Condo Issues.com

When Community Associations Lose "Critical Mass"

2012-01-05T10:39:00.000-08:00

The Consequences to a Community Association of the Loss of Human Energy By Tyler P. Berding, JD, Ph.D. (Editor's Note: The following article comes from our historical file. It was first published in 1997. The message is equally applicable today--community associations which ignore proper management, fail to encourage owner involvement, and do not adequately fund for future repairs will

The Contractual Community

2012-01-04T16:24:00.000-08:00

Why Community Associations Are Not "Governments" By Tyler P. Berding, JD., Ph.D. Editor's note: This article was originally published several years ago. In light of the continuing debate (see post below on a similar topic) over the legal nature of a community association, it is being reprinted here. Articles and blogs devoted to the analysis and, occasionally, criticism of community

Excerpts From an Ongoing Debate

2012-01-03T11:07:00.000-08:00

Do owners believe CCRs are contracts? And why that doesn’t matter! By Tyler P. Berding, JD., Ph.D. Editor’s Note: Evan McKenzie is an Associate Professor of Political Science at the University of Illinois at Chicago. He is also a lawyer and has written extensively on the phenomenon of private government as applied to housing. He has written two books entitled “Privatopia” and “Return to

The Perils of Hidden Damage: Part II

2011-12-30T13:53:00.000-08:00

How do you fix it, What Happens if you can’t? By Tyler P. Berding JD., Ph.D. Every community association will face a major reconstruction project several times in the life of the development. This may occur because of clearly anticipated problems, such as re-roofing or re-painting, but it can also occur because of completely unanticipated (and unreserved-for) problems such as dry

The Perils of Hidden Damage: Part I

2011-12-30T13:48:00.000-08:00

Report: State spurred gated developments

2011-12-30T13:05:00.000-08:00

"Developers have a financial incentive to set association fees on the low side — they want to sell lots to builders and homeowners. High association fees might scare off potential buyers. Also, developers may believe the fees do not need to be high in the beginning because maintenance costs in a new community should be fairly low... It could leave a new association in the hole as it gets

Rentals, Yes--Condos, No?!

2011-12-27T13:03:00.000-08:00

The answer to a blogophile’s prayer? If you check in regularly with the community association social media—blogs, Twitter, Facebook—you cannot miss the group of correspondents who have a decided bias against community associations. It’s not always possible to separate fact from fiction, or personal bias from social concern, but the message is clear—there are many people who don’t like

And Justice for All

2011-12-01T15:31:00.000-08:00

How and why to provide meaningful notice and an opportunity to be heard to members of a Community Association Steven S. Weil, Esq. Chapter 15 of Robert’s Rules of Order begins like this: “Every organization has the right to enforce its rules and expect ethical and honorable conduct from its members. Most organizations have discipline problems from time to time. A discipline problem

Be Prepared!

2011-11-18T06:32:00.000-08:00

Natural Disasters aren’t the Only Reason for Major Reconstruction of a Community Association Big Surprises Every community association will face a major reconstruction project several times in the life of the development. This may occur because of clearly anticipated problems, such as re-roofing or re-painting, but it can also occur because of completely unanticipated (and unreserved-for)

New FHA condo rules cutting owners' loan options

2011-10-23T11:27:00.000-07:00

Editor's note: The following article has appeared in several major newspapers recently. It is very relevant to the readers of this blog...Thanks to Evan McKenzie for his post about this article. "...the new rules put board members into legal jeopardy by requiring them to sign certifications attesting that the condo documents comply with all local statutes and that they have no knowledge of

City in a Salt Pond Revisited

2011-10-13T09:52:00.000-07:00

OP-ED: Future salt pond residents, left holding the (sand) bagOctober 13, 2011, 02:39 AM By Tyler P. Berding As an attorney who has defended Redwood Shores homeowners and who has represented homeowner associations battling over responsibility for flood protection — and the resulting damages when it fails — I have watched Cargill’s proposed new city-in-a-salt-pond moving forward in Redwood City

Look Closer. Or Else!

2011-10-05T21:55:00.000-07:00

We have written many times about the difficult future of the housing industry and that of common interest developments in particular.[1] Underfunded reserves have given way to underfunded operating budgets as the economic crisis deepens and community associations are finding layoffs and foreclosures beginning to

Private New Towns--A promising new concept saddled with an old problem?

2009-03-19T21:04:00.000-07:00

The City of Hercules, once known for The Hercules Powder Company, a manufacturer of dynamite, is redeveloping its old industrial properties into what has become one of the most explosive new ideas in housing and one of the finest communities of its type on the West coast. Call it the anti-suburb plan; Hercules has employed smart growth and green planning concepts to create commuter and

Is Reserve Funding Mandatory?

2009-03-09T17:55:00.000-07:00

Can an Association Legally Defer Funding Reserves Necessary for Repairs and Renovations? There is a continuing debate in community associations over how much cash an association must set aside to adequately fund its operations and reserve accounts, and at what level the assessments must be set to obtain that cash from the members. Boards of directors frequently face the dilemma of

Hang Together or Hang Separately?

2009-02-15T19:24:00.000-08:00

Selling a Distressed Common Interest Development as a Single Parcel: Is Partition an Alternative to Losing it to Individual Foreclosures?To view the future of many common interest developments take a look at the present-day reality of those recent condominium conversions that were born with serious maintenance issues and a major cash deficit. The financial condition of these projects shows us

The "Soft-Story" Problem and Earthquake Safety

2009-01-23T13:19:00.000-08:00

Another Issue for Condominium ConversionsA recent article[1] in the Los Angeles Times[2] highlights an old problem that may have new consequences. The Northridge earthquake occurred 15 years ago and many southern California apartments suffered extensive damage as a result. One complex in particular however, was deadly. The Northridge

A Reader Views the Future of His Community

2009-01-05T20:35:00.000-08:00

Jack Denman is a reader and our occasional correspondent and President of his homeowners association. Taking our concerns to heart, Jack has worked hard to stave off the financial obsolescence troubling many associations and of which we have so often written. Here is his account of the success he achieved in convincing members to raise assessments to stay even with the true cost of ownership.

Worshipping At the Temple of Greed: Fraud, Not Stupidity, Caused Our Economic Mess

2008-12-24T08:42:00.000-08:00

In March of this year, we wrote a short piece entitled, "Who are the Brains behind the Housing Crisis?" (March 2, 2008) We questioned how so many of our best and brightest young people on Wall Street, from the very finest universities, working for well-respected companies like Lehman Brothers, Goldman Sachs, and Merrill Lynch could err so badly. Later we found evidence that at least one computer

Your Homeowners Association is Broke

2008-12-03T19:51:00.000-08:00

Who do you Pay When the Cash Runs Out? We’re living in troubled times. The American economy hasn’t seen anything like this since 1929 and we won’t likely be out of it for several years. Homeowners associations, like the rest of the country, have entered a period of uncertainty, but more to the point, they have entered a period when the cash pool is drying up. Foreclosures, layoffs,

No Right To Refuse Payment

2008-11-17T15:12:00.000-08:00

The Court Turns a Right Into a Duty as it Orders a Board to Assess its Members to Pay a Creditor.A 2005 decision of the California Second Appellate District Court of Appeal in JamesF. O'Toole Company vs. Los Angeles Kingsbury Court[1] answers the question: can association members be forced to pay, by special assessment, debts incurred by their association? Essentially, O'Toole upholds a lower

Are They Building Condos Better?

2008-11-07T16:29:00.000-08:00

Do New Construction Methods and New Materials make a Better Product? Here was the typical multi-family building as constructed 25 years ago: Wood siding, single pane aluminum windows, flat roof, a one or two-ply built-up roof membrane, and galvanized iron water pipes. To make matters worse, the siding often wasn't real wood. Wood substitutes like Masonite, essentially sawdust mixed with glue and

The Contractual Community: Why Community Associations are not Governments

2008-10-31T21:03:00.000-07:00

Articles in this and other publications devoted to the science of community association operations and management often discuss the concept of "community association" as if it were just another subdivision of local government. It is a common perception because so much discussion about this unique housing type is devoted to questions of governance. We have boards of directors that, in some

When Condominiums Become Obsolete

2008-10-25T22:32:00.000-07:00

What Determines the Lifespan of a Common Interest Development? "Obsolescence” is the process by which something loses its value and relevancy usually due to being supplanted by a better product or changes in its environment. Several times we have written about our concerns for the impact of that process on common interest developments.First, let's realize that the

Who’s Responsible for the Crash?

2008-10-23T17:11:00.000-07:00

Today we got our answer... “Alan Greenspan: Bad data hurt Wall Street computer models” On March 2, 2008, we wrote:“...We send our best and brightest young people to Wall Street to learn investment banking and figure out new ways to attract investment funds and enrich their firms and themselves. Usually, many are successful and the economy and the country benefit from this economic stimulus that

Home Ownership for Everyone? Obviously Not.

2008-10-11T08:20:00.000-07:00

The American dream of home ownership has been overstated and misrepresented. If you have any remaining doubts about that, take one more look at the wreckage caused by the sub-prime and even the prime, mortgage crisis and tell me that it is an illusion. People are losing their homes to foreclosure at a rate not seen in decades, if ever. Many if not most, of those homes were lost by people who

California Used Car Lemon Law Tips

2008-10-05T22:21:00.000-07:00

Sergei Lemberg, an attorney specializing in lemon law [link: http://www.lemonjustice.com/ftc_used_car_rule.php], is sitting in the guest blogger’s chair today. He’s outlining some of the ways that consumers with used car lemons can get justice. I don’t know anyone who doesn’t feel at least a little bit of trepidation when they buy a used car. Always lurking in the back of

And What Will Community Associations Get?

2008-10-05T08:30:00.000-07:00

Ok, the Feds just approved $700 billion to "bail out" struggling financial institutions. Great news for struggling financial institutions but what about other struggling institutions, say like cities, counties, and yes, community associations? Cities and counties maintain our local infrastructure, and, increasingly, so do homeowners associations. And all three have major budget shortfall problems

What are We Getting for Our $700 Billion?

2008-09-22T20:59:00.000-07:00

In our last post ("There Has Never Been Anything Like This") we mentioned some doubts about exactly who is getting all that taxpayer money. That is, of course, the now mind-boggling $700 billion bailout proposed by the Bush administration, but without any details yet posted. It would be a stupendous mistake, almost as stupendous as the bailout itself, if all that money went unsecured to the very

There Has Never Been Anything Like This

2008-09-19T18:15:00.000-07:00

The Assault on Our EconomyThe historic meeting described below took place in Washington D.C. on Thursday night, September 18, 2008. WASHINGTON — It was a room full of people who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a

The Role of Experts in Evaluating Building Defects

2008-09-17T19:54:00.000-07:00

When a building fails to perform as it should, we immediately look for answers. Is the problem the result of someone’s failure to assemble it properly? Is the problem an act of nature? Was the proper maintenance of the building not performed as it should have been? The answers often depend upon a number of factors: the age of the effected building component, the exact nature of the problem, the

Home builders look to Urban Development

2008-09-12T15:36:00.001-07:00

In a couple of our prior posts (Back to the Housing Future, The End of Suburbs) we have predicted a return of housing to the inner city core where owners can be adjacent to transit and services as well as jobs. That trend is continuing and now The National Association of Home Builders, those responsible for 3/4 of all homes built in northern California, are opening a new office in San Francisco

Off Their Radar?

2008-09-02T21:04:00.000-07:00

Why are Common Interest Developments Not on Party Platforms? It's all about politics this year. More to the point, its all about Republicans and Democrats. This is the season of the candidates, the issues, and the Parties. We hear everything about illegal immigration, the economy, and the war. The two political parties and their nominees for public offices everywhere are consumed with new and

We're on the Radio!

2008-08-07T20:32:00.000-07:00

Listen to community association talk show host Shu Bartholomew interview your blogger Tyler Berding on her radio show, "On the Commons." We discuss the past and the future of common interest developments--some of it fanciful, but most of it is the real deal. Shu says: "Some of his observations about today's projects are dead on and some of his visions would take American homeowners in yet another

The Decline of Suburbia?

2008-08-07T17:45:00.000-07:00

We have written many times in this blog about the benefits and perhaps, the inevitability, of reversing the trend to suburbia that started half a century ago. Conserving resources, shrinking commute times, re-developing old community associations and finding social benefits to living in higher density communities are all becoming increasingly obvious strategies as this century gets started. Ben

Hidden Housing Opportunities--It Happened in Houston

2008-07-26T20:53:00.000-07:00

Earlier this year we wrote about re-developing older community associations into new, higher density housing located in or near newly expanding urban cores (see February post: "Back to the Housing Future".) And now, we have a real instance of that happening--in Houston. 108 condo units have been consolidated for sale to a developer who will build a high-rise on that 5 acre parcel. To read more,

The Condo Conversion Budget

2008-07-25T13:16:00.000-07:00

How do you Learn the Truth?We have written on these pages before about the economic crisis that can befall the buyers of condominiums converted from old apartment buildings.[1] Buyers wake up to find that the home they thought could be owned and maintained with an attractively low monthly assessment turns out to be a nightmare of hidden expense. Understandably, they want to know the truth, and

Predicting the Future of Community Associations

2008-06-03T00:56:00.000-07:00

An Outline for the Next 50 Years Co-operative, private maintenance of commonly owned land and structures in small villages and towns has been around for thousands of years. But in California, “common area,” and the community associations that maintain it, have only been regulated by statute for a few decades. The California Condominium Act was enacted in 1963. The Davis-Stirling Act, in use today

A Reader Reports Back

2008-05-01T11:56:00.000-07:00

Here is a letter I received from one of our readers:Tyler,The pen is mightier than the sword. I have seen it work on our association that was far less than noble.I took the advice of the association's attorney given to me several years back; and that was to embarrass the bad members of the board. I published several letters called the HOA Observer and only recorded the facts, and the facts where

Sub-Prime Backlash?

2008-04-20T14:26:00.000-07:00

Will New Lender Rules Cut Availability of Condo Loans?Last month we asked the question: “Will the sub-prime crisis impact community associations?” (www.condoissues.com, March 20, 2008) We predicted that mounting foreclosures of condominiums and town homes would greatly impact community association budgets as owners abandoned properties leaving unpaid assessments. Lenders holding first mortgages

The Board's Dilemma

2008-04-12T22:42:00.000-07:00

I had a call the other day from a woman (let’s call her Mrs. X) who was very troubled over recent increases in her homeowners’ association assessment. “I probably can’t live here much longer if this keeps up!” she said. Turns out the board of directors had raised the assessments by 20% on top of similar increases a year ago. They also levied a special assessment to fix some unexpected problems

If Density is the Key to Economic Growth; Are Condos the Key to Density?

2008-04-12T22:02:00.000-07:00

We recently wrote that older suburbs may become the new urban cities if public policy in those areas would favor density (See below, "Will the old suburbs become the new urban core?). Now, Richard Florida, writing in The Wall Street Journal, April 12, 2008 gives us the economic justification for such policies, he states: "...our public policy must work toward, not against, density. Nearly every

Will the Sub-Prime Mortgage Crisis Impact Community Associations?

2008-03-20T21:51:00.000-07:00

How many associations have seen units in their project enter foreclosure? How about yours? For every home that is in default on its mortgage, its a pretty sure bet that the assessments on that unit are also in default. Worse, however, while the lender might recover a % of its loan upon sale of the unit, the association will likely recover nothing. This is because an association's lien for

Community Maintenance Trusts--Could They Make Maintenance More Affordable?

2008-03-14T13:53:00.000-07:00

It isn't often that a complex problem can be solved with a relatively simple solution, and the criticism of skeptics is excused until the problem is truly solved-but a simple solution to the problem of providing new affordable housing, and saving existing projects, may be at hand...Click the Title Link Above to Read the Entire Article...

Who are the Brains behind the Housing Crisis?

2008-03-02T10:45:00.000-08:00

by Tyler P. BerdingMarket melt-down! As I write this, the DJIA is down over 200 points this morning alone, and has dropped almost 15% from its high last year. The news is thick with comment about the possibility of “recession.” The economy has supplanted the Iraq war as the most talked about issue in the presidential campaign. The pundits know how all of this got started: the bursting of a

When Market Value Slips Out the Back Door

2008-02-07T13:54:00.000-08:00

Are Owners stealing value by underfunding reserves and then selling out?By Tyler P. BerdingWe have written a lot on these pages about the damage that reserve underfunding can do to a community association. For ten years we have tried to focus attention on the long-term effects of failing to adequately save for the inevitable reconstruction or replacement of major building components. Nevertheless

Back to our Housing Future: Will the old Suburbs become the new Urban Core?

2008-02-05T09:09:00.000-08:00

A New Role for Older Community Associations?By Tyler P. BerdingHave we reached the end of the move to the northern California suburbs that started after World War II? The gradual shift of the population from inner city San Francisco, Oakland, and San Jose to the Peninsula, San Leandro, Walnut Creek, and Concord started about then, later followed by further shifts to Antioch, Brentwood, Morgan

The Contractual Community

2008-01-01T20:58:00.000-08:00

Community Associations are not Little Governments--They Owe Their Entire Existence to a Contract among the Owners of the Property.Articles in this and other publications devoted to the science of community association operations and management often discuss the concept of "community association" as if it were just another subdivision of local government. It is a common perception because so much

Condominium Conversions: Owner Equity at Risk?

2007-12-27T20:54:00.000-08:00

Why We Should Stop Converting Old Apartments to Condos.Condominium conversions, a really bad idea, are here again. You don’t need statistics to tell you that condominiums converted from old apartment houses have been all the rage for several years. Just look around. Numerous apartment buildings are being sold as condominiums. We saw it twenty years ago when home prices in California experienced

Stealth Reserves: Tapping Unused Assessment Authority

2007-12-27T20:41:00.000-08:00

Thinking Outside the Box...The latest survey done by Berding & Weil and The Levy Company confirms that the average community association reserves are only 53% funded. The result of this is that vital repairs—roof replacement, painting, repair of siding and trim, and similar work—may be either deferred or done in a substandard manner all because of lack of necessary funding...Once a problem has

Construction Defects and the Statute of Limitations

2007-12-27T20:30:00.000-08:00

Have Changes in the Law Imperiled your Associations Right to Recover for Construction Defects?It’s 1998. The plumbing in your association’s 5-year old condo project has started to leak. You hire a plumber who discovers that the plumbing lines are made out of imported galvanized pipe and it is corroding from within leaving pinhole leaks throughout. Further investigation reveals that this pipe was

Sharing the Internet in a Community Association

2007-12-27T20:25:00.000-08:00

No existing law prevents a community association from sharing an internet connection. Of course, agreements with Internet service providers would have to be reviewed to be sure that their contract language did not conflict with the intended use, but with all of the competition among providers, it would seem that some deal could be struck that would allow the connection to be shared by neighbors.

Construction Problems and Community Association Financial Stability

2007-12-27T20:14:00.000-08:00

With many associations surprises have become the rule, and there are no bigger surprises than those that arise from various construction problems. There are, of course the problems found early in an association’s life--those that emanate from defects in original construction. But there are others, also related to the construction of the buildings that can affect financial stability much later...

The Uncertain Future of Community Associations

2007-12-24T21:21:00.000-08:00

Community Associations, especially condominium complexes, are in financial trouble. Most don't know it. Unfortunately, many find out after its too late to solve the problem. Underestimated repairs and rehabilitation costs, and years of inadequate budgeting for them, have exposed many of these projects to massive underfunding from which they may not recover. An explanation of the problem, and some

2007-12-15T11:57:00.000-08:00

Condominium Conversions: Owner Equity at Risk?By Tyler P. Berding Condominium conversions, a really bad idea, are here again. You don't need statistics to tell you that condo¬miniums converted from old apartment houses have been all the rage for several years. Just look around. Numerous apartment buildings are being sold as condominiums. We saw it twenty years ago when home prices in California

A "Community" by Contract

2007-12-15T11:27:00.000-08:00

Why Community Associations Are Not Governments And Why That MattersBy Tyler P. BerdingArticles devoted to the science of community association operations and management often discuss the concept of "community association" as if it were just another subdivision of local government. It is a common perception because so much discussion about this unique housing type is devoted to questions of

Firestorm! Thoughts on the Recent Brushfires in California

2007-12-15T11:13:00.000-08:00

Firestorm!Let’s mourn the loss of life and property, but let’s not deceive ourselves about the real cause of the destruction in southern CaliforniaBy Tyler Berding2007 will set yet another record for California acres consumed by fire. As I write this, after a week of massive destruction, firefighters in southern California are finally achieving some level of control over what will may be the most