $140,000 according to Zillow, prior to the discovery of the defects. During the current high-priced housing market, it is not likely that the property owners will be able to replace their housing even if they receive their full replacement costs from insurance. It is a very sad situation, but, of course, not as sad as an actual collapse resulting in the loss of lives.

Second, Florida’s legislature has passed a law that requires regular building inspections and requires homeowners’ associations to maintain reserves. The act was unanimously passed by both houses, and Governor DeSantis signed the bill into law on May 26th.

Under the new law, inspections are required when a condominium building reaches 30 years of age and every ten years thereafter. For buildings within three miles of the coast, the first inspection is required at 25 years of age.

In addition, mandatory structural integrity reserve studies are required every ten years under the new law, and reserves are required to be maintained based on the studies. The power of the HOA to waive reserves was removed, effective December 31, 2024.

This legislation is encouraging and should be considered in South Carolina, particularly because of the existence of our numerous high-rise coastal condominium projects. The Renaissance project is an example.

The only downside I see about such legislation is that it will make condominium living more expensive and may price some retirees and lower-income individuals out of the market entirely. But, logically, the cost of maintenance should be factored into every residential property purchase. The ability of an owners’ association to waive reserves and thereby kick the maintenance can down the road is a dangerous proposition.

Do you represent residential condominium HOAs or residential lenders? Do you handle residential condominium closings?

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This news from Fannie Mae negatively impacts condo closings

This blog has previously discussed the June 24, 2021 collapse of the 136-unit Champlain Towers South condo project in Surfside, Florida.

South Carolina has many aging condominium projects, particularly along our coast. And we have earthquake issues to consider. Do our local homeowners’ association boards face expensive repair and inadequate reserve dangers like those in Florida? These concerns may impact HOAs, lenders and purchasers. Dirt lawyers should be prepared to assist their clients in navigating these concerns.

Fannie Mae has addressed this issue by issuing Lender Letter (LL-2021-14), which took effect on January 1 of this year. The letter directs lenders that make loans on condominium projects containing five or more attached units to gather information from owners’ associations about potential unsafe conditions.

Dale Whitman, the esteemed retired professor from the University of Missouri School of Law who moderates the national Dirt Real Estate Lawyers Listserv has commented on this letter. He said on a January 24 DIRT entry that HOAs are probably not obligated legally to respond to a lender’s inquiry prompted by Fannie Mae’s letter, but a potential buyer of a unit may not be able to obtain a loan absent a response.  

That’s the crux of the problem. If repair and reserve issues arise in connection with a condominium project, it may become impossible to obtain loans.

DIRT also discussed a December 2021 addendum to the condominium questionnaire of Fannie Mae (Form 1076) that asks if there have been any findings relating to safety, soundness, structural integrity or habitability of the buildings in an inspection report, reserve study or government inspection or if the HOA board knows of such issues. This information is requested whether the issues have been resolved or would be resolved. The form requests information of how funds to make repairs will be obtained.

The lender letter points to a growing concern across the nation about aging infrastructure and significant deferred maintenance issues in condominium projects because a majority of these projects were built more than twenty years ago. Fannie Mae states its condominium standards are designed to support the ongoing viability of these projects.  

Fannie Mae will change the status of deficient condominium projects to “unavailable”, and lenders are able to check the status of projects on Fannie Mae’s “Condo Project Manager™” software.

Consider representing wealthy consumers who may seek to purchase expensive coastal condominium units paying cash. How should a closing attorney advise these clients considering these repair and reserve concerns? This is an issue that should be addressed in residential closing practices.