09.28.23

ISSUE # 75

CIC Info Bytes 09/28/23

CIC Info Bytes are frequent, succinct updates providing educational and engagement opportunities that help your community thrive!  Please forward and share this newsletter with your peers, neighbors and colleagues so they can connect and join.  Our goal is to curate content that provides a robust basis for contextual understanding to support practical takeaways for you and your association.  Please consider following us on Twitter and Reddit. 

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All issues of CIC Info Bytes are available online and indexed from the omnibox search.

Assessing the Association

• Issue# 74 highlighted survey bias.  The latest publicly available HOA homeowner survey continues the dissonance.  Key takeaways from 1,001 HOA homeowners:

  • 47% of HOA residents surveyed believe their neighborhood is better with an HOA.

  • 37% of board members dislike having an HOA

  • 31% of homeowners believe their Board has too much power

  • 64% of HOA residents surveyed feel their HOA honestly handles its finances.

  • 10% of respondents are considering selling their home for HOA-related reasons.

Assessing the Association - Homeowners Weigh In on their HOA — Jessica Edmondson | Rocket Mortgage | August 19, 2023

Even more Foreclosure

• Bloomberg expands on reporting featured in Issue# 72.

A spate of foreclosures filed by HOAs in Denver illustrates the potential risks of an increasingly common homeownership model.

Understanding how and where these policies are impacting homeowners is tricky because of a dearth of public data on the industry’s practices. Stacie Gilmore, a Denver city councilmember who represents Green Valley Ranch homeowners, is working with the city's Office of Housing Stability to commission a tool that would get more data on the impact of HOA foreclosures on communities of color.

When the Homeowners Association Comes for Your Home — Sarah Holder | Bloomberg | September 14, 2023

600% in fees + Water Shut Off = No-Win Situation

• Should community associations be empowered to levy 600%+ in late fees, collection fees and attorneys’ fees?  How about being empowered to shut off utilities?

  • Even more than the 400% levied in this Colorado foreclosure.

  • But not as bad as this foreclosure over $204.75.

  • How about $6,000 in fines for garbage receptacles

  • How about $12,000 in fines for pre-approved windows?

WHY

• Why do some community associations spend thousands to recover hundreds of dollars?  The ~200 home community featured below – and many communities generally – should not be in financial duress for the lack of $713 in assessments.  While there are endless hypotheticals, many business owners would be reluctant to spend $3,500 collecting $700 from a customer.  Community associations are – formally and informally – businesses.  

The answer varies, but in its simplest form derives from a combination of industry messaging and homeowner detachment.  First, the community association legal industry has been built up and touted as the go-to for collections.  Extraordinary legal fees (flat rate or hourly) are applied to collect accounts that are a fraction of the expense.  Second, Board members have a sense of detachment from other homeowners and fail to grasp their power to change others’ lives.

THE ARTICLE

If you’re wondering how the Cottage Cove homeowners association was allowed to turn off Williams’ water in the first place…[it’s in the covenants.]

VIDEO: Atlanta homeowners association shuts off woman's water — Gray Washington News Bureau | September 15, 2023

Fraud ^6

• The latest.  View our prior coverage here, here, here, here and here.

A Dedham town official admitted in federal court to defrauding a Woonsocket condominium association out of almost $50,000 to fund personal expenses and gambling.

Cheryl S. Sullivan, 68, a property manager, real estate broker, tax preparer and former chairwoman of the Dedham Board of Tax Assessors, pleaded guilty to wire fraud in U.S. District Court in Providence, the U.S. attorney’s office in Rhode Island said.

She admitted to using a River Island Condominium Association credit card during trips to Plainridge between January and November of 2019. Sullivan was the property manager for the association and chairwoman of the Dedham Board of Assessors until her indictment last year, according to prosecutors.  She used the association credit card after her personal credit card was declined at the casino, the U.S. attorney’s office said.

An investigation by the FBI and police in Plainville and Woonsocket determined that Sullivan defrauded the association out of $49,156. Sullivan has since paid back about half the amount, according to the U.S. attorney’s office.

Ex-Dedham official admits to defrauding RI condo association — David Linton | The Sun Chronicle | June 26, 2023

Concentration of Risk

• Four of this association’s vendors are related to a Board member who directly or indirectly owns 55 of 252 units (and also appears to control the Board at large).  

  • Their annual meeting (including Board election) will be held 40 miles from the association’s premises.

  • A management company hired to help sort things out didn’t last long…

  • Miami-Dade police confirmed to CBS News Miami its Economic Crimes Bureau is investigating the Association's handling of funds.

Caribbean Isles Condo Association under investigation for neglect, handling of funds — Joe Gorchow | CBS Miami | September 22, 2023

Surface Water: No Coverage

• Do you have coverage for groundwater infiltration?

Their insurance won't cover the damage because it came from an outside source, but the insurance company for the HOA found they weren't liable because there was no proof of negligence [the pipe wasn’t past its lifespan]. Now the couple is left to pick up the pieces…

...They estimate the total cost of damage and renovations to be nearly $85,000, and their insurance won't cover it.  "They said it was "surface water from an external source”...

The couple says the HOA that owns the busted irrigation pipe won't help, despite the couple's repeated pleas.  "We would like to see somebody step up and accept responsibility for what happened. It certainly wasn't us," said Richard.

VIDEO: HOA irrigation pipe floods Castle Pines Village home, causes $80,000 in damage — Olivia Young | CBS Colorado | September 18, 2023

At Your Service!  Or NOT?

• Get to know community associations in What are CICs?!?  The following article explores disparities relating to municipal services for single-family homes vs. condominiums.  The trouble begins when developers “sell” projects to municipalities.

Condominium owners pay the same real estate tax rates as single-family homeowners in cities and towns across the Commonwealth, but they usually don’t enjoy the same municipal services.

While there are exceptions, many municipalities (including Boston) that provide trash pickup for single-family homes, don’t cover trash removal for condominium buildings. That means condo owners have to pay private contractors to haul their trash and recycling away, while single-family homeowners get that service at no additional cost…

The developer has to “sell” the project to the municipality, and very often the sales pitch is a version of the following:

“You’re going to get 50 new taxpayers, which will be much more revenue per acre than you’d get from single-family homes, and condos are going to pick up their own trash and they’ll deal with their own security issues. And they probably won’t use your school system because the units are smaller..."

“The city is happy because logistically they know it’s a better deal for them. So the developer gives away all these rights, but the rights they give away are the rights of the future owners, not theirs.”  And it doesn't end there...

At your service. Or not. In some condo setups, you don’t get what you pay for. — Jim Morrison | Boston.com | September 14, 2023

A Lesson in Capital Improvements: Part III

• Every community should engage their owners before making major capital improvements.  See Parts I and II.

Owners of condominiums at The Renaissance on Turtle Creek in Oak Lawn and the building’s COA board have been embroiled in conflict all summer since the board bid millions of dollars on a neighboring property in July without many owners’ knowledge or approval.

Now, according to a letter from the board to owners obtained by The Dallas Morning News, it seems the owners have won the property war — but a battle over the board’s removal remains to be fought.

The letter details the results of a survey sent by the board to owners on Aug. 24, in which owners were asked to choose between two options: supporting or opposing the board’s “Continued Efforts to Explore Potential Purchase.” In the text of the survey, the board said it would “honor the collective decision of our community, and the certified results [would] be circulated.”

On Wednesday, the board released the results, in which 206 of 282 respondents opposed the purchase. The number of respondents represented just under half of the complex’s 603 units.

…Members are pressing the issue, even after the board’s surrender on the property purchase, because “we don’t trust them,” Lee said.  “There’s a trust issue, lack of communication, arrogance, issues with not holding the management company accountable”...

Turtle Creek condo board won’t try to buy disputed property; removal vote still sought — Sasha Richie | The Dallas Morning News | September 22, 2023

Housing Authority Isn’t Helping 

• The 36 unit Marley Ridge COA reads like a toxic soup: deferred maintenance, delinquencies, lawsuits, you name it.  The DC housing authority owns 9 units.

…But today, some of the condos have sustained major damage from leaky roofs, among other problems. Multiple owners have catalogued them in lawsuits against the board and management over the past five years.

At the crux of the issue, some owners say, is an inactive board president who has failed to call meetings required to approve repairs. The owners also fault the D.C. Housing Authority — which owns a quarter of the units across two of the three buildings — for not doing more.

The authority controls a sizable voting bloc on the board and a vice-presidential seat, which allows it to take over when the president is inactive. The authority has not done so, some owners said. The authority countered that it is up to the owners to initiate meetings and undertake repairs. As the impasse has dragged on, some owners have shouldered repair costs and seen the value of their homes stagnate.

Housing Authority bought condos in their building and let it crumble, owners say

— Danny Nguyen | The Washington Post | September 25, 2023

Go Wild

• The stories below remind us of Maryland’s ground-breaking (lawn-breaking) 2021 HB322 requiring community associations to allow low-impact landscaping.

Multiple States require community associations to allow xeriscaping, but Maryland might be the only one that’s embraced its wild side.  California provides the right of “personal agriculture” (AKA gardening).  

Maine also as a “right to grow” due to a 2021 constitutional amendment, but such right is subject to “abuses of private property rights” (AKA covenants running with the land).  Florida, likewise, prohibits counties, municipalities and other “political subdivisions” of the state such as  from regulating vegetable gardens on personal property, but community associations are not considered “political subdivisions.”

THE ARTICLE

“It looks like nature,” says Negri, 66, a retired engineer.

Roughly 50,000 plants comprising 92 species engulf her 0.14-acre lot, which until 2020 sported green lawn grass. She estimates the yard has cost roughly $75,000 for plants, bulbs, seeds and hardscaping. Negri’s creation, designed by Denver Botanic Gardens assistant curator of horticulture Kevin Philip Williams, rejects the time-honored status symbol of a tidy lawn in favor of a new luxury: the rewilded yard…

Meet the Homeowners Spending Tens of Thousands to Let Their Lawns Go Wild — Jessica Flint | WSJ | September 13, 2023

A gardener’s battle vs. HOA begins in front yard — Bill Finch | AL.com | September 18, 2023

A new bill — and trend toward xeric gardens — is coming to Idaho — Nicole Blanchard | Idaho Statesman | September 24, 2023

Infrastructure + Insurance

• WAKE-UP CALL: Over 27% of all US properties are overvalued due to the underpricing or subsidization of climate risk.

…In total, 39,007,490 properties have risk of increasing insurance prices or reduced coverage due to high climate risk across the FSF Flood Model, Wind Model, and Wildfire Model. These 39 million properties make up 27.1% of the total properties across CONUS (~144 million). This is, nearly one-quarter of all properties across the country are in areas with high and similar climate risk from flood, wind, and wildfire to places where the insurance industry has already responded to high risk by requiring higher deductibles, raising rates, or withdrawing from the area.

This one quarter of all properties represents the current Insurance Bubble of properties likely overvalued due to the underpricing or subsidization of climate risk in their insurance products. While regions across the United States are largely impacted by different types of climate risk, the insurance issue faced by these areas is similar and almost no area of the country is left untouched...

The 9th National Risk Assessment: The Insurance Issue

Highlights From "The Insurance Issue" — First Street Foundation | September 20, 2023

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Millions of U.S. properties are overvalued. Climate risk is one reason.

— Thomas Frank | POLITICO Pro | September 20, 2023

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New rules: Months after California's home insurance market was rattled by major companies pausing or restricting their coverage, the state's top regulator said Thursday that he would write new rules aimed at persuading insurers to continue doing business in the nation's most populous state.

Seven of the 12 largest insurance companies by market share in California have either paused or restricted new policies in the state since last year.

What to know about California's new proposed rules for insurance companies — Adam Beam | KCRA 3 | September 22, 2023

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Citizens last week sent a proposal to the state Office of Insurance Regulation that would lead to an average 11.5 percent increase for homeowners with the most-common type of policies, known as “multi-peril” policies, according to information slated to be presented to the Citizens Board of Governors on Sept. 27.

Citizens Insurance customers could see double-digit hikes — Jim Saunders | WKMG News 6 | September 15, 2023

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…Delores Smerkers, a Davie retiree, said her Citizens policy renewed in July for $5,523 — $650 more that what she paid last year. Less than two months later, in late August, she received a letter saying her coverage was being assumed by Safepoint Insurance Co.

The letter stated that her estimated cost to renew her Safepoint policy will be $6,650 — an increase of $1,127.

That’s a substantial price hike, but because it’s less than 20% above her Citizens premium, she is ineligible to reject the offer and stay with Citizens…

Stunned by a Citizens Insurance 'depopulation' letter? Here's what you need to know. — Ron Hurtibise | South Florida Sun Sentinel | September 24, 2023

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Staggering increases to property insurance premiums have upended affordable housing development across south Louisiana, delaying construction timelines and forcing the state to cough up tens of millions of dollars to try and save projects from falling apart.

Developers with projects in New Orleans, East Baton Rouge, and other areas across the state said they have seen insurance rates double or even triple since the series of destructive hurricanes in 2020 and 2021 upended insurance markets in the state.

In some larger multi-family complexes, insurance premiums have increased to more than $400,000 per year from less than $150,000, according to insurance agents…

High insurance rates are creating a crisis for Louisiana affordable housing development — Sophie Kasakove | NOLA.com | September 17, 2023

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…"It seems criminal to take our money all year then cancel our insurance in August when we are at most risk for forest fires," Fisher wrote in a letter to the Washington Office of the Insurance Commissioner, seeking help. Her mortgage depended on the coverage, she explained.

Instead, the state told her there was nothing it could do and marked her complaint closed.

Fisher is one of dozens who recently sought help from the commissioner for this problem and found the state ineffectual. The number of such complaints reported since 2022 is roughly 10 times higher than the annual average of the previous six years and speaks to a growing problem for Washington residents: insurance companies using wildfire risk scores to discontinue insurance policies…

How wildfire risk scoring puts WA homeowners in insurance jeopardy — Rebecca Moss | The Seattle Times | September 19, 2023

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Rates climbing for Louisiana's insurer of last resort — Chelsea Brasted | AXIOS New Orleans | September 20, 2023

The insurance company demanded a new roof.  The owners emptied their savings and borrowed from their 401(k) to replace their shingles for $28,000.  Then the insurance company proposed a $29,000 premium for their renewal…

We Left Florida Because Our Homeowners Insurance Ballooned to $12,000 — Joran Pandy | Insider | September 20, 2023

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OPINION BY RICK SCOTT: Over the last five years, Florida’s property insurance market has gotten way out of control — it’s time for state leaders to take action. Here’s what to do…

I’m Sen. Rick Scott, and here are three insurance fixes for Florida homeowners — Rick Scott | Tampa Bay Times | September 16, 2023

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About 300,000 customers of the state-run insurer of last resort are receiving letters in the mail this month with an offer to switch to a private insurance company.

If customers don’t respond by Oct. 5, the letters state, customers will be forced to go with the private company — at a potentially far higher cost.

Florida Citizens customers: Check mail or face costly insurance switch — Lawrence Mower | Tampa Bay Times | September 20, 2023

Housing Market & Real Estate

• A little more housing…

New York Mayor Eric Adams is calling for construction of “a little more housing in every neighborhood” to contend with the city’s severe shortage of places to live.

Adams outlined a zoning overhaul that would allow for development of an additional 100,000 homes for 250,000 people over the next 15 years. Measures he supports include allowing construction of two- to four-story additions atop ground-floor commercial spaces, and dwelling units as large as 800 square feet (74 square meters) on the properties of one- and two-family homes…

NYC Mayor Eric Adams Proposes Housing Zoning Tweaks as City Faces Shortage — Jennifer Epstein | Bloomberg | September 21, 2023

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New US home construction [“Housing Starts”] dropped 11.3% in August to the lowest level since June 2020, highlighting the toll of declining housing affordability. The drop was largely driven by a sharp decline in multifamily construction. The recent rise in mortgage rates has also helped drive housing affordability to record lows, suppressing demand and souring builder sentiment. But there’s a twist: applications to build—a proxy for future construction—picked up by the most in almost a year.

— Margaret Sutherlin | Bloomberg Evening Briefing | September 19, 2023

US Housing Starts Drop to Lowest Since 2020 While Permits Rise — Reade Pickert | Bloomberg | September 19, 2023

The total value of US housing rose more than $2.6 trillion in the past year, Zillow said, defying predictions that higher borrowing costs would lead to a prolonged slump. Low levels of supply, enhanced by the lock-in effect — which has left current mortgage borrowers reluctant to give up their low-cost loans — have pushed nationwide prices to a new high.

The gains haven’t been evenly spread across the country. In California, which contains about one-fifth of the US housing market, prices have declined since June 2022. But in Florida, the value of residential property has risen $160 billion in that period — pushing the Sunshine State ahead of New York in the national rankings…

Florida Overtakes New York as Second-Biggest US Housing Market — Alexandre Tanzi | Bloomberg | September 26, 2023

Built Environment

• Energiesprong!

Two workers wait while a square piece of prefabricated wall is lowered by a crane. Like a puzzle piece, the segment is snapped into place, covering up the last bit of faded beige facade on a two-story apartment building. This ordinary mid-century housing block in a neighborhood in the west German city of Moenchengladbach is getting a quick and dramatic efficiency upgrade, thanks to a green renovation technique called Energiesprong.

The method, also known as serial renovation, was devised in the Netherlands in 2010. In Dutch, the term means “energy jump,” and speed is indeed the point. Prefabricated facade components, complete with high-performance windows, are built in factories and then wrapped around buildings, giving them an insulation makeover that’s faster and cheaper than a typical whole-home renovation. Solar panels and heat pumps complement the retrofit, transforming leaky older buildings into “Net Zero” homes that can produce as much power as they consume.

That’s the idea behind the approach, at least. Energiesprong-inspired projects are popping up outside the Netherlands, including in California and Canada. Germany is one of the latest countries to push serial renovation after struggling to hit carbon reduction targets…

Dutch Renovation Technique Promises Quicker Net-Zero Energy Retrofits — Sinja Wind | Bloomberg | September 12, 2023

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View additional commercial to residential coverage.

Across the downtown areas of the nation’s 105 largest cities, the authors estimate that 15% of office buildings are physically suitable for conversion. That drops to about 11% after removing buildings that still house many long-term tenants or those that are “relatively clean” environmentally.

Dozens of aging office buildings across Seattle, Tacoma and Bellevue could be good candidates for conversion into thousands of new apartments, a possible bright spot as the region’s housing crisis persists and empty offices abound.

But making the financial math work on those conversions could be a challenge…

Researchers say these Seattle office buildings could be housing instead — Heidi Groover | The Seattle Times | September 23, 2023

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Dallas office tower to transform half of its space into multifamily units — Plamedie Ifasso | Dallas Business Journal | September 17, 2023

Palm Bay Yacht Club: Part II

• We first covered the $46,000,000 recertification at Palm Bay Yacht Club in Issue# 59.  What’s happened since then?

  • 8 counts and over 150 allegations.  Read the Amended Complaint for Miami-Dade Case # 2022-020799-CA-01 filed September 19, 2023

  • Check the docket.

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Palm Bay Towers, built in 1972, is due for its 50-year recertification. As a result, residents are currently being forced to cover the costs of a $21.5 million assessment that they believe is overwhelmingly exaggerated and unnecessary. That amount translates to a price tag of anywhere from $221,450 to $337,550 per unit owner – even more than what residents at Palm Bay Yacht Club are in the midst of protesting.

Owners at Palm Bay Towers filed a lawsuit against their association in 2021, along with residents of the neighboring Palm Bay Condominium experiencing similar issues. With little progress made during the court proceedings, Towers’ residents have meanwhile been forced to begin coughing up their shares of the debt.

In each scenario the suspected conspiracy is roughly the same: condo association boards made up of developers and self-dealers who many residents accuse of looking to decrease property values and inflate repair costs for their own biddings. Indeed, many residents have already been forced to sell their units at a loss of their potential value.

Just as at Palm Bay Yacht Club, desperate owners at Palm Bay Towers hired an independent engineer to secure their own assessment…

Palm Bay’s Triple Trouble — Biscayne Times | March 7, 2023

Have Fence, Will Litigate

• There’s a lot of drama in this YouTube video, but the case is real.  Read the voided final order and order for summary judgment.  The trial is scheduled for November 2023.

  • Harris County Cause # 2020-35085.  Harris County District Clerk. 

  • SECLUSION ESTATES IMPROVEMENT COMMITTEE INC vs. FLETCHER, HAROLD

  • TX 2021 HB 3571 added TPC 202.023 which protects the rights of homeowners to install fencing, but allows associations to regulate the type of fencing.

Declarant Control

• What follows is an enlightening article from the great state of North Carolina about  the power developers wield.

The WBTV Investigates Team is uncovering the scope and impact of developer-controlled associations, called declarant control. It allows developers to profit off the sale of new homes while simultaneously appointing HOA board members to manage the homeowner fees.

There is no North Carolina law that limits how long declarant control can last.  Enforcement of the statutes that require open board meetings and financial transparency is virtually non-existent.  No state or local agency has the responsibility of investigating homeowner complaints.

That’s why homeowners at communities like The Palisades, Waterfront and Lake Walk have all reached out to WBTV for help…

Homeowners vs Developers: The fight for HOA control in North Carolina — David Hodges | WBTV 3 | February 16, 2023

Use Email Wisely

• Issue#74 covered the precedential California court ruling that emails between directors (for the purpose of exchanging information) do not constitute meetings.  Adams Stirling provides a regular newsletter and one of their readers had some great responses echoing information you’ll find on our confidentiality page:

  • There is no Board member privilege.  Translation: Email communication is not confidential simply because it occurs between Board members.

  • Copying your attorney does not necessarily create attorney/client privilege. 

  • All emails are subject to discovery.  Be aware that your email account used to conduct association business can be reviewed as part of a discovery process.

    1. It’s simple to establish a free standalone email account

  • Email is easy to forward, print and share.

Legislation

• California is the latest state (AB648 — September 22, 2023) to clarify that remote / virtual meetings are acceptable (and encouraged).  This legislation supersedes restrictions in community association governing documents requiring in-person meetings.  Our meetings page has the updates including ‘Not a Meeting’ from Issue# 74.

Issue #73 highlighted a task force established by Maine.  Hawaii is no stranger to task forces as its latest community association oversight task force was established in 2023 by HB1509 with recommendations due >=20 days prior to the 2025 legislative session. 

• Have some legislation for us to share?  Please let us know!

• View newly effective CIC-specific statutory requirements on our Legislation Page.