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.

Be Prepared!

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) problems such as dry rot repair, soil subsidence, and leaks in windows, siding, and foundations. And yes, it can occur because of a natural disaster. The Davis-Stirling Act only requires that a community association reserve study 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 after major natural disasters or because of hidden deterioration.

    Even with expected deterioration, surprises can occur with building components that are not “visible or accessible.” What about areas under staircases that sponsor dry rot due to long-term intrusion of water? Framing components under siding that have allowed water to enter slowly for years without any way to get it out except evaporation? Deteriorating concrete walkways or driveways due to the invasion of roots, or soil subsidence due to unconsolidated fill? Failures that occur when balcony railings rot off of their supports? Three people in Antioch, California were severely injured recently when such a railing collapsed.

    None of these building components would be included in the usual reserve study 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. This scenario has played out in many associations. Unexpected repairs for which there was no reserve funding. So now you have a collapsed balcony or maybe a lot of rotted siding--something that involves more than just the one failed area--what do you do?

New FHA condo rules cutting owners' loan options

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 situations that could cause any unit owner to become delinquent later. The mandatory certification carries a maximum penalty of $1 million in fines and 30 years imprisonment if found to be incorrect."

By Kenneth R. Harney, Special to the Times
In Print: Sunday, October 23, 2011 

WASHINGTON — Condo industry leaders, from the 30,000-member Community Associations Institute to individual unit owners and realty agents, say a series of rule revisions by the Federal Housing Administration has caused thousands of condo projects to become ineligible for FHA mortgages. This, in turn, has abruptly shut off loan money for condo buyers and refinancers, forcing them to pursue conventional bank loans requiring much higher down payments.

FHA says the rule changes — which focus on project budgets, insurance and financial reserves — have been prudent and are designed to avert losses from delinquencies and foreclosures. But the agency confirms that thousands of condo projects have failed to obtain or apply for recertifications under the new rules. Out of about 25,000 condo projects nationwide with expiration dates for FHA eligibility between December and Sept. 30, 2011, only 2,100 (8.4 percent) have been approved or recertified by the agency, according to Lemar Wooley, an agency spokesman.

Bernard Robinson, an owner of a unit in District Heights, Md., says that because of delinquencies on homeowner association payments in his development that exceed the FHA's limit, he and his wife have not been able to refinance. "We are qualified to refinance personally," he said in an interview, but because the development is not certified, "our unit isn't. We've exhausted all our options. They're going to force us to walk away."

City in a Salt Pond Revisited

OP-ED: Future salt pond residents, left holding the (sand) bag

October 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 with growing alarm. Hearing the developer claim that new Bay Area sea level rise plans are somehow good for their scheme is like rubbing salt in a wound.

As they tout the “benefits” for Redwood City, proponents of this development always carefully imply no costs to “current” city taxpayers. Because the fact is that future residents of any Cargillville will be left with massive, unrecoverable costs. This is particularly true given Cargill’s plan to build a levee that will not only have to be maintained in perpetuity, but also raised significantly even to meet their optimistic estimate of sea level rise.

All of this is at homeowners’ expense, long after Cargill has taken its profits and left town.

Flooding around San Francisco Bay has happened many times, and the riskiest areas are locations where the Bay margin was filled to create housing and commercial developments. San Mateo County already is the top county in the state with the most people and infrastructure threatened by sea level rise.

But what is different today from developments built three or more decades ago is that most are built as community associations which are then given responsibility for the expensive engineered facilities. Levees, berms, pumps, riprap and retaining walls will have to be maintained and repaired by the homeowners in those associations.

Developers avoid long-term responsibility and deflect opposition from existing cities with the claim that the huge tax burden for this expensive new infrastructure will not fall on them. Eventual property owners within these new developments are obviously on their own.

Maintenance and repair obligations start immediately, and as Cargill’s own plans anticipate, the facilities will eventually prove inadequate to forestall the coming rising seas. Eventually, the costs to these new Redwood City residents will be enormous. The costs of inaction are worse. Failure of private associations to maintain landscaping or potholes is one thing — imagine the consequences of neglecting critical levees and retaining walls essential to keeping the waters of San Francisco Bay from flooding thousands of homes, businesses and Highway 101.

There are plenty of places in the Bay Area available for the necessary higher-density infill, away from the shoreline on land not threatened by rising tides. And the eventual homeowners would not inherit the potential for both fiscal and physical disaster.

Anyone concerned with the Cargill salt pond development proposal should ask the city one simple question: “Who will be responsible for keeping these massive flood control improvements working in the years to come?”

Don’t be surprised by the answer.

Tyler P. Berding, a partner in the law firm of Berding-Weil, represents hundreds of homeowner associations all over Northern California.

Look Closer. Or Else!

         Older Community Associations Need Better Inspections to Avoid Financial Failure

         Community Associations are not financially prepared for potentially ruinous renovations. Period. Newer communities don’t know it yet. Older ones have found out the hard way—their cash is tight for even routine repairs and for major renovations? Only bank loans and special assessments will dig them out of a very expensive hole if they are lucky. Some will never dig themselves out. Many projects 25 years and older will not have enough money to do the repairs that will eventually be identified. Reserve studies intended to equip homeowner associations with sufficient cash to do repairs are fine as far as they go. But they don’t go far enough. That’s not the fault of the board, management, or the reserve study company.

Blame it on the law. California Civil Code Section 1365.5 requires that community associations conduct a survey every three years to determine which components belong in their reserve-funding program. The statute requires that components found to have a service life of less than 30 years be included. So far, so good. But the statute is flawed. It limits the survey to just those components that are visible and accessible.