By Deborah Goonan, Independent American Communities
For the past three years, I’ve been following the crisis of crumbling concrete foundations in Connecticut and Massachusetts.
Debra MacCoy of Vernon, CT, and several other condo owners recently contacted me, and shared important details about the dilemmas and special challenges they face, as owners of condos and homes in common interest communities.
The problem — defective concrete leads to crumbling foundations
Dozens of towns in Connecticut and several in Massachusetts continue to deal with a widespread problem that’s slowly destroying thousands of homes with concrete foundations. The homes were constructed between the mid-1980s-2016 and built upon concrete foundations, which were poured by numerous contractors.
All of the concrete for the affected homes were supplied by the now defunct J.J. Mottes Concrete Company.
Stone aggregate used to mix the concrete has been traced to Becker’s Quarry in Willington, CT. The Quarry agreed to stop supplying stone to concrete companies in 2016.
The root of the disaster: Pyrrhotite
According to the State of Connecticut’s construction experts, the cause of foundation failures has been traced to the presence of a mineral in the concrete mixture – Pyrrhotite.
About 15 years after tainted concrete is poured, Pyrrhotite starts to expand and break down its structure. The concrete loses its strength as it cracks and crumbles, resulting in premature failure of home foundations.
Pyrrhotite-contaminated concrete driveways and patios exhibit the same effect. But when a foundation fails, it can no longer support the weight of a home, multifamily or commercial building.
Unless the old crumbling foundation is removed and replaced, the structure must eventually be condemned.
Common interest communities hit by crisis, too
MacCoy explained that pyrrhotite contamination has caused basement foundations to crumble in 41 different towns in Connecticut and Massachusetts. To date, more than 770 devastated homeowners have filed claims with the state of Connecticut.
However, almost one fourth of dwellings with failing foundations are dwellings in common interest communities.
Many of them are attached or stacked condominium units that share a foundation. A few of of the condos are detached units with joint ownership of all the foundations in their community.
But some residential dwellings are attached town houses in Planned Unit Developments (PUDs). In the PUDs, each home and its foundation is individually owned. More on that a bit later.
Financial burden for condo owners
To put the matter into perspective, the estimated average cost to repair a foundation is more than $80,000 for a single condo unit and close to $200,000 for a single family home.
Debra MacCoy and her husband purchased a 900-square-foot condo in Vernon for their son, Chris, In 2010. Several years later, Chris moved to a house with space for his home-based business. The MacCoys took over the condo and leased the unit to a tenant. Then in 2016, condo owners in their complex, which consists of more than 200 units, learned that dozens had crumbling concrete foundations.
MacCoy says the current mortgage, condo fees and assessments of her 1980s unit add up to $1,400 per month — and that’s before adding the cost of new foundations. The tenant’s rent covers only about half of those expenses.
Cheryl Cranick learned of problems with her concrete foundation when she tried to sell her condo a few years ago. Now her unit — like all the others with crumbling foundations, is unsellable.
Determined to find a workable solution, Cranick co-founded a group called Connecticut Coalition Against Crumbling Basements (CCACB), along with Tim Heim. The group unites homeowners in their fight for financial help from the federal, state, and local governments.
MacCoy, Cranick, Heim, and hundreds of other condo owners will be forced to walk away from their homes if state and federal aid doesn’t materialize soon.
Hundreds of condo units affected by crumbling foundations
Vernon condo owner Gretchen Shea, a member of CCACB, collects data on the condominium complexes dealing with failing foundations. According to one of her reports on Pyrrhotite damaged foundations:
There are five known complexes with the condition. Three complexes are located in Vernon CT, One in Willington CT, and one in Stafford Springs CT. There are a total of 451 units in these five complexes.
Based on visual inspections of the foundations, at least 209 of 451 units have visual indications of the issue. These buildings are coded Class 2 and Class 3. Class 3 foundations will have priority when replacement is approved. There are 231 units with no visible indications of the condition.
Eleven foundations have been replaced.
Replacing a crumbling foundation is expensive
CCACB also reports that the average estimated cost to repair or replace a single Class 3 condo unit foundation is more than $82,000. The CFSIC covers about 82% of that cost, leaving condo associations to cover the balance.
But that’s not all. In addition to foundation replacement, condo owners must also share the cost to repair or replace “sidewalks, decks, porches, interior basement firewalls, mechanical room framing, and landscaping” impacted by a major reconstruction project.
In the most severe cases, the best solution is to remove the crumbling foundation and replace it. The process involves the use of hydraulic jacks to lift up the home or multifamily structure, removal of old concrete, and pouring a new concrete foundation system.
Once the concrete has time to cure, the building is carefully lowered on top of the new foundation. Not only is the work expensive, it also takes several weeks to complete. Of course, residents must vacate the property during the process.
So far, only one condo association in Connecticut has replaced the foundations of their affected units: Lakeview Condominiums in Vernon.
According to condo owner Ed Oswecki, in August 2017, homeowners paid $821,000 to save 11 homes in their community.
“We assessed all 46 unit owners $19,565.22. Some of the unit owners paid the assessment. For the unit owners who chose not to prepay or could not, the association borrowed the funds,” explains Oswecki. “These unit owners now pay $158.01 per month for 15 years on top of their $300.00 per month condo fees.”
NBC- Connecticut covered the reconstruction process, which began by lifting an 8-unit building seven feet above ground.
Foundations for another 3 units were repaired in place.
Condos Raised to Fix Crumbling Foundation
By Len Besthoff, NBC Connecticut
Published Aug 17, 2017 at 10:52 PM
Connecticut Foundation Solutions Indemnity Company (CFSIC)
In 2018, Connecticut state government created a captive insurance company, Connecticut Foundation Solutions Indemnity Company (CFSIC), which will cover approximately 75% of the cost to replace a crumbling foundation, up to $175,000 per single family home.
A captive insurer is a non-commercial, private company, established for a special purpose. In this case, CFSIC provides limited funding for foundation repair and replacement, where foundations have failed due to the presence of pyrrhotite, a mineral that causes concrete to break down prematurely.
According to its website, CFSIC gets its money from the Connecticut Bond Commission and a surcharge on homeowners’ insurance policies across the state.
CFSIC is currently funded with $100 million, which would be enough money to fund about 570 homes or 4-unit condos at $175,000 apiece. The funds are limited, and, as established by legislation, the CFSIC will stop taking claims as of June 30, 2022.
The CFSIC has established limits for multifamily condominiums and PUDs of up to four units. An April 2019 change has set the limit per unit to $70,000 per unit (an increase from $43,750). Due to a reported legislative “oversight,” condos on foundations with 5 or more units are not eligible for any financial help at all.
3 Severity Classes
The CFSIC divides claimants into three severity classes, based upon a Connecticut licensed engineer’s report of visible damage to a concrete foundation.
Class 1 — no visible damage to the foundation. CFSIC will not process a claim unless it is accompanied by core testing results, which show evidence of pyrrhotite.
Class 2 — cracking associated with pyrrhotite on less than 20% of foundation wall surface.
Class 3 — cracking associated with pyrrhotite on 20% or more of foundation wall surface.
In terms of payment, Class 3 claims will take priority, followed by Class 2 claims, and finally, Class 1 claims.
What about homes that don’t show damage now?
As for concrete foundations that don’t show visual evidence of damage, condo associations face another dilemma. Should they test every foundation now, or assume that all is well, only to face expensive repairs several years in the future?
Shea of CCACB summarizes the plight:
Buildings coded Class 1 pose an additional challenge to Associations. These foundations do not show any indication of crumbling concrete. The challenge is that the CFSIC program allows only one application per condo complex.
Therefore, associations must decide whether to perform core testing to determine if the concrete contains pyrrhotite prior to applying to the CFSIC for the Class 2 and Class 3 buildings, or risk future issues without any assistance from the state program.
Core testing is expensive ($1700 – $2000 per core) and there is no standard for how to process or interpret the results. If performed, these tests may have the unintended consequence of identifying trace elements of the mineral in foundations without any cracking or deterioration. A positive test will require the foundation to be replaced at some point, and will impact the real estate value recovery time period.
Class 1 buildings add $16,170,000 to the CFSIC program costs and $2,910,000 to the loans the Associations will have to obtain.
State funding solutions in process
CT State Legislature is amending the law to include financial assistance through CFSIC for all condominium dwellings.
MacCoy lists several active bills that address the crumbling foundation crisis in Connecticut. But, in order to help hundreds of owners of condominiums, Legislators will need to amend language to include residential condominium dwellings in buildings with more than 4 housing units.
A few of the more notable bills include:
HB5969 – An Act Establishing a Collapsing Foundations Loan Program to Provide Low-Interest Loans to Certain Property Owners.
HB6996- An Act Extending the Foreclosure Mediation Program.
HB7179 – An Act concerning crumbling concrete foundations.
Classifying all condominiums as “residential buildings”
HB7179 is key, because its passage would affect several related bills and assistance programs for owners of homes with crumbling foundations caused by pyrrhotite.
Most importantly, the bill expands the definition of a “Residential Building” to include condominium buildings with more than four units, so that more owners can receive funding through the captive insurer, CFSIC, as well as other financial assistance programs in the state.
The bill also proposes the establishment of an $8 million grant program, to fund innovative solutions to reduce the average cost of foundation replacement from $175,000 to as low as $40,000.
HB7179 was introduced by the Insurance and Real Estate Committee, and is cosponsored by State Representative Geoff Luxenberg, Assistant Majority Leader (D-Manchester).
CFSIC announces increased coverage for condominiums, with exceptions
In anticipation of increased funding for condominiums, last month CFSIC announced that it would take applications from condo owners of buildings with more than 4 units sharing a foundation in need of replacement.
Then on April 15th, the CFSIC announced a new higher cap for condo units, at $70,000 per unit. But, according to CFSIC guidelines, bank owned condos and units purchased at a low price to “flip” are not eligible for financial assistance.
CFSIC’s policy, combined with the shared nature of condominium living, creates a dilemma.
Consider a 6-unit condo building, sharing one foundation. If two units are in foreclosure and bank-owned, and one unit is owned by an institutional investor, only three unit owners will be eligible for financial help. The condo building would receive, at the most, $70,000 x 3 units, or $210,000.
Therefore, owners of three units would also be on the hook for the full cost of repairing the foundations under three ineligible units.
Consider also that CFSIC’s aid covers only about 80% of the actual cost of a foundation replacement. In this example, condo owners would have to finance an additional $315,000 to cover the gap.
For owners like the MacCoys, who are already paying $1,400 a month carrying costs for their condo, the additional cost of a massive reconstruction loan seems unthinkable.
Lower caps for condo, PUD homeowners
As state officials try to sort out a fair and reasonable financial assistance program, condo owners bear the burden of trying to explain different ownership structures in their communities.
In most cases, a Condominium Association owns all the foundations in its community as a “common element.” Typically, each individually owned condo unit consists of the space from the drywall in, plus permanent contents such as cabinets, fixtures, flooring materials, and wall finishes.
In essence, in a stacked, apartment-style condo, you own a “box of air.” Everything else in the community is owned in common by the all owners in the Association, with joint financial interests and responsibilities in the common property.
Remember, the CFSIC now caps payment of condominium association claims at $70,000 per unit.
However, some common interest communities consist of attached row homes or townhomes, legally organized as Planned Unit Developments, or PUDs. In several of the PUDs with crumbling foundations, each dwelling is individually owned from the foundation to the roof.
CFSIC will also pay up to $70,000 toward the cost of foundation replacement of PUD units.
To add to the confusion, however, condominium associations sometimes include detached housing units, with the same appearance as any single family home. The difference is, owners of detached condos generally don’t own any land beyond the footprint of their foundations.
In some communities, owners of detached condo units own a “box of air,” and all home exteriors (including foundations) are jointly owned by the condo association.
In the case of site condominiums, the entire structure of each detached unit is individually owned, while all owners in the community share an interest in the land and community structures (such as a clubhouse or pool) outside of the individual units.
The key point is that a condo association creates joint ownership of common property, no matter what form the housing takes — attached or detached, stacked units or townhouses.
Detached condo vs. single family home
The size and form of condo units vary just as much as they do for single family homes that are not governed by a condo association.
With so many different variations of housing structure and common ownership models, it’s a challenge to come up with a fair and equitable way to assist homeowners.
And as the Legislature reworks the definition of “residential building” to include common interest housing, there are some unintended consequences.
Dave Antinore of Stafford, recently learned that, under the new CFSIC condominium cap, he will receive only $70,000 toward foundation replacement, even though his unit is structurally equivalent to a detached single family home. If his detached home were not part of a condo association, the Antinore would be eligible for up to $175,000.
What about insurance?
Insurance companies typically deny homeowner’s claims, because the deterioration does not constitute a “sudden” structural collapse. In fact, insurer added language supporting this exclusion to many policies over the past twenty years. The courts have upheld these exclusions.
As of December 2018 and January 2019, three insurance companies agreed to offer limited reimbursements (Insurance Benefit Program) to homeowners in the state of Connecticut: Travelers, Liberty Mutual, and The Hartford.
The Insurance Benefit Program is meant to help homeowners cover the gap between CFSIC grants and the actual cost of replacement.
However, at this time, none of the insurance companies offer coverage through condominium master policies. Again, this policy shortchanges hundreds of homeowners in Connecticut.
U.S. Senators seek federal help for home and business owners
At the federal level, Sens. Richard Blumenthal (D-CT) and Chris Murphy (D-CT) have filed legislation to assist homeowners in both Connecticut and Massachusetts.
Blumenthal’s bill, entitled “The Crumbling Foundations Small Business and Homeowners Assistance Act of 2019 (S. 355),” seeks up to $20 million per year for the next five years from FEMA.
In part, the bill reads as follows:
The [FEMA] Administrator shall award grants to States to provide assistance to owners of small businesses, condominium associations, and homeowners located within the State to prevent, mitigate, and repair damage to structures that have sustained or may sustain damage due to concrete foundations that contain pyrrhotite.
Murphy’s bill, the “Aid to Homeowners with Crumbling Foundations Act (2019-2020) S. 356,” seeks $100 million from HUD over the next 5 years, to fund state-level foundations that have been set up to assist homeowners affected by crumbling foundations caused by pyrrhotite.
Similar legislation was filed last year, but it didn’t gain much traction in Congress. And even if had, the bill did not include consideration for condo buildings of more than four units.
This year, MacCoy and CCACB have been promised that the bills will be amended to include condominium dwellings of all sizes.
Here’s the current working definition in Senator Murphy’s Aid to Homeowners with Crumbling Foundations Act:
the term “residential building” means any family dwelling, including any building, condominium unit, or dwelling in a planned unit development;
This year, both Blumenthal’s and Murphy’s bills are co-sponsored by Senators Elizabeth Warren (D-MA) and Edward J. Markey (D-MA).
Home and condo owners remain hopeful
Restoring thousands of homes is no easy task. Paying for new foundation work is the hardest part for homeowners. State and federal Legislators continue to create funding solutions. Still, owners of residential units in condo associations and PUDs appear to bear a bigger financial burden, and a longer road to recovery.
MacCoy and fellow owners of homes in common interest communities remain cautiously optimistic that their crumbling foundation nightmares will soon come to an end.
Lawmakers May Consolidate Hearings on Dozens of Bills on Crumbling Concrete
By Len Besthoff, NBC CT
Published Feb 12, 2019 at 6:17 PM
Editorial: Why shut these crumbling condos out of state repair funds?
By EDITORIAL, Hartford Courant
NOV 16, 2018 | 3:30 PM
Condos are now eligible for concrete funding
By Eric Bedner
Apr 15, 2019 Updated 10 hrs ago
Latest News…April 15, 2019 (CFSIC)
An Important Change for Condos…
CT senators seek funds to fix crumbling foundations
By Ana Radelat, CTMirror.org Published 2:54 pm EST, Thursday, February 7, 2019
Blumenthal and Murphy introduce bills to provide relief to homeowners and businesses with crumbling foundations (U.S. Senate Press release, Feb. 7, 2019)
What’s The Difference Between A Condo, A Townhouse And A PUD?
By Lawrence “Larry” And Sheila Agranoff, Business | Mar 16, 2012 5:44 pm ET | Updated Mar 20, 2012 8:31 pm ET
Buying a Condo: What Property Will You Actually Own?
Knowing what’s yours as a condo owner — and what’s your responsibility to repair or replace — may be less obvious than you’d imagine. By Beth Ross