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So as most are probably tracking, the city council passed legislation a little while ago in response to the deadly 2017 Marco Polo fire. The most recent iteration of the legislation, Honolulu Ordinance 19-4 I believe, requires the installation of a sprinkler system or otherwise modifying your building to ensure that it has certain specified fire proofing: https://www.honolulu.gov/rep/site/hf...e_19-04_v2.pdf
My building is looking at things now and have determined that we will be going the sprinkler route. Per two assessments done, the fireproofing in my building is only technically an issue for less than two week of wall space by the cabinets in the bathrooms, but this is not a realistic risk of fire danger. Yet, we are still required to go through with everything per the terms of the law. Due to the specifics about the area to be treated, option number two really isn't feasible.
Anyone else going through this process right now? If so, how are your buildings going about things? I'm particularly interested to hear the different financing options (e.g. increase in monthly condo fees vs. some other method). My building's contractor is claiming that we are the first building on island (apart from Marco Polo) that is addressing this issue, which I'm skeptical of (the requirement isn't due until 2028, but those who get a jump start now vs. waiting until years from now will almost undoubtedly save on overall costs). Since this is a legal requirement, I'd imagine that these upgrades would have a somewhat positive impact on pricing if and when people decide to sell.
The building I own in was built with a sprinkler system. So I am not impacted but have been watching the issue.
Have you been given any idea yet what the cost per unit might be if they go the route of installing a sprinkler system ? That is something I'm quite curious about as well. I assume the costs will vary depending on building specifics.
I don't expect this will result in a positive impact on pricing when people sell. Prior to the ordinance, I think only a few people ever considered sprinklers or not. And after the Marco Polo fire, I think some people may have looked for a unit with sprinklers, but not enough to impact pricing (again, in my opinion). So now, with all units required to add sprinkler systems, I don't feel it alone will result in higher prices.
I actually think that IF the cost of installing sprinkler systems results in very high Special Assessments, you would likely see some people deciding to sell and prices actually dip a little in buildings that need to install systems. But again, that is just my thoughts. I think a lot will depend on the costs to install.
So the meeting my association held last week with one of the contractors was to basically decide (decision still hasn't been formally made, but it will almost certainly be for sprinklers as the other option really isn't an option for my building) on which option to go with, so we haven't gotten to the point about pricing yet.
But when we were first having meetings on the issue in 2018, there were rough estimates of $3-$10k per unit, but those were based on comps on other cities so you can likely tack on 20% to those figures easily for Hawaii; I know a wide range! I wouldn't be surprised if it's closer to the higher end of that figure, especially as they have to set up a separate water line for the system.
Yeah, I would estimate at the higher end as well. I know some associations try to go out and secure a loan to pay the cost of some of these type of things and then increase the HOA dues to cover the cost of the loan payments.
Other HOA's just give each unit a separate assessment that needs to be paid and the unit owner can either pay it in cash or secure their own personal loan.
Personally, I prefer units to get their own assessment rather than an increase in HOA dues. Increasing HOA dues to pay for an Association loan means you end up paying for interest. And I think high HOA fee's suppresses demand for a building and, thus, prices.
You've got a few years to get it done so you could just do a large monthly assesment now to build up some reserves to cover the payment in a couple years. But if it were me, I'd want to bite the bullet now, keep my monthly dues lower and just get a one-time lump assessment and get it over with now. The price will only be higher later.
Anyway, those are my thoughts. I know there are a lot of buildings that will be affected.
Yeah, I would estimate at the higher end as well. I know some associations try to go out and secure a loan to pay the cost of some of these type of things and then increase the HOA dues to cover the cost of the loan payments.
Other HOA's just give each unit a separate assessment that needs to be paid and the unit owner can either pay it in cash or secure their own personal loan.
Personally, I prefer units to get their own assessment rather than an increase in HOA dues. Increasing HOA dues to pay for an Association loan means you end up paying for interest. And I think high HOA fee's suppresses demand for a building and, thus, prices.
You've got a few years to get it done so you could just do a large monthly assesment now to build up some reserves to cover the payment in a couple years. But if it were me, I'd want to bite the bullet now, keep my monthly dues lower and just get a one-time lump assessment and get it over with now. The price will only be higher later.
Anyway, those are my thoughts. I know there are a lot of buildings that will be affected.
That all makes a lot of sense. If we do go the assessment route, members will still be able to cut a check for the full amount and have their unit's monthly fees be unaffected, which is good. We are also replacing the sewer lining pipes for my building, so I do have some thinking to do! I did just refinance, which saves me a few hundred dollars a month, so that will give me more options no matter what happens.
Is yours a large building or a smaller building ? And how old is it ? Do you feel your HOA has been well managed and building its reserves over time for infrastructure repairs ?
My building is older (1965), and very large (around 1,100 units) but they have always had a very substantial reserve and large item repairs are pretty well planned. The nice thing is that if some unexpected expenses comes up, a small assessment can generate a large amount of money quickly.
Anyway, good luck. A lot of buildings will be facing the same issues with respect to sprinklers.
Anyone else going through this process right now? If so, how are your buildings going about things? I'm particularly interested to hear the different financing options (e.g. increase in monthly condo fees vs. some other method). My building's contractor is claiming that we are the first building on island (apart from Marco Polo) that is addressing this issue, which I'm skeptical of (the requirement isn't due until 2028, but those who get a jump start now vs. waiting until years from now will almost undoubtedly save on overall costs). Since this is a legal requirement, I'd imagine that these upgrades would have a somewhat positive impact on pricing if and when people decide to sell.
Your building is likely an early adopter - and impressive they are adopting this now. Costs will definitely be higher in the future - and now is the time to strike with interest rates so low.
As far as how to pay for this - that really depends on your HOA - but they should have several options such as you cut a check (many homeowners will draw on a cheap home equity loan) - they may proactively team with a bank that gives preferred financing - you don't want your HOA fees to go up, that is the least desirable.
I don't think the units will increase in value with the work being done - rather, buildings opting out or delaying this work will likely have negative pricing impacts at some point in the future.
Quote:
Originally Posted by prospectheightsresident
But when we were first having meetings on the issue in 2018, there were rough estimates of $3-$10k per unit, but those were based on comps on other cities so you can likely tack on 20% to those figures easily for Hawaii
You should be prepared for at least $10K+. The good news, interest rated are so low now is the time to draw on it.
Is yours a large building or a smaller building ? And how old is it ? Do you feel your HOA has been well managed and building its reserves over time for infrastructure repairs ?
My building is older (1965), and very large (around 1,100 units) but they have always had a very substantial reserve and large item repairs are pretty well planned. The nice thing is that if some unexpected expenses comes up, a small assessment can generate a large amount of money quickly.
Anyway, good luck. A lot of buildings will be facing the same issues with respect to sprinklers.
My building was built in 1961 so older, and has 200 units. My association is pretty well run and we have at least $1.5 million in reserves. Most recent community projects have been repainting the building exterior, roof replacement, changing the rooftop pool from fresh to salt water, and recreation area tile replacement, which took place over the past few years.
I do know that the building is leveraging its reserves to help secure better rates for the sewer line replacement. Apparently a lot of older buildings will be coming due in the coming years for sewer line replacement as the salty air quality has cut the general usable lifespan for these pipes by a lot according to our contractor, who is also working on multiple other buildings for this issue.
I'll probably end up just cutting a check for both projects, though I see many people being forced to sell due to the expenses.
Your building is likely an early adopter - and impressive they are adopting this now. Costs will definitely be higher in the future - and now is the time to strike with interest rates so low.
As far as how to pay for this - that really depends on your HOA - but they should have several options such as you cut a check (many homeowners will draw on a cheap home equity loan) - they may proactively team with a bank that gives preferred financing - you don't want your HOA fees to go up, that is the least desirable.
I don't think the units will increase in value with the work being done - rather, buildings opting out or delaying this work will likely have negative pricing impacts at some point in the future.
You should be prepared for at least $10K+. The good news, interest rated are so low now is the time to draw on it.
Yeah, the lower interest rates are a big reason why my association wants to get the ball rolling now as opposed to later. Many aren't happy about it, but realize the benefits to getting this started now.
I sold my condo in an older building a few months ago. This building was definitely included in the requirement for the fire code evaluation and possible sprinkler install.
Good on your board for trying to get ahead of it. It’s not just the cost of things that will go up, but demand to get the work done.
It’s a process - go through the questionnaire, get an evaluation - act upon the changes that need to be made. Each of those milestones are a couple years apart. So really, I don’t think my previous building will have to actually do any sprinkler work for several years. They are very busy with other expensive projects to even begin to fathom adding sprinklers. Once they have to get them in, I feel bad for the existing owners and the costs they will have to pay.
The issue is going to be that all the buildings needing sprinkler work are going to be looking to do it at the same time. Only some any companies on island can even do the work. I’m assuming that the chosen contractors will be insured - some folks go with uninsured vendors and pay the price later. But with all that demand, and no labor - prices will skyrocket. Any time you mention that you need work done for a condo - the prices get inflated anyway...insurance and liability is partly to blame for that.
I am not surprised that the contractor said your building is the first to look at doing the work.
As far as the work increasing the value of the units in a building....and am not convinced that it will. Sorry to be negative about it, but there are some things in play that fight older buildings and units retaining their value. It was very hard to sell my unit. It was tastefully remodeled and in a ‘desireable’ building with great amenities, solid reserve, sane board of directors, excellent staff. But the thing is - dues never go down, even when expenses go down. Older buildings have things that need to get fixed, and fixing them is expensive. As dues go up, affordability goes down. To balance it out, prices don’t appreciate as much as the rest of the market. People want to buy in new buildings that don’t have the impending repairs and replacements that have to be paid for. Elevators, windows, piping - all of that stuff is crazy expensive.
And that’s even before you factor what will happen with the current economic disaster that is about to take hold. As people don’t pay their mortgages, they don’t pay dues either. The bills have to be paid, so who will pick up the slack? The other owners. So dues will go up, values will go down. Once they go up, dues are not going to go back down. And high dues affects affordability and brings prices down even further.
I am not buying a condo in Honolulu again. Now that I know...the math just doesn't work. It is less expensive to rent, hands down. While I lucked out and was able to sell before Covid hit, things are looking pretty grim for anyone wanting to sell in the next couple years. Literally just last week a unit in my old building, 20+ floors higher than my unit, went into escrow for $35K less than mine sold for. And I had to drop my price ALOT before it would sell. Anyone that sold this time last year caught the market at it’s peak. I suspect it will take a good 4-5years before that level returns.
Disclaimer: This is all just my opinion, it’s not investment advice, please do your own research.
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