The Perils of Hidden Damage: Part II

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 rot repair, soil subsidence, or leaks in windows and siding.

          California’s Davis-Stirling Act only requires that a community association reserve include those components that visual inspections of accessible areas reveal have a useful life of 30 years or less, and makes no allowance whatsoever for reconstruction due to hidden and unknown deterioration. There can be two decidedly different outcomes to any attempt to repair previously unknown damage. The first is a predictable project that succeeds in repairing the damage within the association’s means. That is the subject of Part I. Part II, however, considers the situation where invisible damage is so unexpected and expensive to repair that it overwhelms the association’s resources.

Part II

What if the Cost of Repair exceeds all Expectations?

            That can happen and when it does it creates a dilemma for the board of directors. The problem that was the original reason for a major repair may not be the end of the story, depending upon how much was known about the extent of that damage before the job began. Its one thing to discover some dry rot in one isolated area during a routine repair, but quite another if that dry rot is part of systemic deterioration of the building.

If your major repair project is begun with an insufficient understanding of the extent of hidden damage, your entire funding scheme may be overwhelmed and owner equity could go with it. It is critical in an older building, therefore, to determine the scope of work and the cost of repair as accurately as possible before the project begins. But what happens when all else fails and the damage exceeds all reasonable expectations and funding?

The Perils of Hidden Damage: Part I

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 rot repair, soil subsidence, or leaks in windows and siding.

California’s Davis-Stirling Act only requires that a community association reserve include those components that visual inspections of accessible areas reveal have a useful life of 30 years or less, and makes no allowance whatsoever for reconstruction due to hidden and unknown deterioration. There can be two decidedly different outcomes to any attempt to repair previously unknown damage. The first is a predictable project that succeeds in repairing the damage within the association’s means. That is the subject of Part I. Part II, however, considers the situation where invisible damage is so unexpected and expensive to repair that it overwhelms the association’s resources.

Part I

 How to Extract a Successful outcome from an Unexpected Repair

            Even during planned or expected repairs, surprises can occur when building components that are not “visible or accessible” are exposed during construction. Normal painting projects can reveal rotted areas due to long-term intrusion of water. A minor deck or siding repair can expose framing components that have allowed water to enter slowly for years without any way to get it out except evaporation.  Problems with deteriorating concrete walkways or driveways due to the invasion of roots, or soil subsidence due to unconsolidated fill may develop so slowly that they escape notice. Or there can be a catastrophic event—a spontaneous failure that occurs when someone leans on a rotted balcony railing, for example. Three people in Antioch, California were severely injured recently when such a railing collapsed.

            None of these building components would likely be included in the usual reserve account and unless detected by some other means, would not appear in the maintenance budget, yet the association in a typical condominium and in many planned developments, is nevertheless responsible for necessary repairs. Unexpected repairs for which there was no reserve funding. So now you have a collapsed balcony or maybe a lot of rotted framing-- what do you do? Follow these steps and you will improve your chances of successfully solving the problem.

Report: State spurred gated developments

     "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 started, and struggling to raise artificially low association fees. Usually association fees are set by a vote of all community homeowners. Residents planning to stay in the community for a limited time do not see the need to pay more."

 This rare report from a public agency makes clear what many of us have written about for years: that community associations are often created more for the benefit of municipalities (tax dollars) and developers than for the eventual owners. There is an incentive to underfund the operation and reserves of the new association to keep assessments low and facilitate sales.

Thanks to Evan McKenzie and Fred Pilot for this post.

Report: State spurred gated developments PoconoRecord.com

Rentals, Yes--Condos, No?!

 Are Rental Apartments the New Condos?

          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 their homeowners association specifically or the entire concept generally. Claims of over-reaching by boards of directors or managers; vendors who see community associations as a piggy bank; and professionals—attorneys especially—who are blamed for overzealous enforcement of the rules and regulations and foreclosures, are all listed as reasons why community associations are not a good thing, or maybe even unconstitutional!

          Of course, these commentators’ understanding of the legal framework of homeowner associations can be a little thin and hence their opinions often lack practical application, but the passion is clearly there. I have read many times that we should (somehow) restrict or ban this type of housing altogether. I can empathize with some of the frustration that they feel because it is obvious that community associations are often creatures of convenience for developers and municipalities rather than organizations with their eventual owners in mind. They are created under laws enacted by state legislatures that respond more to the notion that we need to build more affordable housing now than to the idea that it has to be practical to maintain and manage in the long run. Regardless, boards, managers, and vendors inherit the real-life responsibility for these projects no matter how flawed they may be in concept. 

          But for now, the pundits' prayers may be answered—at least for a little while. Rental, rather than owned, housing seems to be the real estate concept du jour. And of course, rental housing does not come equipped with a homeowner’s association. That’s not the same as banning them outright as some politically naïve souls might like, but it probably has the same practical effect—you will be able acquire affordable housing without the drawbacks of an association of owners to weigh you down and interfere with your constitutional rights.[i]  

And Justice for All

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 may be something as simple as a member misbehaving at a meeting or an officer overstepping the boundaries of his or her office. If the problem is not corrected when it arises, it can escalate into something more serious…”

    An association has several ways to discipline its members. The fairness and effectiveness of each depends on the nature and context of the misbehavior, the enforcement tools available under the governing documents and the manner in which they are used by the association’s board of directors.