YARD SALE – Selling Your Association’s Yard?
By Stephen H. Moriarty II
Was your community built in the 1960s or 1970s? Is its design or layout suitable for your use today? Is there open space going unused, or structures that are no longer functional but continue to appear on your budget and capital reserve study? Is your community in need of additional funds in order to match your annual and long-term needs? Why not have a yard sale?
Why not sell the yard?
As unusual as this might seem, some communities have confronted these very questions and decided that parting ways with some of their spaces or structures might be in their best interest.
A design that was logical and functional a few decades ago very likely is unsuited for today’s needs. A complex that was built originally as rental apartments then converted to a condominium twenty or so years later is a prime example. A modest sized swimming pool or a single (asphalt) tennis court may have been attractive to young renters many years ago but now could present little more than line items on the annual budget and capital reserve study. The advent of up-to-date County-maintained community centers, replete with pools, saunas, racquetball courts and the like, have made some of these facilities obsolete.
Communities age, as do their residents. Original owners may be replaced by renters or older adults who have downsized. All the same, capital components must be maintained and eventually repaired or replaced. All of this comes at the expense of the association members.
One local condominium recently utilized a consultant in navigating its way out of this conundrum. Identifying underutilized, unwanted and deteriorating assets, the consultant guided the association through the process of removing what had become an expensive blight and converted it into a source of revenue. There, a swimming pool and attached bathhouse had gone unused because the cost of instituting necessary repairs had become insurmountable. Rather than leaving them shuttered, only to diminish the values of the individual units, the association teamed with their consultant and sold the pool and bathhouse property. It will soon be developed by an outside party.
As the condominium learned, a large check was going to change hands; the question was whether the association was going to be paying it or receiving it. By choosing the latter, the condominium reduced its maintenance, repair and capital reserve obligations and improved its financial standing at the same time. It now has the ability and flexibility to fund any of several ventures: improve or add to the original common elements, upgrade the exterior appearance of the structures or the interior hallways, or any of a long list of things it has put off for years due to economic constraints.
Such an internal redevelopment can aid a community in more ways than just reducing obligations and gaining revenue. The process also can be used to redesign or reconfigure parking areas to accommodate the needs of all the residents. Other facilities can be incorporated into the redevelopment scheme and remain under the ownership of the association but improved by the developer as part of the larger plan.
The economic collapse of 2008 cast a long shadow over the local real estate market. For older communities, whose owners may be shackled by mortgages that outstrip the values of their properties, there is little that may be done, internally, in order to improve the situation. There is only so much value that can be improved by updated maintenance, fresh paint and landscaping. Even if owners could take a step back and envision a more efficient and profitable use of the entirety of a community’s property, they could never afford to put it into action on their own. Teaming with a professional organization (that works on commission, not a fee) offers associations an alternative to just waiting for the region’s real estate market to recover. They can take control of their own destinies.
The objective, of course, is not just to sell and rebuild portions of an association’s property, but to install creative, viable and affordable changes that result not only in a new use for otherwise underutilized land or facilities but to improve the underlying community’s “livability” and objective value.
If portions of your physical plant have become significant cash drains due to increased costs of maintenance and repair, or if they have drifted into disuse, consider the possibility that someone else might envision a better use the same asset and be willing to foot the bill to make it happen. As always, we recommend consulting with legal counsel prior to entering into any such arrangement or proceeding with this type of project.