CARFAX for Condos

Last month, a federal judge approved a $1.2 billion settlement for unit owners and affected families in the Champlain Towers South condo collapse in Surfside, Florida.  The 2021 collapse was the deadliest condominium collapse in United States history and the third deadliest structure failure in United States history.  While the collapse is still under investigation, a leading factor in the collapse appears to be structural support degradation and corrosion caused by water intrusion. Champlain had obtained an engineering report in 2018 which found major errors in the construction of the pool deck, which had allowed rainwater to penetrate into and degrade the concrete.  Additionally, the maintenance manager for the condo had reported that in major tidal events, the maintenance crew had needed to pump out salt water which was penetrating the building’s foundation.  In 2019 five board members resigned over the need for  multimillion dollar repairs and the association’s minutes showed the  board had argued and struggled over approving the repairs.  In short, there were multiple warning signs that the structure was compromised and that repairs were needed.

Following the Champlain Towers collapse, there has been renewed interest by startups who seek to maintain a “CARFAX-like” database of reports related to the operations of condominiums, in order to allow potential purchasers of units to avoid buying into a building with problems such as those suffered by Champlain Towers.  These startups function much like the reports that dealers or car sellers generate to increase the salability of their vehicles.  For the seller of a condo unit in an older condominium, these reports help to facilitate their sale, by demonstrating to the buyer in an easily-digestible form of due diligence that the condo association has a long history of properly documenting its corporate business, properly understanding its maintenance obligations, and timely addressing those concerns.  That report can also demonstrate that the association has not maintained robust records, has a maintenance “blind spot,” is in financial distress, or has extremely expensive ongoing maintenance concerns.  Some of these startups may request records from the association on behalf of a seller, however, standing alone, such companies likely do not have the standing of a “member.” 

Under North Carolina law, condo owners, as members of the association, can request a wide variety of records and documents. However, non-members- including third party database operators- usually have no access to those records. Companies may attempt to gain access to information by basically bullying the board and arguing that they need to claim the association’s profile to avoid bad publicity.  While providing information to these companies may make some units easier to sell, there are real concerns about sharing association records with third parties. How will this affect the association’s reputation, or perceived value to outside parties? Who will control the information once it is shared? Who, if anyone, will correct errors or update information to show that past issues have been corrected? And, of course, associations should never share information from closed sessions (such as collection actions involving personal financial information).

Condo members always have ways of getting information on their association directly in the event of a potential sale, through records request and services used by the association. The association has the ability to update these records, control the distribution of information, and otherwise avoid the misuse that the “CARFAX- like” services companies can involve.  The bottom line is to tread carefully with these services, and consider carefully their pros and cons before diving into use of these services.

If you have questions about this or any other community association related matter, please contact one of our North Carolina attorneys in Charlotte, Greensboro, Wilmington or the Triangle, or our South Carolina attorneys in Greenville and Columbia.

HOA & Condo Associations