In this time of economic turmoil, more and more unit owners are leasing out their units when they have to move and are unable to sell. If you are an owner who leases your unit, you can make the leasing experience successful and positive for everyone by understanding your responsibilities. This will help preserve your property value specifically and maintain the association’s property value in general.
Your tenants may not be familiar with common-interest community living. Please take a few minutes to explain to them that living in a community association is very different from living in a rental apartment community. Specifically, your tenants, like all residents, are subject to the rules and regulations of the association, and it’s up to you to educate them and see that they comply. Your association normally will assist you in this area, but the responsibility lies with you. It is recommended that you provide your tenants with written copies of all policies and rules and advise them on the proper use of the association’s facilities. You can obtain copies of these and other useful documents from the Board or property manager.
It is also strongly recommend that you have a written lease agreement with your tenant. As a lessor (landlord) of a home in a community association, the lease you use must require tenants to comply with the association’s governing documents. Typically, in the event your tenant fails to comply with these documents, including the bylaws, or its rules and regulations, a representative of your association will first contact your tenants in an attempt to remedy the problem.
If your tenant does not correct the violation, the association will then contact you and expect you to remedy the violation using the recourse available to you through your lease agreement. If you are unable to correct the violation, the association may pursue appropriate legal action against the tenant, and possibly against you.
It is important that you provide the Board and property manager with the names and contact information of your tenants. This information is necessary if the Board or management company needs to contact your tenant for any reason and of course in case of emergency.
Follow these simple steps and you, the tenants and the association will all have a positive community association living experience:
• Provide your tenants with copies of association rules.
• Educate tenants about the need to follow association rules, and see that they comply.
• Advise tenants on the proper use of association facilities.
• Use a written lease agreement.
• Make sure your lease requires tenants to comply with all association governing documents.
• Provide the association with contact information for your tenants.
Renters: If you don’t have a copy of the association rules or you’d like more information about the association, please contact a board member or manager.
Monday, November 22, 2010
Thursday, November 18, 2010
Collected Assessments and Established Reserves = Fiscal Viability
By Jim Digre
One of the biggest responsibilities that a condominium board faces is maintaining the fiscal viability of the association. The operating income of the association comes from the assessments paid by the unit owners and in the light of rising costs, it is inevitable that those assessments will need to increase, if only to keep up with inflation. However, no condo owner wants their assessment raised and there are some who blithely wonder just why assessments should ever have to go up. Well, now that we are in a time of financial crisis, when personal incomes are suffering, and foreclosures abound, the problem of fiscal viability verses assessments becomes an even greater concern to the Board and the association.
Because of the ongoing financial crisis, many boards are having a difficult time collecting some portion of the monthly assessments needed to run the association. When you pile on top of this a history of poor fiscal management, major problems for the community can arise that may take years of strict financial austerity to overcome. In parts of the country, some situations have gotten so bad that buildings that were once thriving condo communities are looking more like slum projects on the "bad side of town". Units get abandoned, repairs go undone, and general neglect of the property becomes the norm.
Hopefully we are starting to see a turnaround for the economy and those associations that are struggling will have the chance that things will get easier financially. In light of all this though, there are some associations that seem to go on weathering financial storms as if nothing was happening at all and I'm not talking about just communities full of rich people. I'm talking about those associations run by boards whose members truly understand their fiscal responsibilities.
The Illinois Condominium Property Act specifically lays out the responsibilities of the board and what they can and can't do. So, when elected, the first thing board members should do is to thoroughly acquaint themselves with the provisions of the act. The second thing is to read and digest the Decs and Bylaws of their own association. Since assessments are the life blood of the association, part and parcel to these documents is what the board can and must do to enforce the collection of past due assessments. In addition to the collection of assessments, establishing a workable budget that contains provisions for adequate reserves is critical to achieving the financial where-with-all to avoid a crisis when the economy implodes.
"Adequate" reserves is a nefarious statement that can be interpreted in many ways. Most commonly, because of Government lending guidelines, it is thought of as a minimum of 10% of the annual budget. However, those associations that stay viable and avoid special assessments approach their budget, assessment and reserve requirements in a specific and technical manner that addresses the actual needs of the association not just an estimated guess. Understanding that reserves are meant for scheduled repair and replacement of common area elements not "extra" money, separating them from the operating budget and the undertaking of a reserve study to see what they actually need financially is what creates a successful association that can "weather the storm".
If you are wondering what your association can do to improve its fiscal viability and avoid the need for special assessments, e-mail me and I will happily send you a free report entitled "Reserve Study Know How". In this report you will learn how to do your own reserve study at a fraction of the cost charged by reserve study companies.
One of the biggest responsibilities that a condominium board faces is maintaining the fiscal viability of the association. The operating income of the association comes from the assessments paid by the unit owners and in the light of rising costs, it is inevitable that those assessments will need to increase, if only to keep up with inflation. However, no condo owner wants their assessment raised and there are some who blithely wonder just why assessments should ever have to go up. Well, now that we are in a time of financial crisis, when personal incomes are suffering, and foreclosures abound, the problem of fiscal viability verses assessments becomes an even greater concern to the Board and the association.
Because of the ongoing financial crisis, many boards are having a difficult time collecting some portion of the monthly assessments needed to run the association. When you pile on top of this a history of poor fiscal management, major problems for the community can arise that may take years of strict financial austerity to overcome. In parts of the country, some situations have gotten so bad that buildings that were once thriving condo communities are looking more like slum projects on the "bad side of town". Units get abandoned, repairs go undone, and general neglect of the property becomes the norm.
Hopefully we are starting to see a turnaround for the economy and those associations that are struggling will have the chance that things will get easier financially. In light of all this though, there are some associations that seem to go on weathering financial storms as if nothing was happening at all and I'm not talking about just communities full of rich people. I'm talking about those associations run by boards whose members truly understand their fiscal responsibilities.
The Illinois Condominium Property Act specifically lays out the responsibilities of the board and what they can and can't do. So, when elected, the first thing board members should do is to thoroughly acquaint themselves with the provisions of the act. The second thing is to read and digest the Decs and Bylaws of their own association. Since assessments are the life blood of the association, part and parcel to these documents is what the board can and must do to enforce the collection of past due assessments. In addition to the collection of assessments, establishing a workable budget that contains provisions for adequate reserves is critical to achieving the financial where-with-all to avoid a crisis when the economy implodes.
"Adequate" reserves is a nefarious statement that can be interpreted in many ways. Most commonly, because of Government lending guidelines, it is thought of as a minimum of 10% of the annual budget. However, those associations that stay viable and avoid special assessments approach their budget, assessment and reserve requirements in a specific and technical manner that addresses the actual needs of the association not just an estimated guess. Understanding that reserves are meant for scheduled repair and replacement of common area elements not "extra" money, separating them from the operating budget and the undertaking of a reserve study to see what they actually need financially is what creates a successful association that can "weather the storm".
If you are wondering what your association can do to improve its fiscal viability and avoid the need for special assessments, e-mail me and I will happily send you a free report entitled "Reserve Study Know How". In this report you will learn how to do your own reserve study at a fraction of the cost charged by reserve study companies.
Friday, October 15, 2010
How to Sell Your Condo in Today's Tough Market
By Brynn Alexander
Condo owners have the same problems home owners have in this tough market but with one added disadvantage. They're selling a condo.
Buying a condo is buying into lifestyle. A lifestyle that is very different from owning a house. The upside of owning a condo is little to no maintenance, they are usually in trendy neighborhoods, and many have amenities like swimming pools and workout rooms. The downside is you have no yard, you have a common wall(s) with your neighbor(s), and little freedom when it comes to major remodeling.
Some buy condos not because of the lifestyle they offer but because of their value. You can get more space for your dollar. However, those that were looking at condos a few years ago can now afford to buy a house.
Knowing what attracts buyers to condos is one of the keys to successfully unloading your property. The other major factors you'll need to know are price, quality, and hiring the right real estate agent.
"It's All About Price"
You're not going to get the same price in today's market that you would have received from your condo a few years ago. In order to sell your condo you can't price it competitively you have to price it to beat your competition.
Additionally, it's harder for first time home buyers to get a loan to buy a condo. If they can't get one, then the 20 percent down usually turns them away.
"It's all about price," says Mary Ann Grabel of Greenwich Fine Properties in Greenwich, Connecticut. "People who really want or need to sell are willing to take less than what they paid two or three years ago."
If you're dead set on getting top price for your condo then be prepared not to sell. It's that simple.
"The 'Wow' Factor"
"If it doesn't shine, nobody's going to buy it," warns Cyndi Johnston, a broker with RE/MAX Equity Group in Portland, Oregon.
Not only do condo buyers want the lowest price possible, but they also want the best quality possible. If that makes them sound picky it's only because they are picky. Condo buyers have that luxury.
Obviously, you'll want to "stage" your condo as best as possible. That means you'll be removing about half of your belongings, taking down pictures and other personal mementos, and getting rid of all pets (moving them to a friend's house). Basically, you'll want the condo to look as generic as possible-inviting to prospective buyers.
Besides the staging, you'll also want to remodel any weak spots. We don't mean redo the kitchen, but if the counters are in bad shape or the carpet needs replacing now is the time to do it. A fresh coat of paint is not enough in a tough market.
"Part of the reason is that you have all these decorating programs on TV," says Tom Apligian, a realtor for Re/Max in Plano, Texas. "People want to walk in and say 'wow!' The "wow" factor is very important today."
"In What Circles?"
You'll want a knowledgeable, responsible, and capable real estate agent. You'll also want one that knows how to market a property.
To help you pick an agent, interview at least five. Compare and contrast their fees, their resumes, and their marketing and promotion ideas. Try to find the right agent for you-one that will go the extra mile, knows the local market, and is well-connected.
"...you should ask your selling agent, 'In what circles will you be promoting my home?' Many times, the sale comes down to who you know," advises Johnston.
Once you find the right agent, make sure you work with them on marketing your condo. In these tough times it pays to be creative. Nothing, no matter how crazy it may sound, is off limits.
"Like Pulling Teeth"
A lot of condos are built in great locations with excellent views. If your condo has an excellent view take a picture, preferably at a favorable time of day (sunrise or sunset).
While your camera is out, take lots of pictures of your condo. Make sure your pictures include outside areas (like decks and patios), how light filters in, and storage areas.
Tell everyone you know that you're selling your condo. Word of mouth is a great marketing tool. Even if your friends and co-workers aren't interested they might know someone who is.
In order to buy a condo many lenders are going to need information about the Home Owners Association. The sooner you start this process the better.
"Getting the HOA to fill this stuff out is like pulling teeth," laments Ernest Cooper from RE/MAX Equity Group in Portland, Oregon.
Compiling all the necessary information beforehand will help speed up the sale when you finally find a buyer.
"What's Wrong With That Property?"
As hard it might sound, take your condo off the market after 90 days. That doesn't mean you're done trying to sell it and you have to live there forever. It just means your condo needs to take a break. After awhile you can put it back up for sale.
"If a house sits on the market, people start to wonder, 'what's wrong with that property. How come it's not selling?'" explains Elizabeth Weintraub an agent for Lyon's Real Estate in Sacramento.
Brynn Alexander writes for Homeguide411.com, a comprehensive directory of home professionals and an in-depth resource for home owners and home buyers. Visit the Homeguide411.com blog where you can read original and useful articles such as How to Hire a Home Repairman.
Article Source: http://EzineArticles.com/?expert=Brynn_Alexander
Condo owners have the same problems home owners have in this tough market but with one added disadvantage. They're selling a condo.
Buying a condo is buying into lifestyle. A lifestyle that is very different from owning a house. The upside of owning a condo is little to no maintenance, they are usually in trendy neighborhoods, and many have amenities like swimming pools and workout rooms. The downside is you have no yard, you have a common wall(s) with your neighbor(s), and little freedom when it comes to major remodeling.
Some buy condos not because of the lifestyle they offer but because of their value. You can get more space for your dollar. However, those that were looking at condos a few years ago can now afford to buy a house.
Knowing what attracts buyers to condos is one of the keys to successfully unloading your property. The other major factors you'll need to know are price, quality, and hiring the right real estate agent.
"It's All About Price"
You're not going to get the same price in today's market that you would have received from your condo a few years ago. In order to sell your condo you can't price it competitively you have to price it to beat your competition.
Additionally, it's harder for first time home buyers to get a loan to buy a condo. If they can't get one, then the 20 percent down usually turns them away.
"It's all about price," says Mary Ann Grabel of Greenwich Fine Properties in Greenwich, Connecticut. "People who really want or need to sell are willing to take less than what they paid two or three years ago."
If you're dead set on getting top price for your condo then be prepared not to sell. It's that simple.
"The 'Wow' Factor"
"If it doesn't shine, nobody's going to buy it," warns Cyndi Johnston, a broker with RE/MAX Equity Group in Portland, Oregon.
Not only do condo buyers want the lowest price possible, but they also want the best quality possible. If that makes them sound picky it's only because they are picky. Condo buyers have that luxury.
Obviously, you'll want to "stage" your condo as best as possible. That means you'll be removing about half of your belongings, taking down pictures and other personal mementos, and getting rid of all pets (moving them to a friend's house). Basically, you'll want the condo to look as generic as possible-inviting to prospective buyers.
Besides the staging, you'll also want to remodel any weak spots. We don't mean redo the kitchen, but if the counters are in bad shape or the carpet needs replacing now is the time to do it. A fresh coat of paint is not enough in a tough market.
"Part of the reason is that you have all these decorating programs on TV," says Tom Apligian, a realtor for Re/Max in Plano, Texas. "People want to walk in and say 'wow!' The "wow" factor is very important today."
"In What Circles?"
You'll want a knowledgeable, responsible, and capable real estate agent. You'll also want one that knows how to market a property.
To help you pick an agent, interview at least five. Compare and contrast their fees, their resumes, and their marketing and promotion ideas. Try to find the right agent for you-one that will go the extra mile, knows the local market, and is well-connected.
"...you should ask your selling agent, 'In what circles will you be promoting my home?' Many times, the sale comes down to who you know," advises Johnston.
Once you find the right agent, make sure you work with them on marketing your condo. In these tough times it pays to be creative. Nothing, no matter how crazy it may sound, is off limits.
"Like Pulling Teeth"
A lot of condos are built in great locations with excellent views. If your condo has an excellent view take a picture, preferably at a favorable time of day (sunrise or sunset).
While your camera is out, take lots of pictures of your condo. Make sure your pictures include outside areas (like decks and patios), how light filters in, and storage areas.
Tell everyone you know that you're selling your condo. Word of mouth is a great marketing tool. Even if your friends and co-workers aren't interested they might know someone who is.
In order to buy a condo many lenders are going to need information about the Home Owners Association. The sooner you start this process the better.
"Getting the HOA to fill this stuff out is like pulling teeth," laments Ernest Cooper from RE/MAX Equity Group in Portland, Oregon.
Compiling all the necessary information beforehand will help speed up the sale when you finally find a buyer.
"What's Wrong With That Property?"
As hard it might sound, take your condo off the market after 90 days. That doesn't mean you're done trying to sell it and you have to live there forever. It just means your condo needs to take a break. After awhile you can put it back up for sale.
"If a house sits on the market, people start to wonder, 'what's wrong with that property. How come it's not selling?'" explains Elizabeth Weintraub an agent for Lyon's Real Estate in Sacramento.
Brynn Alexander writes for Homeguide411.com, a comprehensive directory of home professionals and an in-depth resource for home owners and home buyers. Visit the Homeguide411.com blog where you can read original and useful articles such as How to Hire a Home Repairman.
Article Source: http://EzineArticles.com/?expert=Brynn_Alexander
Tuesday, October 5, 2010
The Condominium Community - Know Thy Neighbor
By Jim Digre
Many people who purchase and move into a condominium have just left apartment living and may have difficulty understanding that there is a distinct difference between renting an apartment and owning a condo unit. Living in a apartment inherently creates a situation where the landlord or building manager is responsible for your living conditions. If something breaks...call the landlord. If the property is poorly maintained or a neighbor is creating a problem...call the landlord. There really is no reason to get to know those living in such close proximity to you. There are many people who do get to know their apartment neighbors but most renters never get beyond a fleeting "Hi" should they happen to pass in the hall.
Moving into a condo presents the new owner with an entirely different dynamic when it comes to the relationship between themselves and their neighbors. Like apartment living, you are still living in close proximity to others and many of the same problems inherent in apartment living exist in condo living too. However, there is no landlord to call upon when it comes to repairs in your unit or conflicts with your neighbors. Yeah, there may be a management company and there is the condo Board and yes they can help advise you but the responsibility for your living conditions is yours.
Every condo owner shares in the ownership of the property (you now are the landlord) and are therefore dependent on one another for creating a community where everyone enjoys being there and each interact to the benefit of all. This kind of community can only be achieved when you get to know your neighbors and we are not talking about fleeting "hellos" in the hallways.
Getting to know the people in your association is best achieved by attending board meetings, working on committees and participating in any and all events your association puts on. Conflicts are resolved and understandings are more easily reached when you more than just casually know your neighbors. Participate in your community. Get to really know as many people in your association as possible and you will find that condominium living can be a truly wonderful experience.
Dowling Properties strives to be the Premier Management Company in Chicago's near-west suburbs. We have been serving condo communities for over 25 years and can offer quality advice on how you can create a community that works together for the enjoyment of all. Call us at 708-771-0880 or e-mail us at customerservice@dowlingproperties.com . We are happy to serve your communities needs.
Many people who purchase and move into a condominium have just left apartment living and may have difficulty understanding that there is a distinct difference between renting an apartment and owning a condo unit. Living in a apartment inherently creates a situation where the landlord or building manager is responsible for your living conditions. If something breaks...call the landlord. If the property is poorly maintained or a neighbor is creating a problem...call the landlord. There really is no reason to get to know those living in such close proximity to you. There are many people who do get to know their apartment neighbors but most renters never get beyond a fleeting "Hi" should they happen to pass in the hall.
Moving into a condo presents the new owner with an entirely different dynamic when it comes to the relationship between themselves and their neighbors. Like apartment living, you are still living in close proximity to others and many of the same problems inherent in apartment living exist in condo living too. However, there is no landlord to call upon when it comes to repairs in your unit or conflicts with your neighbors. Yeah, there may be a management company and there is the condo Board and yes they can help advise you but the responsibility for your living conditions is yours.
Every condo owner shares in the ownership of the property (you now are the landlord) and are therefore dependent on one another for creating a community where everyone enjoys being there and each interact to the benefit of all. This kind of community can only be achieved when you get to know your neighbors and we are not talking about fleeting "hellos" in the hallways.
Getting to know the people in your association is best achieved by attending board meetings, working on committees and participating in any and all events your association puts on. Conflicts are resolved and understandings are more easily reached when you more than just casually know your neighbors. Participate in your community. Get to really know as many people in your association as possible and you will find that condominium living can be a truly wonderful experience.
Dowling Properties strives to be the Premier Management Company in Chicago's near-west suburbs. We have been serving condo communities for over 25 years and can offer quality advice on how you can create a community that works together for the enjoyment of all. Call us at 708-771-0880 or e-mail us at customerservice@dowlingproperties.com . We are happy to serve your communities needs.
Monday, October 4, 2010
What Does a Condo Management Company Do?
By Jim Digre
When the typical condo owner who's never been on the Board thinks about what their management company does, the first thing that usually comes to mind is landscaping and cleaning of the building. This isn't something that should come as a surprise since all they really see is the building grounds and common areas. What they don't realize is that their management company may not be directly involved in the maintenance of the building other than contracting for the crew that does the work. Of course, a good management company will do regular inspections of the property, part of which is to observe how well the maintenance crew is doing its job. They then will report to the Board on what they have observed and may offer corrective suggestions.
Actually, the real purpose of a management company is to relieve the Board Members of the burden of day to day management of the association. The operation of a condominium association, especially in a large complex or building, can be incredibly demanding. Between budgeting, bill paying, inspections, contracting of services, dispute resolution, assessment collection, banking, financial reporting and tax filings, most condo board members who hold full time jobs are rapidly overwhelmed by the scope of the task.
Hiring the right management company enables the Board Members to function solely as decision makers and then rely on the property manager to insure that those decisions are properly carried out. In addition, since most Board Members are not well experienced with what it takes to run a corporation (which is what an association is), an experienced management group is invaluable in providing advice on what to do in any given situation that may arise.
Proper management of your association goes a long way towards maintaining not only the value of the property but insures that you have a viable association that runs smoothly and effectively. Most people who live in a condominium do so because they want to own property but don't want all the hassles associated with home ownership. Effective management is what makes that a reality.
Dowling Properties has been in business for over 25 years and is one of the oldest property management companies in the near-west suburbs, We have a dedicated staff that would be proud to serve your association in a professional, responsive and pro-active manner. We can help any association function at its best. You can contact us by phone at 708-771-0880 or by e-mail at: customerservice@dowlingproperties,com and we would be happy to provide a no-obligation proposal and quote for our services.
When the typical condo owner who's never been on the Board thinks about what their management company does, the first thing that usually comes to mind is landscaping and cleaning of the building. This isn't something that should come as a surprise since all they really see is the building grounds and common areas. What they don't realize is that their management company may not be directly involved in the maintenance of the building other than contracting for the crew that does the work. Of course, a good management company will do regular inspections of the property, part of which is to observe how well the maintenance crew is doing its job. They then will report to the Board on what they have observed and may offer corrective suggestions.
Actually, the real purpose of a management company is to relieve the Board Members of the burden of day to day management of the association. The operation of a condominium association, especially in a large complex or building, can be incredibly demanding. Between budgeting, bill paying, inspections, contracting of services, dispute resolution, assessment collection, banking, financial reporting and tax filings, most condo board members who hold full time jobs are rapidly overwhelmed by the scope of the task.
Hiring the right management company enables the Board Members to function solely as decision makers and then rely on the property manager to insure that those decisions are properly carried out. In addition, since most Board Members are not well experienced with what it takes to run a corporation (which is what an association is), an experienced management group is invaluable in providing advice on what to do in any given situation that may arise.
Proper management of your association goes a long way towards maintaining not only the value of the property but insures that you have a viable association that runs smoothly and effectively. Most people who live in a condominium do so because they want to own property but don't want all the hassles associated with home ownership. Effective management is what makes that a reality.
Dowling Properties has been in business for over 25 years and is one of the oldest property management companies in the near-west suburbs, We have a dedicated staff that would be proud to serve your association in a professional, responsive and pro-active manner. We can help any association function at its best. You can contact us by phone at 708-771-0880 or by e-mail at: customerservice@dowlingproperties,com and we would be happy to provide a no-obligation proposal and quote for our services.
Monday, September 27, 2010
Past Due Assessments: What Should A Board Do?
In our previous post we talked about the importance of collecting past due assessments in order to maintain the value of your condo building. One of the things we mentioned was that legal action should be used only as a last resort. That is all well and good, but what does the board do besides communicating with the defaulting residents and initiating legal action?
According to the Law firm of Kovitz Shifrin Nesbit, as outlined in their pamphlet "THE ART AND PRACTICE OF COLLECTING DELINQUENT ASSESSMENTS" one of the first things a condo Board needs to consider is the establishment of a formal collection policy.
Why Establish a Collection Policy?
A formal collection policy is the foundation of a successful program in order to:
♦ Maintain necessary cash flows
♦ Reduce financial loss from owner defaults on assessment payments
♦ Establish and maintain reserves
♦ Present a sound financial picture to potential lenders for the association or a mortgage
company for potential purchasers
A board must establish a systematic approach to delinquencies. This can usually be done
by the board without owner approval. When a board formulates such a policy, it must be
communicated to the owners on an ongoing basis. An educated community is a well-run
community.
Consequences of Uncollected Delinquent Payments
By not having a tough but fair policy in place:
♦ Innocent owners’ assessments have to be increased to cover the deficit, either by way
of increases in the operating budget or through special assessments.
♦ Essential maintenance may become unaffordable and put off when needed.
♦ The property begins to appear run-down — which, in turn, reduces property values.
♦ Borrowing from reserves may become necessary to cover shortfalls.
♦ Disharmony may occur between paying owners and the board for its failure to take
action.
If the ratio of delinquencies to paid-up assessments is out of proportion, mortgage lenders may begin to reject applications and the association may not be able to obtain a loan to make essential repairs that need to be financed.
Establishing a Firm Collection Policy
To Establish a Firm Collection Policy
1. The board should consult with its attorney, accountant and manager to set up
guidelines. A formal resolution of the board should be adopted at an open meeting of members that:
♦ Specifies the problem
♦ Delineates the authority for taking the approved action
♦ Designates the procedures to be followed
♦ Designates the circumstances under which the procedures are required or permitted
♦ Establishes deadlines
The final policy should ultimately be included as part of the association’s handbook or
completed rules and regulations.
2. Set a firm due date for assessments and the levying of a late fee (usually the 15th
of the month), subject to the rules and regulations and Declaration.
3. Outline the steps to be taken by the manager or person responsible for collecting
assessments when a payment is overdue.
4. Allow for payment plans in cases of special need and financial hardship (so long
as it is not abused).
5. Specify when a delinquent assessment should be referred to legal counsel. The
manager should note that this is automatic once a delinquent account reaches a specified age or amount. (We generally recommend no later than sixty (60) days except in special cases.)
6. Provide for the collection of any costs associated with collecting delinquent
assessments and the assessment of attorneys’ fees at the time they are incurred.
7. It is critical that this policy be communicated to all owners ongoingly so there is
no question as to what the procedures are.
By waiting too long to turn over an account, an association may lose out if a mortgage foreclosure is filed against the unit or the owner goes into bankruptcy. In a foreclosure, the lender will assume ownership of the unit before the association has a chance to collect its money.
According to the Law firm of Kovitz Shifrin Nesbit, as outlined in their pamphlet "THE ART AND PRACTICE OF COLLECTING DELINQUENT ASSESSMENTS" one of the first things a condo Board needs to consider is the establishment of a formal collection policy.
Why Establish a Collection Policy?
A formal collection policy is the foundation of a successful program in order to:
♦ Maintain necessary cash flows
♦ Reduce financial loss from owner defaults on assessment payments
♦ Establish and maintain reserves
♦ Present a sound financial picture to potential lenders for the association or a mortgage
company for potential purchasers
A board must establish a systematic approach to delinquencies. This can usually be done
by the board without owner approval. When a board formulates such a policy, it must be
communicated to the owners on an ongoing basis. An educated community is a well-run
community.
Consequences of Uncollected Delinquent Payments
By not having a tough but fair policy in place:
♦ Innocent owners’ assessments have to be increased to cover the deficit, either by way
of increases in the operating budget or through special assessments.
♦ Essential maintenance may become unaffordable and put off when needed.
♦ The property begins to appear run-down — which, in turn, reduces property values.
♦ Borrowing from reserves may become necessary to cover shortfalls.
♦ Disharmony may occur between paying owners and the board for its failure to take
action.
If the ratio of delinquencies to paid-up assessments is out of proportion, mortgage lenders may begin to reject applications and the association may not be able to obtain a loan to make essential repairs that need to be financed.
Establishing a Firm Collection Policy
To Establish a Firm Collection Policy
1. The board should consult with its attorney, accountant and manager to set up
guidelines. A formal resolution of the board should be adopted at an open meeting of members that:
♦ Specifies the problem
♦ Delineates the authority for taking the approved action
♦ Designates the procedures to be followed
♦ Designates the circumstances under which the procedures are required or permitted
♦ Establishes deadlines
The final policy should ultimately be included as part of the association’s handbook or
completed rules and regulations.
2. Set a firm due date for assessments and the levying of a late fee (usually the 15th
of the month), subject to the rules and regulations and Declaration.
3. Outline the steps to be taken by the manager or person responsible for collecting
assessments when a payment is overdue.
4. Allow for payment plans in cases of special need and financial hardship (so long
as it is not abused).
5. Specify when a delinquent assessment should be referred to legal counsel. The
manager should note that this is automatic once a delinquent account reaches a specified age or amount. (We generally recommend no later than sixty (60) days except in special cases.)
6. Provide for the collection of any costs associated with collecting delinquent
assessments and the assessment of attorneys’ fees at the time they are incurred.
7. It is critical that this policy be communicated to all owners ongoingly so there is
no question as to what the procedures are.
By waiting too long to turn over an account, an association may lose out if a mortgage foreclosure is filed against the unit or the owner goes into bankruptcy. In a foreclosure, the lender will assume ownership of the unit before the association has a chance to collect its money.
Tuesday, September 14, 2010
Retaining Property Value in a Declining Market
By: Jim Digre
The economic conditions brought about by the housing collapse in the United States has had a devastating affect on the condominium market for Oak Park, River Forest, Forest Park and Berwyn. To be frank about it you could say that the ability to sell your condo, especially if you have a one bedroom, is virtually non-existent. Conventional Wisdom says the market will come back and all you have to do is hold on. The problem with that is it doesn't take in to consideration life changes that require people to move on to different housing arrangements. Knowing this, many owners are very worried about the value of their unit and what to do if they should have to move for one reason or another.
There are a number of steps that condo owners and association boards can take to help mitigate this situation. First and foremost is to do what it takes to get your building FHA approved. To be blunt, there is absolutely no excuse or rationalization for not doing so. The predominant buyer for condos, especially one bedroom units, is the first time buyer. Low-down and no-down conventional mortgages that these buyers need are currently extremely rare if not completely unavailable. So, if you expect to have any market for your units and want to avoid foreclosed or abandoned units, get this done. Nothing will reduce the over-all value and marketability of your units more than a large number of foreclosures in the building.
Secondly, the Board needs to review whatever restrictions exist on allowing owners to rent out their units. The number of rentals in a condo building can adversely affect the ability of borrowers to get a mortgage for a unit in the building, but this is no excuse for not establishing a workable rental policy. Having a rational and fair rental policy enables those owners that must move and can't sell to be able to continue meeting their mortgage obligation, and most importantly for the association, to pay their assessments.
Thirdly, the matter of pets in the building or complex should be considered. According to Wikipedia, 63% of households in the United States own one or more pets. When it comes to selling a condo in your building, if you have a no-pet policy, 6 out of 10 potential buyers are eliminated from what is right now not a huge pool of buyers in the first place. Eliminating a no-pets rule can go a long ways towards maintaining the values in your building.
In addition to the above three recommendations, the Board needs to pay close attention to building maintenance. Making a good first impression on a potential buyer and retaining property value falls heavily on curb appeal and over-all cleanliness of the building. Keeping the grass cut and edged (unfortunately an area often overlooked) along with weeding and edging the shrub and flower beds can do wonders for the appeal of your building. You don't necessarily need tons of flowers to make your landscaping appealing, although it does help, you just need to keep things neat and clean. Blowing papers, empty bottles and miscellaneous trash on the property are a statement to observers that the people who live in the building don't care about it and is a huge turn-off to a potential buyer. The Board needs not only to insure that the maintenance personnel are doing the job they're being paid for but also to constantly remind residents that it is every one's responsibility to keep the place clean. If you see some trash, pick it up. Everyone will benefit and you will not only enhance the value of your property but will enjoy living there more.
Finally, and this is an area that can create hostility and resentment, the subject of assessments must be addressed. It seems that the first thing that many condo owners do when money gets tight is to stop paying their assessments. Somehow they manage to make the monthly mortgage payment (so they don't get foreclosed on) but figure they can skip the assessment. Condo Boards and management companies that take a laze-fair approach to collection of past due assessments are not only cheating the paying residents but also condemning the building to a gradual decline in value. Without the assessments, the Board will be unable to pay the expenses of maintaining the building. The Board, working in conjuction with the management company must pay attention to the status of un-paid assessments and take the necessary actions to collect what is due. Using legal action should be the last resort. Someone on the board, along with a management company representative, if needed, should first meet with the offending resident(s), and find out why the assessments aren't being paid. They should then try to work out a solution that is fair and equitable to both the resident and the association. Remember, the further an owner gets behind, the more difficult it will be for them to catch up. Action needs to be taken right away and followed up on or more and more residents will stop paying. What may end up happening is, "if he's not paying, why should I?" will start to spread through the building and that can only spell disaster for all concerned.
If you want more information on how to initiate the above suggestions, contact your management company. If they can't help, give us a call here at Dowling Properties. We would be happy to sit down with you and explain how working together we can keep your property at its highest value.
Contact us at: 708-771-0880 or visit our web site at http://www.dowlingproperties.com/
The economic conditions brought about by the housing collapse in the United States has had a devastating affect on the condominium market for Oak Park, River Forest, Forest Park and Berwyn. To be frank about it you could say that the ability to sell your condo, especially if you have a one bedroom, is virtually non-existent. Conventional Wisdom says the market will come back and all you have to do is hold on. The problem with that is it doesn't take in to consideration life changes that require people to move on to different housing arrangements. Knowing this, many owners are very worried about the value of their unit and what to do if they should have to move for one reason or another.
There are a number of steps that condo owners and association boards can take to help mitigate this situation. First and foremost is to do what it takes to get your building FHA approved. To be blunt, there is absolutely no excuse or rationalization for not doing so. The predominant buyer for condos, especially one bedroom units, is the first time buyer. Low-down and no-down conventional mortgages that these buyers need are currently extremely rare if not completely unavailable. So, if you expect to have any market for your units and want to avoid foreclosed or abandoned units, get this done. Nothing will reduce the over-all value and marketability of your units more than a large number of foreclosures in the building.
Secondly, the Board needs to review whatever restrictions exist on allowing owners to rent out their units. The number of rentals in a condo building can adversely affect the ability of borrowers to get a mortgage for a unit in the building, but this is no excuse for not establishing a workable rental policy. Having a rational and fair rental policy enables those owners that must move and can't sell to be able to continue meeting their mortgage obligation, and most importantly for the association, to pay their assessments.
Thirdly, the matter of pets in the building or complex should be considered. According to Wikipedia, 63% of households in the United States own one or more pets. When it comes to selling a condo in your building, if you have a no-pet policy, 6 out of 10 potential buyers are eliminated from what is right now not a huge pool of buyers in the first place. Eliminating a no-pets rule can go a long ways towards maintaining the values in your building.
In addition to the above three recommendations, the Board needs to pay close attention to building maintenance. Making a good first impression on a potential buyer and retaining property value falls heavily on curb appeal and over-all cleanliness of the building. Keeping the grass cut and edged (unfortunately an area often overlooked) along with weeding and edging the shrub and flower beds can do wonders for the appeal of your building. You don't necessarily need tons of flowers to make your landscaping appealing, although it does help, you just need to keep things neat and clean. Blowing papers, empty bottles and miscellaneous trash on the property are a statement to observers that the people who live in the building don't care about it and is a huge turn-off to a potential buyer. The Board needs not only to insure that the maintenance personnel are doing the job they're being paid for but also to constantly remind residents that it is every one's responsibility to keep the place clean. If you see some trash, pick it up. Everyone will benefit and you will not only enhance the value of your property but will enjoy living there more.
Finally, and this is an area that can create hostility and resentment, the subject of assessments must be addressed. It seems that the first thing that many condo owners do when money gets tight is to stop paying their assessments. Somehow they manage to make the monthly mortgage payment (so they don't get foreclosed on) but figure they can skip the assessment. Condo Boards and management companies that take a laze-fair approach to collection of past due assessments are not only cheating the paying residents but also condemning the building to a gradual decline in value. Without the assessments, the Board will be unable to pay the expenses of maintaining the building. The Board, working in conjuction with the management company must pay attention to the status of un-paid assessments and take the necessary actions to collect what is due. Using legal action should be the last resort. Someone on the board, along with a management company representative, if needed, should first meet with the offending resident(s), and find out why the assessments aren't being paid. They should then try to work out a solution that is fair and equitable to both the resident and the association. Remember, the further an owner gets behind, the more difficult it will be for them to catch up. Action needs to be taken right away and followed up on or more and more residents will stop paying. What may end up happening is, "if he's not paying, why should I?" will start to spread through the building and that can only spell disaster for all concerned.
If you want more information on how to initiate the above suggestions, contact your management company. If they can't help, give us a call here at Dowling Properties. We would be happy to sit down with you and explain how working together we can keep your property at its highest value.
Contact us at: 708-771-0880 or visit our web site at http://www.dowlingproperties.com/
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