10.26.23

ISSUE # 77

CIC Info Bytes 10/26/23

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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Windows & Lawsuits - II

• Remember Windows Lead to Lawsuits from Issue# 74?  Here’s some updated coverage that helps explain the situation.

VIDEO: HOA fines homeowner $12K because windows didn’t match her neighbors — Jason Stoogenke | WSOC TV | October 13, 2023

Misappropriation

• This condominium is fighting multiple legal battles and now a criminal investigation.  View prior coverage of fraud and embezzlement 7, 6, 5, 4, 3, 2 and 1.

The legal problems are mounting for the  EmeraldBay Condominium Association, which is fighting a new lawsuit from the company it hired to do extensive concrete restoration work for the 12-story Key Colony building. 

The association is also a defendant in a lawsuit brought by the Key Colony Homeowners Association, which takes care of common spaces in the vast complex. The HOA claims it was being shorted, as well. 

All of this comes as a criminal investigation was launched last week by Key Biscayne police into what they described as “misappropriation of funds” with investigators releasing few new details. Key Biscayne Police Chief Frank Sousa said the records are being redacted because of an active criminal investigation. “Our interest is to investigate the case and determine if any charges are warranted, so that we can guarantee a successful prosecution,” he wrote… 

EmeraldBay condo named in another lawsuit as problems mount — John Pacenti | Key Biscayne Independent | June 1, 2023

Unregulated Closing Costs

• A $200 “HOA estoppel fee” as a buyer.  A $200 “HOA certification fee” as a seller.  Head-scratching at best.  Consumer-gouging at worst.  Transfer fees are loosely regulated.

Man warns others after surprise HOA fees revealed while selling Knoxville home

HOA fees to be aware of before buying or selling home — Don Dare | WATE 6 | October 10, 2023

Declarant Control - III

• Developer William Ferrigno has failed to deliver.  See Issue# 75 and Issue# 76 for more coverage of concerns related to declarant (developer) control.

Simsbury homeowners suing developer, want control of their HOA — Sam Smink | WFSB News 3 | October 19, 2023

Remember Juneau

• Despite CAI telling homeowners that it advocates for their legislative needs, federal and state laws fail to provide owners of condominiums and HOAs the same fiscal aid as owners of single family homes.  View Issue #72: Lacking Foundation.

Building D needs a new foundation, and the erosion left three more buildings vulnerable to future floods.  The cost to fix those things is estimated at more than $1 million.  Each individual condo owner will have to pay between $21,000 and $26,000 for the repair work, depending on the size of their unit. But under those same state laws, the HOA is treated like a nonprofit business, not a group of individuals. Which means people like Heitz can’t access most forms of individual state disaster aid. 

The state disaster declaration freed up some recovery money — up to $20,500 per homeowner.  But the way Alaska law treats HOAs — and the way state disaster aid is doled out — makes the Riverside Condo residents ineligible for state aid. 

In the weeks since the flood, insurance has denied most of their claims. Then, in late September, the Federal Emergency Management Agency denied requests for disaster aid. 

Brenna Heitz still hasn’t been able to get into her unit on the top floor of Building D. She applied for individual disaster assistance from the state, which can hypothetically cover repairs for property that’s damaged in a natural disaster. But she was denied.  The state told her that repairs for her damaged building were not her responsibility.   “It’s the HOAs responsibility. But in order for them to fix that they need money, and that comes from us,” Heitz said. “I am not eligible for homeowners aid, even though the money is coming out of my pocket.”

That’s because Alaska state law requires that homeowner’s associations share responsibility for “common elements.” In this case, all of the Riverside Condo buildings count as a common element, and all 51 homeowners in 9 condo buildings are on the hook for repair costs…

Juneau condo owners take on $1 million in flood repairs without help from state or federal aid — Anna Canny | KTOO | October 17, 2023

This Association Needs to Get Real

• Homeowners are nonplussed and taking their concerns to court.

A dispute involving a homeowners association has boiled over into a court battle pitting neighbors against one another, with thousands of dollars at stake.

About a dozen residents of the Crestview Park subdivision have filed suit against William Van Offeren accusing him of fabricating the organization and installing himself as president so he could collect money.

Van Offeren has filed liens against several Crestview Park homeowners, alleging that they owe membership dues, sometimes thousands of dollars, that must be paid before they can sell or refinance their homes...

Van Offeren: “I am the acting caretaker,” he said. “Millions of dollars in property value are at risk.”

Crestview Park, which was developed in the 1970s, includes about 290 homes along Six Mile Road near the lakefront north of Wind Point. The property includes private park space and other common areas in need of regular maintenance.

The neighborhood had a homeowners association until 2010 when Crestview Park Association Inc. was dissolved.

According to the lawsuit, Van Offeren moved into the subdivision and attempted to create a new association, but did so without incorporating properly or seeking input from other residents.

Van Offeren has sought $75 a year from homeowners, and in some cases accused them of being delinquent by thousands of dollars, the suit states. In the name of Crestview Park Homeowners Association, he filed liens this summer against 25 homeowners alleging past-due assessments…

Homeowners association horror story: Residents sue to stop payment demands — Scott Williams | The Journal Times | October 19, 2023

Racine County Case# 2023CV001206 Joseph Bryant et al vs. William Van Offeren

Reign of Terror

• Issue# 76 included Deadly Weapon.  Now we have attempted arson and verbal abuse.

Former Condo Association President Arrested for Alleged Reign of Terror — Bob Garguilo | WIOD | October 17, 2023

It’s a Matter of Time…and Statutes

• TLDR: the owners were able to prove certain improvements were made well before a new law came into effect 12 years later.

Condo management turns to court; fails to obtain order to remove alterations — Lydia Lam | Today | October 10, 2023

The 9th Circuit’s September 2018 Martin v. Boise decision changed the way municipalities enforce camping and sleeping in public…or did it? 

One court case changed how West Coast cities deal with homeless encampments — Greg Kim | The Seattle Times | October 15, 2023

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We started a WWYAD (What Would Your Association Do) Reddit poll about this topic after reading this article about a civil action to stop the placement of tiny homes on an empty lot governed by the covenants of the Pu'unoa HOA in Hawaii.

Some are bouncing from hotel room to hotel room, in some cases to make way for the return of tourists who are crucial to the local economy. Many are struggling to find places to rent amid a housing shortage — and steep prices — that plagued the island even before the fire wiped out an estimated 3,000 homes and apartments in Lahaina.

And it’s not feasible for authorities to bring in the mobile homes used to shelter people after natural disasters elsewhere, given Hawaii’s humidity and the difficulty of shipping them from the U.S. mainland.

The government, via the Federal Emergency Management Agency, paid for Nahale and some 8,000 other displaced residents to move into hotels, vacation rentals and other short-term housing after the Aug. 8 fire. There are still about 6,900 people in short-term lodging more than two months later.

It’s unusual for FEMA to put so many people in hotels after a disaster, particularly for months, but Maui had plenty of empty hotel rooms after tourists left in the wake of the fire.

Bob Fenton, administrator of the FEMA region including Hawaii, is leading the government’s response. His agency has the authority to house people in hotels for six months, and in some cases that can be extended, he said. Still, he wants to see people get into stable housing — “a place they could be for the next two Christmases,” Fenton said in an interview.

A Maui single mom was lucky to find a 'tiny, tiny cottage' for double what she was paying before her subsidized unit burnt to a crisp

— Audrey McAvoy and The Associated Press | Fortune | October 15, 2023

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Housing is expensive.  The only way to pay for more of it is additional taxes.

On the ballot roughly every seven years, the housing levy has long been popular with voters. The existing levy — double the cost of its predecessor — passed in 2016 with 71% of the vote.  The latest iteration of the Seattle Housing Levy would raise $970 million over seven years, more than triple the existing levy that expires at the end of this year.

Over the next 20 years, Seattle is expected to need 3,500 new homes every year for people with low and moderate incomes. The levy is expected to fund 3,200 new homes in that income range over seven years.

If approved, property owners in the city would pay 45 cents per $1,000 of their property’s assessed value. That amounts to about $385 a year for the owner of a median $855,000 home, an increase of about $260 a year from the present levy rate. 

Seattle voters to decide on $970M levy to fund affordable housing — Heidi Groover | The Seattle Times | October 22, 2023

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Urban environmentalists—that is, pro-housing groups and transit advocates—have been correctly pointing out a serious shortcoming of environmental impact statements: Environmental review has been commandeered by slow-growthers and anti-housing groups to thwart green transit projects and even modest density, such as backyard cottages.

Can we please look at the bigger picture? Adding density not only translates into a better return on infrastructure investments, such as new transit, by improving efficiency and adding riders, but it also reins in sprawl and its accompanying high-carbon commutes. Framing new housing along these lines makes one wonder why we don’t do environmental benefits statements for new development…

The Impact of Housing Scarcity, Not Housing Development, is the Problem — Josh Feit | PubliCola | October 18, 2023

Rent prices for apartments in Oakland — the Bay Area city of about 430,000 people — dropped 7.2% over the last year, according to data from Apartment List. That marks the largest drop in rent prices in any of the US's 100 largest cities. Median monthly rent for a one-bedroom apartment in the city hit $1,430 — its lowest level since 2017. 

The decline is in large part due to a bunch of new housing hitting the market. The city built about 8,000 new homes over the last 10 years, helping ease its housing shortage. The city has also lost residents, after years of population growth. Over the last few years, Oakland had the fifth-highest rate of housing construction and the seventh-largest drop in population among California's 73 largest cities. But even has the number of residents in Oakland has fallen, the number of occupied homes has increased, with fewer people occupying the average home. 

In one example of the city's building boom, it's in the process of constructing 13 buildings — four of which will be affordable for lower-income and formerly unhoused people — on a spit of formerly industrial waterfront property known as the Brooklyn Basin. The megaproject will ultimately add 3,700 new homes, several hundred of which are already occupied. The project is more than 20 years in the making, as the land was first purchased by its developer in 2001. 

Rents in Oakland have fallen faster than anywhere else in the US for a simple reason: The city built more housing — Eliza Relman | Insider | October 14, 2023

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Chrystal Audet tried to get comfortable in what she called her “bedroom” – the back seat of her 8-year-old Ford Fusion. To stretch her legs, she had to leave a passenger door ajar, but September nights are raw and rainy in the Pacific Northwest.

From her own “bedroom” in the front seat, her 26-year-old daughter Cierra Audet asked her to close it.  “We have to get out of this,” Chrystal Audet said to herself as she pulled a comforter against the cold and struggled to fall asleep in a parking lot in Kirkland.

Audet, 49, earns over $72,000 a year as a social worker for the Washington state Department of Social and Health Services. But a combination of bad luck, bad debt and a bad credit score priced her out of her apartment in Bellevue, another suburb of Seattle, one of the most expensive housing markets in the country. With an eviction looming, she put her furniture in storage this spring and began parking the sedan in a U-shaped parking lot outside a church in Kirkland…

In Kirkland and across U.S., working people are living out of their cars — Rukmini Callimachi | NYT; The Spokesman-Review | October 18, 2023

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Also see Issue#73 for The Menace of the Megamansion Conversion by Curbed.

About a decade ago, Timon Malloy encountered a problem familiar to families trying to raise two children in New York City: His apartment started to feel too small.

Many New Yorkers, facing such a dilemma, have simply left for cheaper pastures. Mr. Malloy chose a more luxurious route. He bought an apartment below his own, cut a hole in the floor, built a staircase and made his Upper West Side apartment bigger…

Through apartment combinations like Mr. Malloy’s, and conversions of buildings with several units into single-family homes, the city has lost more than 100,000 apartments since 1950, according to a new analysis of building records shared with The New York Times. Overall, the number of apartments in the city has grown since then, but the pace of new construction has not kept up with the growth in population and demand…

How 100,000 Apartments in New York City Disappeared — Mihir Zaveri | NYT | October 18, 2023

• Do you recall the primary causes of increased property insurance costs?

  1. Catastrophic and non-catastrophic losses due to climate change

  2. Construction costs

  3. Excessive litigation

  4. Reinsurance rates

A search on Law 360 identified 152 insurance related lawsuits filed by Washington State condominiums since 2005.

Data from FL DPBR shows that Florida is home to over 28,000 condominiums with nearly 1,500,000 units.  Florida community associations generate a substantial volume of insurance related lawsuits.

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“Reconstruction costs are not coming down anytime in the near future,” said Tom Cotton, Orlando insurance agent.

“I really don’t think there’s a lot more that [lawmakers] can do,” Cotton said…

New report: Florida Property Insurance Premiums won’t drop — Ashlyn Webb | WFTV | October 17, 2023

Managing Expectations: Why Florida Homeowners Insurance Premiums Are Not Likely to Go Down — Karen Clark | Karen Clark & Company | October 2023 

“We love it here,” said James, who plays golf with his 3-year-old son on Saturdays and can swim year-round in his backyard pool. 

Then the renewal for his home insurance arrived. The new rate for the year starting in September was around $121,000—more than seven times what the Molinaris said they paid last year, and more than 13 times what they paid when the family moved to Florida in 2019. 

While they found a better rate from another insurer, at about $33,000 it is still nearly double what they paid last year. The family this month listed the home for sale with an asking price of nearly $3.5 million after determining that insurance costs made staying there too expensive. Others in Flamingo Park told The Wall Street Journal they are drawing the same conclusion…

Home Insurance Is So High in This Florida Town, Residents Are Leaving — Deborah Acosta | WSJ | October 17, 2023

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There are signs that buyers are growing more cautious. In a recent survey, almost a third of house builders in Florida said buyers’ concerns about home insurance were “somewhat slowing sales.” The proportion in Southern California was very similar, at 29%, the survey by John Burns Research & Consulting found. That is much higher than the national figure of 9% of builders reporting sales affected by insurance concerns.

Rising Insurance Costs Start to Hit Home Sales — Jean Eaglesham | WSJ | August 25, 2023

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“We’re forced to have to contact these company’s and give them our money, and put up with their nonsense,” said William. “How is a fire hydrant, installed by the local government, my problem?”...

Calise’s insurance company, Southern Oak inspected his property.  Last month, they sent him this letter, stating there’s “no fire hydrant present within 1,000 feet.”  The insurer states that this may “increase the potential for future losses.”...

So, what did the Citrus County Fire Rescue have to say about the hydrant issue?  In a letter to William, the Chief writes in part “engines and tankers…carry water” and that “it is important to note that our engines…could pump.. from alternate water sources.”

Citrus homeowner could lose insurance for being too far away from fire hydrant — Mahsa Saeidi | WFLA | October 16, 2023

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Shocked by the sharp increase in their premiums, many Florida homeowners might be considering finding an insurance company willing to give them a better rate. But there’s little chance of finding one, especially if they live in the southeastern part of the state. 

Half a dozen independent insurance agents consulted by the Miami Herald said that only a handful of insurance companies are willing to write new policies in the region, and new ones are focusing efforts on policies that are being handed over by the state-created Citizens Insurance.

 “The market is very difficult right now. We have a crisis, and the tri-county area is where the situation is most difficult,” said Darling Ribalta, owner of Ribalta Insurance Corp., an independent agency based in Pembroke Pines that helps homeowners find coverage.

Looking for a lower insurance rate? In Miami, you have tough options… — Antonio Maria Delgado | Miami Herald | October 13, 2023

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H03 insurance policies with Citizens aren’t all bad…

Your insurance company dropped your coverage? It could be doing you a favor in Florida — Antonio Maria Delgado  | Miami Herald | October 19, 2023

• Armageddon for real estate agents (as originally reported in Issue # 58).  This case is being heard by a federal jury assembled in the Western District of Mississippi as 19-cv-0332: Sitzer et al v. National Association of Realtors (renamed Burnett v. National Association of Realtors).  NAR Coverage: Burnett v. NAR Trial Begins Today | Fostering Consumer-Friendly Real Estate Marketplaces

As powerful lobbies go, few have more clout than the Realtors. But the cartel faces a major legal challenge on Monday when a federal jury trial begins in a class action against its rules that raise the cost of buying and selling homes.

The National Association of Realtors requires its 1.5 million or so members to comply with numerous rules that inflate their pay. Missouri home sellers are arguing in the lawsuit that a rule requiring them to make a blanket offer of compensation to any potential buyer’s broker violates the Sherman Antitrust Act…

Realtors Face an Antitrust Reckoning — WSJ Editorial Board | WSJ Opinion | October 15, 2023

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The lucrative broker commission system at the heart of the US residential housing market is facing unprecedented antitrust scrutiny from the Justice Department and two private class-action lawsuits that risk weakening the National Association of Realtors, the industry’s powerful lobbying group.

Federal antitrust enforcers are poised to decide whether to pursue their own case after a years-long investigation, according to a person familiar with the issue. The Justice Department is focused on the real estate commission-sharing system that typically puts homesellers on the hook for a 5% to 6% cut of the sale, split between their agent and the buyer’s agent.

It’s a structure largely unique to the US, preserved by the association’s control of many of the country’s multiple listing services — an essential tool that aggregates properties available for sale in a given region. To use the system, NAR requires sellers to offer compensation to the buyer’s representative, which critics say inflates home prices…

US Real Estate Brokers' Commission System Faces DOJ Antitrust Risk — Jordan Yadoo and Leah Nylen | Bloomberg | October 16, 2023

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The U.S. housing market is pushing buyers and sellers to opposite ends, as one group struggles with affordability while the other is locked into low rates.

“It’s a tale of two markets,” Priscilla Almodovar, chief executive of Fannie Mae, told MarketWatch in an interview on the sidelines of the Mortgage Bankers’ Association’s annual conference in Philadelphia…

It's a ‘tale of two housing markets’ for buyers and sellers, Fannie Mae CEO says — Aarthi Swaminathan | Marketwatch | October 16, 2023

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Housing demand will rebound from this year's strained levels after a mild recession pulls down today's high mortgage rates, the Mortgage Bankers Association says.

Mortgage originations, or the process leading to a homebuyer loan, are estimated to reach 5.2 million by loan count next year in the MBA's housing market forecast released on Sunday. That's a 19% jump from the 4.4 million loans predicted for the entirety of 2023.

By another measure, 2024 origination volume is predicted to surge 19% to $1.94 trillion, against $1.64 trillion expected for this year.

Mortgage originations will surge 19% in 2024 as a recession will force rates down… — Filip De Mott | Insider | October 16, 2023

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The 30-year fixed mortgage rate just hit 8% for the first time since 2000… — Diana Olick | CNBC | October 18, 2023

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Americans must earn more than ever to buy a home in the US.

Homebuyers needed a $114,000 salary to afford a typical home in September — assuming a 7.2% mortgage rate with 20% down on a median priced home of $412,001 — according to real estate brokerage Redfin Corp.

To comfortably “afford” a home payment, a buyer should spend no more than 30% of their income on housing costs. And Americans have never needed more than current levels in data going back through 2012, when the salary requirement was roughly $38,000. 

How Much Do I Need to Make to Buy a House? $114,000, According to Redfin — Paulina Cachero | Bloomberg | October 19, 2023

Built Environment

• From funeral homes to … condominiums.

On Tuesday, Robert Christy, a principal with Gardens on Kenoza Corporation, revealed the new developer plans to rent units in a former funeral home rather than sell them as condominium units as agreed nearly two years ago. Christy came before councilors in search of approval of landscaping designs at the former Grondin-Carnevale Funeral Home at 125-129 Kenoza St. Lawyer Gordon Glass explained the change of plans.

“(The) plan going forward right now for the ownership structure for the units is, for the next few years, Gardens on Kenoza does intend to be a landlord of that property and to rent out the units to residential rental tenants. At that time, they would convert the units to owner-occupied condominium housing and sell of those units to new owners,” he said.

“When this project came before us, this was an exciting project because it was going to increase homeownership opportunities in that area. That’s why we supported this project. To find out that a new developer came along after the original applicant got approval for seven condominium units, and now the new guy comes along, and he doesn’t want to do that anymore. Well, that’s not our problem,” he said.

Developer Agrees to Create Condo Association After Haverhill Council Cries Foul… — John Lee Grant | WHAV | July 13, 2023

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HTA Design has completed College Road, a 163-meter-tall apartment building in Croydon, UK, which it claims is "Europe's tallest residential building to be completed using volumetric construction methods".

The structure is comprised of two adjoining 50 and 35-storey towers, wrapped in a pleated ceramic facade…

Dezeen Agenda features Europe's tallest modular residential tower — Saudatu Bah | Dezeen | October 17, 2023

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Skyscrapers planned for Indigenous land "look like the future of Vancouver" — Ben Dreith | Dezeen | October 18, 2023

Federal Reserve officials look set to hold interest rates steady for the second time in a row next month — but they’re far from calling an end to their tightening campaign.

Policymakers across the hawk-dove spectrum have signaled in recent days that they’re inclined to forgo a rate hike at their Oct. 31-Nov. 1 meeting following a run-up in bond yields that has tightened financial conditions.

But with data on the labor market and inflation showing an economy that’s still humming, the Federal Open Market Committee is unlikely to take further rate increases off the table.

Stock Bulls Embrace Great Yield Surge in a Dangerous Bet on Fed — Craig Torres and Rich Miller | Bloomberg | October 14, 2023

Cashing In

• Another great picture of duration and interest rate risk and reward.

…“The risk-reward for duration is extraordinarily favorable right now and it’s just the bond math,” Karissa McDonough, fixed income strategist at Nottingham Trust, said on Bloomberg Television’s The Close. “If you have just a slight decrease in yields from here for the 10-year, we can talk about a double-digit total return in long bonds and we haven’t seen that in literally years.”...

— Katherine Greifeld | Bloomberg 5 Things to Start Your Day | October 13, 2023

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Retirement bond anxiety: Even with 6% yields, you can’t set and forget it — Beth Pinsker | MarketWatch | October 10, 2023

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Don’t forget about opportunity cost.  Bond returns are calculated based on concepts of duration and convexity.

…In a post following a Bloomberg News story from earlier this week, Rich Falk-Wallace, the CEO and founder of Arcana and a former portfolio manager at Citadel, offered an explanation about how the relationship between bond yields and bond prices leads to the prospect of “asymmetric” returns…

Bond math' shows Treasurys could reap dazzling returns with little risk — Joseph Adinolfi | MarketWatch | October 17, 2023

Cashing Out

• Some Americans are forced to choose: housing or transportation.

Americans are falling behind on their auto loans at the highest rate in nearly three decades.

The percent of subprime auto borrowers at least 60 days past due on their loans rose to 6.11% in September, the highest in data going back to 1994, according to Fitch Ratings. Behind the surge is both higher car prices and borrowing costs. And with the Federal Reserve indicating it plans to keep rates higher for longer, the problem is likely to persist, especially as millions of Americans recently started paying their federal student loans again.

“The subprime borrower is getting squeezed,” said Margaret Rowe, senior director with the asset-backed securities group at Fitch. “They can often be a first line of where we start to see the negative effects of macroeconomic headwinds.”

High Car Loan Interest Rate Payments: Americans Struggle With Bills — Claire Ballentine | Bloomberg | October 21, 2023

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American retirees could once rely on a 60% to 40% ratio of stocks to bonds in their portfolio to earn safe returns. That formula is crumbling.

The Trusted 60-40 Investing Strategy Just Had Its Worst Year in Generations — Eric Wallerstein | WSJ | October 19, 2023

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The Charts Revealing Treasuries Switching to Headache From Haven — Garfield Reynolds | Bloomberg| October 23, 2023

• Colorado SB23-178, which became effective August 7, 2023, prohibits associations from restricting the installation of gardens and expands prohibitions against xeriscaping.

Gov. Polis signs law expanding environmental options for home landscaping in Colorado — Katie Parkins | Denver 7| May 17, 2023

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

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