11.28.24

ISSUE # 104

CIC Info Bytes 11/28/24

🔊 Listen to the Audio Overview of Issue# 104

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Excessive Fees and Kickbacks Down Under

• New South Wales, Australia: Why are outrageous business practices permissible by law?  Because the business industry lobbies legislators to help them continue operating in a chaotic and unregulated environment that prioritizes profit over consumer protections.

One of the country's most high-profile strata management firms has been using its wholly owned insurance arm to charge apartment owners insurance brokerage fees as high as three times the typical rate.

The company, Netstrata, has also been taking kickbacks from contractors and suppliers it hires using the strata funds of more than 1,000 buildings, and 35,000 apartments, across NSW.

To the outrage of owners and advocates, it appears the company's conduct has been permissible under NSW law…

High-profile strata company Netstrata caught charging excessive fees and taking kickbacks — Linton Besser, and Ninah Kopel | ABC | March 20, 2024

Mega Insurance Broker Misleads Australian Clients

• Australia: The Steadfast Group isn’t so steadfast in supporting its clients...

Australia's largest strata insurance broker has been caught misleading its clients, burying an offer of cheaper insurance from a rival company, and instead recommending a more expensive policy from its own wholly owned firm.

The revelation — described as "of concern" by the Australian Competition and Consumer Commission — lifts the veil on the growing power of Steadfast Group, a $7 billion publicly traded insurance giant. 

The company presently brokers 40 per cent, and writes 55 per cent, of Australia's strata policies.

A Four Corners investigation has also established the company has been part of opaque schemes to channel insurance kickbacks to strata management firms — without disclosing the schemes to the apartment owners from whom the money ultimately comes…

ACCC chair calls for ban on strata insurance commissions as insurance giant Steadfast Group caught misleading clients

— Linton Besser, Mayeta Clark and Echo Hui | ABC | September 8, 2024

Egregious Management Contracts

• Queensland, Australia: The community association management ecosystem is replete with egregious management contracts and kickbacks galore supported by its fiercest proponent: the Community Associations Institute (CAI).  Read Ethical…Lapse in Issue# 98.

…Another clause regarding commissions on insurance states the strata manager must be paid a commission on insurance, regardless of which insurer is used.  The contract states if the commission paid is less than 15 per cent of the base premium paid by the owners' corporation, the OC must pay a fee to the manager to make up the difference.

Another strata management contract Ms Weir has reviewed states that where the OC buys their own insurance, they must still pay their manager an amount equivalent to 20 per cent of the base premium plus GST.  Ms Weir said when her OC sought to amend these clauses, they faced pushback from the strata manager.

"The manager said these are SCA contracts, and we are not to alter them, because we're members of SCA and therefore we rely on these contracts, and we expect that SCA must have had legal advice to say that these were appropriate clauses," Ms Weir said.

SCA said that its state-based template contracts were intended as a helpful resource only.  "Our members can choose to use these templates, but they are not mandatory," an SCA spokesperson said.  "Ultimately, any contracts are between the client and the company."...

Push to overhaul unfair strata contracts that favour managers to better protect apartment owners — Echo Hui | ABC | November 14, 2024

“All late fees charged to a delinquent owner will be applied to billing and will be shared at a rate of fifty percent with management company.” 

— u/Brief-Mind5323 | r/HOA | November 10, 2023

Everyone Wants Professional Oversight (Not Coming Soon)

• Queensland, Australia: Challenges for community associations cross continents and oceans.

Queensland strata managers are handling millions of dollars without even a background check in what has been dubbed an "entirely unregulated" industry by its former commissioner.

Strata managers are responsible for a building's finances, levies and insurance, as well as making sure the body corporate complies with legislation.  But unlike other jurisdictions, Queensland has no minimum training, trust accounting or licensing requirements.

"It means tomorrow, you or I can go out there and say, 'I am a strata manager, now I would like your work, I would also like to be a signatory of your bank account,'" Chris Irons, who was the state's body corporate commissioner for five years, said…

Queensland has more than 52,000 body corporates.  A Four Corners investigation into the strata industry received thousands of submissions, many about conflicts of interest, kickbacks, and hidden fees…

🎥 VIDEO: Queensland strata managers handling millions without a background check… — Lexy Hamilton-Smith and Jessica Black | ABC | November 23, 2024

Dammed If you Do, and Damned if You Don’t

• Henry County, Georgia: Misplaced frustration about deferred maintenance and abiding by assessment methodologies established by the covenants.

A Henry County homeowners association board was unseated Tuesday night.  It happened after homeowners received a $29,000 special assessment from the HOA to fix a dam owned by the community.  Tuesday night packed into a conference room, the homeowners association board for Lake Dow Estates was in the process of being voted out, when they stepped aside...

...The assessment is related to Lake Dow and the dam along the lake, which is community property of the Lake Dow Estates neighborhood.  Years ago, the state came in and reclassified the dam.  That meant either the lake had to be kept at a lower level, or millions had to be spent to improve the dam.  The price to fix the dam now costs $8.9 million or $29,000 per acre.

It’s pitted homeowners who live on the lake and want to see it full pool, or full of water, increasing their property value, against those who don’t live on the lake and don’t think they should pay for something they won’t benefit from...

🎥 VIDEO: Henry County HOA board unseated after homeowners each receive $29K assessment — Candace McCowan | WSB-TV2 | November 13, 2024

Fenced…Out?

• Houston, Texas: Green Valley Estates HOA.  Responsibility for coordination and expenses related to inspection, maintenance, repair and replacement should be found in the declaration of covenants, conditions and restrictions (CC&Rs).

…“After those two major storms, within 72 hours, their crew came over and replaced the fence,” said Aldridge. “I didn't have to call them. They were here.”

This year the fence was damaged again, this time by Hurricane Beryl. Pauletta said no one showed up to repair it, so she called the HOA.

“They just told me that they no longer want to have that expense,” said Pauletta. “It's your responsibility. We don't want it. We won't. We won't maintain it any longer.”  The sudden change caught Pauletta off guard, leaving her frustrated and potentially on the hook for repair costs…

🎥 VIDEO: After years of the HOA paying for repairs on fence damaged by storms, this Houston homeowner says she's responsible now

— Julissa Garza | KHOU 11 | September 23, 2024

Fire Self-Extinguishes after Melting Water Pipe

• Saskatoon, Saskatchewan, Canada: Owners at the Saskatchewan Crescent West condominium association got some help from the fire itself.

…After an investigation, the fire department concluded the blaze was caused accidentally by work being performed in the ceiling space on Wednesday.

“Smoldering insulation ignited the wood truss above the drywall,” the fire department said in a statement.  The investigation also found that the blaze burned hot enough to melt a sprinkler pipe, which triggered the alarm and actually helped to put out the fire.  “Water flowing from the melted sprinkler pipe extinguished the fire,” the department said.

The total damage from both the fire and water was estimated at $500,000…

Condo fire extinguished by melted water pipe leaves $500,000 in damage — 650 CKOM | February 22, 2024

Michigan Condominium Explosion

•  Orion Township, Michigan: A local church is helping devastated homeowners after a condominium explosion.

🎥 VIDEO: 'A lot of devastation.' Community steps in to help those impacted by condo explosion — Carli Petrus | WXYZ | November 20, 2024

Deadly Fire in Mass.

• Leominster, Massachusetts: Fire kills.  Man in his 60s dies in Leominster, Massachusetts, condo fire — Veronica Haynes | WCVB | November 20, 2024

No Help for Florida Condo Owners Now, but Maybe Later

• Florida: Watch this condominium deferred maintenance roundtable discussion. 

Florida's new legislative leadership shot down speculation of a special session to address an affordability crisis among condo owners, despite urging from Gov. Ron DeSantis for one to be convened by the end of the year.

The crisis was largely sparked by a series of changes OK'd by the state after the deadly June 2021 collapse of the Champlain Towers South, a 12-story condo in Surfside, Miami-Dade County.

"We agree with the governor's sense of urgency," said Sen. Ben Albritton, R-Wauchula, who was elected Senate president on Tuesday. "We agree we need to look very closely at this. It is a complex issue."

But Albritton said lawmakers would work on it during the regular session, which begins March 4.

Rep. Daniel Perez, R-Miami, who was voted in as House speaker, said something similar.

"The question shouldn't be when. The question should be what," Perez said. "When people call for a special session, they're very quick to pull the trigger on saying 'special session,' but we should think about what is the topic and the solutions that we're trying to solve for...."

Gene Santiago (former Chief Building Official): “For example, I had a building in Ft. Lauderdale back in the 70’s that called me in to do repair design.  I came out with a contractor and we gave them an estimate and it was like $6,000,000.  They said “no, no, we can’t afford that.”  Well they came back 15 years later and it had gone to $80,000,000.  So at that point, it was too late.  If you don’t do it on a timely basis and you’re right next to the water, that salt air is killing your building.  It’s a cancer that’s growing bigger and bigger every day and it gets to a point that you can’t fix it any longer.

🎥 VIDEO: Florida's new legislative leadership says no to special session on condo crisis — Douglas Soule | Tallahassee Democrat | November 19, 2024

____________

…NBC6 sat down with Pizzo to talk about the financial impact of some of the reforms passed by the state legislature in the wake of the Surfside condo tragedy in 2021, specifically about the requirement for condo reserves to be adequately funded by the end of 2024.

“We saw for an entire generation people were waiving reserves, which was allowed by law, and really just sort of passing the buck, kicking the can, deferring  maintenance,” Pizzo said.

Several state leaders have suggested changing the looming reserve funding deadline as a way of easing some of the financial burdens of the reforms. But the incoming speaker of the Florida House, South Florida Republican Daniel Perez, said they have already delayed the deadline enough.

“It’s for their own benefit,” Perez said. “This is not a special interest push. This has nothing to do with politics.This has to do with saving lives because I never want to see another Surfside take place.”

…“The 30-year plus, that is very, very difficult to sell right now because of the fear of special assessments,” said Craig Studnicky, CEO of ISG World. “I think the state of Florida is gonna have to help these condominium associations finance these special assessments.”  

But Perez and Pizzo said that is not likely to happen.  “There’s no state bailout coming,” Pizzo said. “There’s no financing coming from the state. It’s just, the numbers are not there. The resources aren’t there.”  Instead, Pizzo said he would like state lawmakers to explore ways to bring down insurance costs, which is another big factor that is driving up the cost of condo ownership. Both Pizzo and Perez told NBC6 they expect condo reform to be a legislative priority next year.

Why an extension of the condo reserve funding deadline isn’t likely — Alina Machado | NBC | November 16, 2024

Don’t Forget About the “My Safe Florida Condo” Pilot Program

• Florida: Condominiums within 15 miles of the coastline are eligible. 

The Florida Legislature created the “My Safe Florida Condo” pilot program during the 2024 legislative session and provided $30 million in funding statewide.  Under the pilot program, eligible condominium associations will receive a free initial inspection to identify existing hurricane-resistant features of their properties and potential recommendations for improvements.  Owners may then apply for a mitigation grant to implement the recommended improvements, officials said. The following mitigation projects are authorized by the program:

• Opening protection, including exterior doors, garage doors, windows and skylights

• Reinforcing roof-to-wall connections

• Improving the strength of roof-deck attachments

• Secondary water resistance for roof

In addition to making properties safer, officials said the program may also help lower costs, with the added benefit of potentially lowering wind insurance premiums…

…Condominium associations must be within 15 miles of the coastline to be eligible for the pilot program. The maximum grant contribution per association is limited to $175,000…

Florida condo owners can now get free inspections, grant funding; here’s how — Sierra Rains | WFLA | November 15, 2024

Mandatory Evacuation in Maryland

• Laurel, Maryland: A growing number of condominiums have been subject to evacuation.

Families in Laurel are facing a difficult and uncertain start to the new year as they scramble to find temporary housing after being told they must leave their homes by January 10, 2025. 

The order comes from the City of Laurel, which stepped in after years of warnings about dangerously unsafe stairwells at the Tiers of Laurel Lakes Condominiums that they say continue to pose serious risks to residents’ safety.

The safety concerns date back to December 2021, when inspectors identified 58 staircases in need of repair or replacement to meet safety standards. Despite repeated efforts by the City of Laurel to work with the Condominium Association, little progress has been made. By September 2024, inspections revealed that 49 staircases were still out of compliance, leaving residents at risk.

The City hired an independent structural engineering firm in October 2024, which confirmed that the stairwells violated critical safety codes, including the City’s Building Codes, Life Safety Codes, and National Fire Protection Codes.

Now, residents in 116 units have no choice but to vacate their homes, creating significant stress and uncertainty as they try to figure out their next steps as the go into the holiday season…

Residents have to evacuate condos in Laurel over safety concerns, city says

— Samantha Gilstrap | WUSA9 | November 25, 2024

Florida HOAs Continue to Tow Despite State Law for Parking

• Spring Hill, Florida: Despite prohibitions against restrictions on parking in FS 720.318 and FS 720.3075(3)(d), some Florida HOAs aren’t backing down.  Enforcing parking registration issued by a governmental entity is not the purview of an HOA.  Also see Issue# 95.

…Outraged neighbors of a Pasco County subdivision tell ABC Action News Investigator Adam Walser that their homeowners’ association and the tow company it contracted to enforce parking laws are going too far…

"I told you it’ll be a $75 drop fee. We can take card or cash,” the driver said.  When Shaw refused to pay, the A-1 employees threatened to call the police.  They said they were towing cars on orders from the HOA.  “I am employed by the HOA right now,” the driver said.

Attorney Kathleen Reres represents the Lone Star Ranch HOA. She said she believes the HOA has a right to send vendors onto private property to enforce rules outlined in the HOA’s covenants and declarations.  “I think that it does. Whether it’s a good idea is an entirely different issue,” Reres said…

Company contracted by HOA tows vehicles with expired tags from private driveways

— Adam Walser | ABC Action News | November 20, 2024

Rough Roads

• Johnson County, Texas: Lakeside Estates HOA.  Streets are falling apart.  The developer, Silver Oak Realty, needs to maintain them.  In a story oft repeated, the county conditioned approval of the plat on agreements that a non-public entity would maintain certain infrastructure.

Q: Do you think there’s anything the county can or should be doing to hold developers accountable to building roads to a certain standard, because it seems like a glorified honor system at this point.

A: You’re right and I’m glad you asked that question and I’m not sure what we can do… and he suggested a …set of big signs that say “These roads are not county maintained.”...

Now after weeks of trying, we did finally manage to talk to the owner of Silver Oak Realty.  He was under the impression the home builder he sold the lots to would be responsible for maintaining the roads.  That company is no longer in business.  However, he did say now that this has been brought to his attention, he does plan to get the streets repaired, though he couldn’t give us an exact timeframe for when that could happen…

DON’T TAKE ANYTHING FOR GRANTED: I think it’s pretty fair that most of us that purchase a home take for granted that the roads will be taken care of and they’re good to go...

🎥 VIDEO: Johnson County neighbors seek answers as roads crumble in their development — Caroline Vandergriff | CBS | November 17, 2024

Toilets Optional

• Addis Ababa, Ethiopia: Read Move In, or You’re OUT in Issue# 100.

Asfaw Hailu, a father of two who moved into a new neighborhood three weeks ago, barely notices anything missing from his two-bedroom apartment. This is despite the fact that his new home is semi-finished and missing many basic features such as paint and a toilet…

…Asfaw is not alone; an uncanny housing development in the northeast part of Addis Ababa has been flooded with urbanites over the past month and a half. Dozens have settled in the housing condominiums near Mariam Church around the Ayat Kibir Demena area in search of affordable accommodation. Neither the unpainted walls nor bathrooms without sinks and toilets have deterred the influx of residents fleeing skyrocketing rent in the capital.

Tesfaye Hirpo, a member of the residents committee, is unfazed by the rush of new tenants flocking into their neighborhood. He says the rapid demolition of low-rent, publicly owned houses as part of the Capital’s aesthetic renovation will leave little room for options.  “There are just not enough affordable homes in the city,” Tesfaye told Shega…

…Last month, the City’s Housing Development Corporation issued a stern ordinance directing homeowners who purchased homes to move in immediately, citing illegal activities in the vacant, semi-finished homes. Threats of sales contract revocations nudged many homeowners to look for tenants in a bid to avoid the fallout…

Desperate Times See Addis Ababa’s Residents Move into Semi-Finished Condominiums — Daniel Metaferiya | Shega | November 16, 2024

• Colorado’s DORA provides critical information on property insurance.

Town Halls on Homeowners Insurance — Colorado DORA Division of Insurance | November 12, 2024

Home Hardening and Resiliency - NAIC-CIPR — Colorado DORA Division of Insurance | June 12, 2024

Initial Estimates of Underinsurance for Homes in the Marshall Fire — Colorado DORA Division of Insurance | April 16, 2022

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Colorado: Property insurance is front and center in the  housing affordability equation.

Two factors have been identified as the driving force behind sharp increases for homeowners insurance in recent years: Summit County’s designation as a high-risk area for wildfires and the national trend that shows wildfires are growing in intensity.

Breckenridge officials heard from Red, White and Blue Fire Protection District wildfire division captain Matt Benedict at a Nov. 13 Breckenridge Town Council meeting regarding some of the struggles locals have experienced and what the district is doing to help.

Colorado’s Division of Insurance estimated insurance costs increased more than 50% across the state between 2020 to 2023. Benedict said Summit County is contending with home value spikes, construction cost increases and a “red zone” designation on maps that determine wildfire risk, all of which impact insurance costs.  “Some of our big properties have seen upwards of 1,000% increases,” he said. “It’s not unheard of.”...

‘Upwards of 1,000% increases:’ …officials discuss extreme spikes in homeowners insurance… — Kit Geary | SummitDaily | November 20, 2024

• Historic home prices are not a boon for most Americans.

Here’s one of the most striking trends in the U.S. right now: Homeowners are sitting on a record $35 trillion of equity, more than double what had built up on the eve of the 2008 housing crash. 

Skyrocketing property values are dividing Americans into three broad camps: those that are now locked out of homeownership, those that are effectively stuck in their current homes, and a lucky minority who have the flexibility to cash out at a historic high…

…The share of sales to first-time buyers has dropped to a record low 24%, according to a recent report by the National Association of Realtors, or NAR.  And first-time buyers who do show up have aged almost a decade. Traditionally, Americans got a foothold on the property ladder during their late 20s. Today, the median age of first-time buyers is 38… 

…House hunters have been stuck on the sidelines hoping that mortgages will become more affordable as the Federal Reserve cuts interest rates. But the opposite is happening. The weekly average rate on a 30-year fixed-rate loan is now back at 6.78%, up from 6.09% the week the Fed began loosening in mid-September, Freddie Mac’s latest data shows. 

Mortgage rates are more closely tied to what is happening with the 10-year Treasury yield than short-term interest rates set by the Fed. Investors’ concerns about the size of the U.S. fiscal deficit and the possibility of more inflationary policies under a second Trump administration have pushed the 10-year yield back to 4.43%. Historically, 30-year mortgages have been priced at a roughly 2-percentage-point spread to the Treasury yield. 

So what if today’s mortgage rates are the new normal? At 6.78%, the monthly repayment on a median-priced home eats up over a quarter of the median U.S. household income. That is more than even the peak of the 2008 housing bubble. 

Without lower home prices, the difficult situation that younger home hunters and families find themselves in could crystallize. Older Americans are enjoying a golden era to cash out, but the wider benefits of this strange housing boom are hard to see for anyone else. 

America’s Homes Are Piggy Banks That Few People Can Afford to Raid (free 🔗) — Carol Ryan | WSJ | November 15, 2024

Haynes City, Florida: City living is giving way to the exurbs.

Not long ago, Polk County’s biggest draw was citrus instead of people. Located between Tampa and Orlando, Florida’s citrus capital produces more boxes of citrus than any other county in the state and has devoted tens of thousands of acres to growing millions of trees.

But last year, more people moved to the county than to any other in the United States, almost 30,000.

Bulldozed citrus groves in recent years made way for housing and big box stores that could one day merge the two metropolitan areas into what has half-jokingly been dubbed, “Orlampa.”

The migration — and property sprawl — reflects a significant kind of growth seen all over the country this decade: the rise of the far-flung exurbs.  Outlying communities on the outer margins of metro areas — some as far away as 60 miles (97 kilometers) from a city’s center — had some of the fastest-growing populations last year, according to the U.S. Census Bureau. Those communities are primarily in the South, like Anna on the outskirts of the Dallas-Fort Worth metro area; Fort Mill, South Carolina, outside Charlotte, North Carolina; Lebanon outside Nashville; and Polk County’s Haines City…

Forget downtown or the ’burbs. People are moving to far-flung exurbs — Mike Schneider | Associated Press | November 15, 2024

Built Environment

• Pompano Beach, Florida: More luxury condominium towers on the way.

Italian fashion house Armani is planning its second residential project in South Florida in an area that is seeing increased development along the waterfront for luxury condominiums.

Armani is teaming up with several South Florida developers to build the Armani/Casa Residences Pompano Beach at 1550 N. Ocean Blvd. in Pompano Beach, Florida.

Armani/Casa is joining a growing list of luxury towers rising in Pompano Beach that include the first-ever standalone Waldorf Astoria Residences, being developed by Related Group and Merrimac Ventures, and the Ritz-Carlton Residences from Fortune International Group and Oak Capital…

Armani plans latest luxury condominium project in southern Florida — Joshua S. Andino | CoStar | November 18, 2024

• Take a lesson from the federal government and carefully delegate authorization to operationalize your association’s annual budget instead of taking a vote on every single piece of spending throughout the year.  View examples on our Policies, Procedures and Resolutions page.

…Though Ramaswamy suggested that programs Congress no longer authorizes are prime targets for cuts, in reality, many programs where Congress has let authorization lapse are covered by funding bills that policy wonks call “self-authorizing.”

In other words, instead of needing two laws — one to approve funding for an agency and another to actually allocate the money — Congress only passes one: the allocation, which intrinsically gives a department authority to spend its funding. It is Congress’s way of making legislative work more efficient, and its legality has been confirmed by numerous government studies…

10 programs that could be on the ‘government efficiency’ chopping block — Jacob Bogage | The Washington Post | November 16, 2024

Authorizations and the Appropriations Process — Congressional Research Service | May 16, 2023

Inflation and Monetary Policy

• Slow and steady is the name of the game for FOMC interest rate decisions.

“Participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2% and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time,” according to the minutes of the Federal Open Market Committee meeting ended Nov. 7.

The Fed lowered its benchmark interest rate by a quarter-percentage point earlier this month, to a range of 4.5%-4.75%, following a larger-than-usual, half-point reduction in September.

Fed Chair Jerome Powell said earlier this month that the economy is not sending signals policymakers need to be in a hurry to lower rates. Fed officials will gather for their last policy meeting of the year on Dec. 17-18.

The record of the November meeting showed some officials said the Fed could pause rate cuts and hold borrowing costs at a restrictive level if inflation remains elevated. Some noted reductions could be accelerated if the economy or labor market deteriorates…

Fed Minutes Show Officials Prefer Future Rate Cuts to Be Gradual — Amara Omeokwe | Bloomberg | November 26, 2024

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Inflation has proven stickier than previously thought.

For most of this year, US inflation has been on a steady downward trend, fanning hopes that surging prices would give way to falling interest rates.

But as 2025 looms, there are signs that some pockets of inflation are proving more stubborn than expected, prodding economists to ask if this is as good as it gets…

…For all of 2025, economists now see a 3.25% to 3.5% range for the federal funds rate, indicating one less rate cut than they projected a month ago. Investors and economists have generally pared back expectations for how low rates will fall…

Economists See Stubborn Inflation, Gradual Fed Rate-Cut Tempo — Augusta Saraiva and Dana Morgan | Bloomberg | November 22, 2024

Cashing In

• Read Issue# 103 for more on the America First trade and how investments in principal-guaranteed fixed income assets erode capital by underperforming inflation.

…This deeply held investor conviction breathes fresh life into a controversial debate in the investment world: With American equities beating pretty much everything out there over the past decade and more, is there any actual point spreading your bets into other markets?

Sure, diversification sounds wise in theory: Don’t put all your eggs in one basket. One bad wager can be offset by others that do well. And so on. But with the S&P 500 up a stonking 25% in 2024, any deviation from US stocks is leading to a world of pain for diversifiers. Owning international equities, for instance, would only give you a paltry gain of 3% this year, the biggest relative underperformance since 1997.

Sinking money into fixed income can be equally punishing with a Bloomberg index for government and corporate bonds up a meager 1.5%. Such a poor return versus the S&P 500 has only been seen in two separate years since at least 1976. Anyone following established diversification allocation methods — like the so-called 60/40 model or risk-parity — is also missing out…

Unbeatable US Stocks Leave Diversifiers In the Dust — Lu Wang | Bloomberg | October 22, 2024

United States: The measure of success (on a financial scale) keeps rising.

The price of success? About $270,000 a year.  That’s the annual salary it takes to be considered financially successful, according to a survey released Friday by financial services company Empower. The hurdle for net worth is $5.3 million, according to respondents.

Those numbers are well beyond the reach of most Americans. The average US salary in 2023 was about $67,000, according to the Social Security Administration, and the mean 401(k) balance at Fidelity Investments as of this year’s second quarter this year was $127,100. While home ownership can send one’s net worth soaring, affordability remains a major issue for Americans who don’t own property.

Fewer than four in 10 people surveyed consider themselves financially successful, with a higher percentage of men (42%) saying that than women (33%). Close to half of respondents don’t expect to reach the level of success they’d like. Among the greatest obstacles cited were the economy and a lack of savings (both chosen by 35% of respondents) and “irregular or insufficient income streams” (30%)...

Americans Say You Need $5.3 Million to Be Considered a Success — Suzanne Woolley | Bloomberg | November 22, 2024

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US household wealth reached a fresh record in the second quarter, fueled by a steady rise in the value of real estate and Americans’ stock holdings.

Household net worth increased $2.76 trillion, or 1.7% from the prior quarter, to $163.8 trillion, a Federal Reserve report showed Thursday. The value of real estate held by households climbed about $1.75 trillion, the most in a year, while the value of equity holdings rose about $662 billion…

US Household Net Worth Climbs to Record on Home Values, Stocks — Vince Golle | Bloomberg | September 12, 2024

Delayed Assessment

• North Carolina: Many states have resale requirements that include language such as “A purchaser is not liable for any unpaid assessment or fee greater than the amount set forth in the certificate prepared by the association,” BUT that does not prevent this situation.  CRS 38-33.3-123(2) prevents untimely enforcement related to violations of building restrictions that should have been known, but that doesn’t help in this case.

My HOA is charging me $13K for hailstorm damage that happened 2 years before I bought — Maurie Backman | Moneywise | October 10, 2024

Owners in Common

• Washington State: This is a case about a materialmen’s lien, but the slip opinion reiterates that owners of individual units are the owners of a condominium.  While this truth seems self-evident, it does not always translate into representation: anyone representing a condominium should represent the interests of the owners in common while simultaneously working through their liaisons who are most often the Board and managing agent.

…Therefore, for the purposes of the condominium act, the owner of a condominium is the unit owners of that condominium…

No. 85704-5-I: MDK General Construction v. Aspen Grove Owners Association — Washington Court of Appeals, Division I November 25, 2024

Sins of the Developer

• Singapore: A developer of a lot adjacent to a condominium is suing for damages related to encroachment.

A hotel developer is seeking nearly $6 million in damages from 30 unit owners of a condominium in Killiney Road because their building allegedly encroaches on the neighbouring plot, where a hotel is being built...

...Lucrum (Killiney) Hotel and Lucrum (Killiney) Commercial, which own 110 and 112 Killiney Road, allege that this encroachment caused a 180-day delay to their hotel development plans, and resulted in losses exceeding $4.5 million.  They also estimated that it led to a $1,075,000 reduction in their property’s value due to the loss of 36.22 sq m of gross floor area. This is in addition to a sum of $472,102 spent on rectification...

...The Management Corporation Strata Title (MCST) argued that it was formed only after the condominium was completed and attributed the alleged encroachment to condo developer Creslin, a subsidiary of Amara Holdings, which was dissolved in 2019.

Represented by lawyers Daniel Chen, Enzel Tan and Drashy Trivedi of Lee & Lee, the MCST contended that the “concrete backfill” was a standard construction measure to fill the gap between the buildings and prevent rainwater and debris from collecting. They argued that this was necessary to avoid water damage and structural degradation to both Killiney 118 and the claimants’ property.

The MCST’s lawyers further said the encroachment should not have been a surprise because it was “clearly visible” when the claimants demolished Tai Wah Building in 2019, and had been evident for more than six years before the lawsuit was filed…

…The MCST also named the surveyor, architect and structural engineer engaged by the building developer as parties in the lawsuit…

Hotel developer seeks $6m from Killiney Road condo owners for encroachment into its property — Joyce Lim | The Straits Times | November 26, 2024

Architect Accountability

• California: Developers are not the only parties that can be held accountable.

California’s Supreme Court has ruled unanimously that the principal architects for a condominium project may be sued directly by a condominium homeowners association for design defects. 

Skidmore, Owings & Merrill and HKS, Inc. were the principal architects for a 595 unit condominium project built near AT&T Park in San Francisco. The case, Beacon Residential Community Association v. Skidmore, Owings & Merrill, LLP, pertained to a 595-unit condominium project built near AT&T Park in San Francisco…

…The decision held that even though, on most projects, the developer has the final say on design choices, the architect can’t escape liability to the end user. This decision is likely to give homeowners associations another target in defect cases. Architecture firms should consult their liability insurer to determine whether these claims will be covered.

California Supreme Court rules that architects can be sued by condo association — Building Design + Construction | July 11, 2024

Municipal Cross Complaints

• California: The HOA is definitely in the middle here, but let’s be clear: the developer, not the HOA many years later, failed to install backwater valves.  As enumerated further on our What Are CICs?! page, community associations are a responsibility-shifting mechanism employed by municipalities and developers.

…James Chen and the live-in tenant at his property, Michael Spragg, filed the negligence suit against the city in Santa Monica Superior Court in September 2023. On Tuesday, Judge Mark A. Young gave the nod to the city's request to bring a cross-complaint against the 1749 12th Street Homeowners Association, which oversees the plaintiffs' property. Both men allege the city's negligence caused a sewage backup in the home, resulting in flooding and property damage.

The city maintains the flooding was of a "minor, trivial or insignificant nature in view of the surrounding circumstances." Now, the city's countersuit will allow them to seek compensation for a fair share of any damages assessed against them. The city also is seeking a judge's declaration of the rights and duties of the defendants.

"The city believes that the HOA contributed to the sewage backup described in plaintiffs' complaint by failing to install or require installation of backwater valves at the property," the judge wrote. "There is no known prejudice that will result from allowing the city to bring the HOA into the case."

According to the underlying suit, in October 2022 the city's employees were "negligently performing work on sewage and drainage lines that were directly or indirectly connected to the subject premises."...

Santa Monica Can Cross Complain Against HOA in Flooding Suit: Judge

— City News Service via Patch | Thursday, November 21, 2024

More Insurance Lawsuits

• Washington: The Island Habitat condominium association has filed suit in federal court against its insurer seeking relief related to coverage for the building envelope.  There’s even a CPA claim.  Stein, Sudweeks & Stein has filed numerous insurance cases over the years.

2:24-cv-01921 Island Habitat Owners Association v. American Southern Home Insurance Company

Insurer Owes $4.5M For Water Damage, Wash. HOA Says — Law 360 | Thursday, November 21, 2024

• CALIFORNIA: Bring on the condominiums.  New laws effective in 2025 will reshape housing in the Golden State by increasing the types of housing that can be constructed in various settings and theoretically increasing affordability along the way.

In California, 2023 was a blockbuster year for housing legislation with bills that streamlined approvals in most major cities, doubled the affordable housing density bonus, created more options for townhouses, condos and ADUs, and allowed religious organizations to build affordable housing on their land, regardless of zoning…

Here’s how a host of new housing laws will change California in 2025 — Alfred Twu | SF Chronicle | November 16, 2024

• ILLINOIS: New parking mandates in 2025.

Beginning January 1, 2025, the Illinois Condominium Property Act (ICPA) will have new guidelines requiring accessible parking for disabled unit owners. This pivotal change requires each homeowner association (HOA) existing on January 1, 2025, to:

(1) Adopt a written policy to accommodate unit owners with a disability by April 1, 2025;

(2) Provide proactive resolutions; and

(3) Ensure that there is new construction compliance

New Year, New Rules: Navigating Illinois’ 2025 Accessible Parking Mandate for Condos — Sayra Contreras | Tressler LLP | November 20, 2024