New Requirements for Condominium Loans

To reserve or not to reserve. Community associations have debated that question endlessly, and ignored it periodically, for years. But the tone of that perennial discussion is about to change, because the question – to reserve or not – is no longer academic. It has been made real, and pressing by new rules imposed by Fannie Mae and Freddie Mac – the two secondary market giants that purchase most of the residential mortgages financial institutions originate and set the standards those loans must meet. Those rules, published late last year, require lenders to verify for virtually every condominium loan they approve that the community association has a line item in its budget calling for annual reserve contributions equal to 10 percent of revenues. Even without conducting a scientific survey to test the theory, it is probably safe to assume that few community associations, if any, currently meet that requirement. In communities that don’t comply, owners will have trouble refinancing an existing mortgage or finding buyers able to purchase units they are trying to sell. Boards that have avoided the reserve question will have to address it. Community associations that haven’t established reserves or funded them adequately will have to do so and all communities will have to begin thinking more seriously than many have done in the past about their reserves and their reserve funding policies. The elephant in the room is about to take a seat at the table.    Read more

Religious Issues Again in Courts, News

No Right to Mezuzot at Condos

Observant Jews have no right under federal law to install small scrolls known as mezuzot outside the doors of their condominiums, a federal appeals court declared yesterday. The 7th U.S. Circuit Court of Appeals ruled, 2-1, that the condominium association at Shoreline Towers in Chicago did not run afoul of the Fair Housing Act when managers removed the religious items pursuant to a rule barring the placement of signs, shoes, mats, and any other sort of object outside residents' doors.    Read more

Freedom of religion, but not from HOA

Hector Febus believes he is being forced out of his Waterford Lakes home strictly based on the traditions of his Santeria religion. On July 5 he received a notice from his landlord to vacate in less than two weeks, with an attached list of alleged homeowners’ association violations from Waterford Lakes Tract N19. The landlord could either go through an expensive mediation process or choose to fight the HOA in court. He instead decided to ask Febus to leave. “None of these allegations sent to my landlord are true,” Febus said through a translator. “It is not fair and it is illegal. I did not do anything wrong. It is persecution and discrimination against my religion.” Several weeks ago police responded to a complaint from HOA President Marc Wasko about a large group of people entering Febus’ home along Lake Underhill Road with several kinds of farm animals.   Read more

Homeowners or Condominium Association Fees: Nondischargeable, But Maybe It’s Not a Problem

Section 523(a)(16) of the bankruptcy law, as amended by the 2005 Bankruptcy Reform Act, makes homeowners or condominium association fees nondischargeable, but only if the association fees arose after the date the bankruptcy was filed, and only for so long as the debtor has an ownership interest, or some other equitable interest, in the property. A post-bankruptcy sale or foreclosure of the debtor’s interest in the property, once fully completed, ends any further accumulation of association fees. For debtors who are keeping their townhouse or condominium notwithstanding their bankruptcy filing, the nondischargeable nature of post-bankruptcy association fees is not a problem. However, debtors who plan to surrender their townhouse or condominium in the bankruptcy are vexed by the question of what to do about post-bankruptcy association fees.  Read more

How Did We Get Into This Mess?

I am old enough to remember Laurel and Hardy. One of their stock lines was “Well, here's another nice mess you've gotten me into.” As an HOA Board member or just a homeowner have you ever felt that way? Have you ever just looked around and suddenly said: “How did we get here?” All of us have and all of us have scrambled then to get out of the mess. Peter Senge in The Fifth Discipline mentions a few laws of how systems really work. In my last article I mentioned three things that sometimes indicate an organization has a learning disability. This article deals with some of the “laws” or processes that may be operating around us.   Read more

Fight Nights, or Fight Nice?

Much has been written about the lack of civility within community associations, and in particular, between board members and homeowners. Why do these situations arise so often? One person said she thought it was because “condo meetings almost always lend themselves to arguments because, just like a marriage, money is involved.” While there is validity to that statement, I believe the reason there is so much conflict in communities has more to do with a lack of appropriate communication on matters at hand, very poor advocacy and communication skills on the part of individuals, and virtually no consequences for the obstructionists. Add ego, frustration, plain bad manners, and certain psychological disorders, and you have all the ingredients for the average cantankerous association meeting. Let’s look at what can take some of the fight out of fight night.   Read more

Maintenance - A Team Effort

Many articles have been written over the past few years regarding different aspects of maintenance programs, how to, where to, who to and who pays. Only this past month we saw two articles in the Journal discussing some of these aspects of maintenance. There is a reason behind this prolific outpouring of knowledge on this topic. One of the most daunting tasks for associations and boards is maintaining the common property. It is a fiduciary responsibility; and, lacking good judgment and appropriate advice, the board may be sued for failing to perform this function properly.  Read more

The Controlling Director

How many of us have experienced the board member who wants to control all aspects of his or her community association’s operation from finances to personnel to housekeeping? This controlling person just doesn’t want to accept that there is a division of responsibility in the operation of an association. How do you handle such an individual and keep the association out of trouble? The answer lies within legal and insurance purviews. A controlling director may volunteer to serve as the manager without compensation. As such, he would not be covered by the association’s workers compensation insurance in the event he is injured. If he were to receive payment for his services, then many governing documents and state statutes require that he no longer serve on the board. The board’s decision should be easy: do not allow a board member to serve in an association-related role that is in any way connected to employment, and approve a resolution agreeing not to hire board member to avoid any perception of a conflict of interest.   Read more

HOA Nest Feathering

When people are elected to positions of power, there is always the chance they may knowingly or unknowingly engage in a conflict of interest. Conflicts of interest come in several shapes and sizes. It is almost impossible to avoid them but how they are handled is critical.  For example, when it comes time for painting or roofing and your HOA has limited funds, whose buildings get done first? If the board president decides to paint his own unit first, there is an obvious conflict. Rather than be exposed to well earned criticism, why not ask a third party consultant to make the call in writing and share it with the owners? This technique can be used in many situations where limited resources cause some owners to benefit over others. Avoid the perception of self dealing. Get someone else to make the call.  Read more

Brother/Sister Owners Of Adjoining Condominium Units Reap Attorney’s Fees Of $531,159 As Prevailing Parties In An Action Where They Won Damages Of $4,620 And Equitable Relief Requiring Disclosure of A Building Wide Problem.

In 1998-1999, brother and sister (the eventual plaintiffs) bought two adjoining units in a Westwood 13-story condominium building that was constructed in the 1960-1962 time frame.  Slab penetrations in concrete throughout the building made for piping configurations were neither filled nor fire proofed, but existing building codes allowed for the unfilled floor penetrations to remain as an existing, non-conforming condition.  Brother/sister and some of their tenants complained about smoke odors in the units; investigations began, and the slab penetrations were identified as the likely culprits.  The condominium association’s expert also blamed the slab penetrations, further indicating that they posed a significant fire safety risk.  After lots of investigations and side wranglings, the condominium board held a hearing on brother/sister’s requests to repair the slab penetrations adjacent to their own unit and all penetrations throughout the building.  Board denied their requests and imposed fines for brother/sister’s failure to fill the holes adjacent to their units.  Board also obtained a contractor bid indicating that the brother/sister penetration work could be completed for $2,700 per unit, a bid declined by brother/sister.  Predictably, litigation ensued.   Read more

Preventive Maintenance … Prevents Death and Disaster. For Real

It's always tempting to make the public areas attractive or keep the unit-owners monthly payments low instead of making repairs and capital improvements. But maintaining your property is not only prudent management, it can save lives and money, avert lengthy litigation with your insurance company, and keep the board out of court — or even jail. Let's walk through some scenarios. Your roof, which is five years past its useful life and its warranty, occasionally leaks. The managing agent and the super both say you should get a new roof, costing $30,000. But you want to redo the lobby, so you have the roof patched instead. You proceed to have your lobby redone — hey, lookin' good! — and whenever anyone complains about a leak from the roof, you patch it.      Read more

Not by-passed: Living in limbo in targeted Squirrel Ridge

A few months after Bill Massie moved to 312 Squirrel Path in the 1980s, he picked up the daily newspaper and was stunned by what he saw: a four-lane highway was planned to roll right through his house.  Now, 20 years later, the Western 29 Bypass still has not been built, and Massie's Squirrel Ridge neighborhood continues under a cloud. But as the Bypass seems less and less likely to materialize, the little neighborhood-- that once even pleaded to be destroyed-- may have the last laugh.   Read more

Smart Irrigation Controllers – How Smart Are They?

Do you know what a Smart Irrigation Controller is? No? Well, don’t feel bad. Lots of people don’t. A Smart Irrigation Controller can save you and your clients money with very little time and effort. Smart controllers are irrigation clocks that automatically adjust irrigation run times in response to environmental changes. Smart controllers use sensors and weather information to manage watering times and frequency. As environmental conditions vary, the controller increases or decreases irrigation. Smart controllers have the ability to turn off your sprinklers automatically during rain, high wind or low temperature. Smart controllers reduce outdoor water use by an average of 15 to 30 percent. They also reduce over watering, which can cause fungal disease and insect problems.   Read more

Security and Snooping Directors

QUESTION: Can associations install surveillance cameras? Doesn't it violate our privacy as owners?

QUESTION: The board installed security cameras but won't tell us where they installed the monitors. Can they refuse to give us this information? We are concerned that snoops on the board are watching us from their own condos.

QUESTION: Can associations hire private security guards to stop vehicles in the community, enforce speed violations with a radar gun, and ticket for Vehicle Code violations?   Read more

[Editor's Note:  "I know its summer and I know the following article is talking about large institutions, but I think this is something northern management companies can start talking about with their snow removal contractors -  and to think about creating "Snow Manuals" of their own"]

How To Eliminate Rock Salt and Sand

The University of Michigan started putting together a rock-salt-reduction program in 1989. The university wanted to use brine — a salt and water mixture — and other liquids as a substitute for rock salt and sand. “We’re very big on sustainability and environmental issues,” Lawter says. “So we have a pretty robust salt-and-sand-reduction program.”   Read more

Snow and Ice Removal: Preventive Maintenance

With new technology constantly surfacing, departments have to look ahead to see what products and services will help them not only next winter, but five years down the road. “We keep tweaking (the plan) every year because new things happen,” Holysz says. “New technologies are out there, new equipment is out there, new tools of the trade (exist).”   Read more

Trusting your Professional Service Providers

Homeowners associations are comprised of people from all walks of life, and for that very reason their boards of directors often consist of individuals who bring various levels of knowledge to the administration of the association. Some community associations will elect members to the board of directors based on their ability to offer specific areas of expertise, such as attorneys, accountants, or other trades considered to be of importance to their community. Still other association members will elect board members based more on their dedication to the community and a strong desire to serve their fellow homeowners. While these individuals may not have direct expertise in any particular area, they will often have the ability to expend the time demanded of a board member.   Read more