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JULY 2011 | VOLUME 15 | NUMBER 2

CondoLifestyles

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THE SOURCE FOR INFORMATION ON COMMUNITY ASSOCIATIONS, CONDOS, TOWNHOMES, CO-OPS & HOAS

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Financial Crisis Causes Deferred Maintenance & Repairs F E AT U R E S

Election Issues for Community Associations Sound Fiscal Management in a Challenging Economy Important Insurance Issues for Community Associations Running the Perfect Meeting (Part 2)

How to Keep Your Meetings Short and Your Patience Long

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table of contents COVER STORY

03 Financial Crisis Causes Deferred Maintenance & Repairs

By David Mack BOARD BASICS

07 Election Issues for Community Associations

by Pamela Dittmer-McKuen M O N E Y M AT T E R S

10 Sound Fiscal Management in a Challenging Economy

By Ted Verner RISKS & LIABILITIES

12 Important Insurance Issues for Community Associations

By David Mack 16 Industry Happenings Compiled by Michael C. Davids & Sherri Iandolo 18 Editors Message 19 Directory Advertising S P E C I A L F E AT U R E

26 Running the Perfect Meeting (Part 2) How to Keep Your Meetings Short and Your Patience Long

by Jordan Shifrin

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COVER STORY

By David Mack

Financial Crisis Causes Deferred Maintenance & Repairs Previously, in this series on the effects of the financial crisis on community associations, we have consulted managers and bankers for their opinions and reflections on the subject in this still tenuous economic climate.

I

n this issue we have turned to lawyers who have many clients that are associations, and asked for their views on how seriously this crisis has impacted those they serve.

“Deferred maintenance of common elements due to lack of funds exacerbated by (assessment) delinquencies is becoming a real problem,” said Howard Dakoff of Levenfeld Pearlstein, LLC. “Many associations are experiencing this issue and are hesitant to adopt special assessments for fear the same unit

delinquencies will not pay their share of the special assessment.” Major items such as masonry work, window replacement and roof repairs are being delayed a year or two except where a deteriorated condition has become hazardous.

Making Only Band-Aid Repairs Jordan Shifrin of Kovitz Shifrin Nesbit (KSN) has seen first hand some associations hit very hard by what has been happening. “I

am aware of, and have advised a number of associations that are having serious financial difficulties as a result of the current economy,” he said.

Problems run the gamut, including, “multiple foreclosures where assessment collections are falling way below budgeted projections, an inability to special assess to pay for a major capital project because it is unaffordable for most residents, an inability to qualify for a bank loan because of much more rigid restrictions (and) ending all delinquency collection activities because of the inability to pay attorneys’ fees and costs of collection.” As a result, building upkeep is falling behind seriously and only band- aid repairs are undertaken in a short-term approach to property preservation.

Shifrin described one situation in which a client association had experienced several

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CONDO LIFESTYLES

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to be seen. foreclosures, leading to collection action by his firm on its behalf for delinquent assessThreatened by Village ments. Because of those cases and being left With Condemnation in a financially strapped condition by the Some of the client associations of developer, the association has had to pay legal Keough and Moody, P.C. have had to delay costs in installments, which has made the undertaking work projects because of a board reluctant to pursue new collection cases shortage of money.

One was threatened by the because of that debt. KSN is, however, still Village with condemnaworking with the association of its building if it tion to stabilize its finanMajor items such as masonry work, didn’t do a major exterior cial state. renovation but it was In another case, the window replacement and roof unable to do so because developer filed for bankof assessment delinquenrepairs are being delayed a year or ruptcy, couldn’t be comcies, which also resulted pelled to make necessary two except where a deteriorated in it being turned down repairs and walked away by a lender. “The project from the property, condition has become hazardous. was deferred for a year,” leaving the association in said Dawn Moody, while, a negative cash flow “the association worked through the collecpredicament. The board is trying to steady its tion process to get the delinquencies down to financial condition by increasing assessments, an acceptable level for the lender. ” doing a separate assessment to pay for repairs The firm of Penland & Hartwell proover an extended period and by seeking other vides legal services to a number of associasources of funding. How thorough the collections, which in the last two to three years tion of those new assessments will be remains

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have had to put off major upgrades such as those necessary for compliance with Chicago’s Life Safety Ordinance and window replacement projects. To attempt that work now would place undue strain on reserves in addition to being a financial hardship for unit owners if a separate assessment was adopted.

There is already a shortage of funds due to a decline in regular assessment collections.

“Many associations, especially the newer ones, have significant collection and foreclosure problems, fueled by both the downturn in the economy and over purchasing by investor owners,” said David Hartwell. Delinquency rates run as high as twenty percent in some harder hit properties. Physical problems are worsening because of the inability to raise the necessary funds to do the work.

A number of Hartwell’s associations along Lake Shore Drive, while very striking in appearance, are sixty or more years old and need extensive retrofitting to meet life safety requirements. Costs of necessary upgrades run into the millions of dollars. Another forty- year old association has to replace its

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COVER STORY

windows because of deterioration due to the proximity to the Lake, which will cost four million dollars and to which many owners are objecting because they can’t afford both an increase in assessments and to pay their mortgages. An increase in foreclosures is likely and assessment delinquencies have already begun to mount. “Owners in recent years have Where associations have to make tough decisions to put off important

abatement over appearance?” That answer would appear to be yes but in neglecting cosmetic work, such associations will have to be on their toes so they can time correctly and coordinate a resumption of appearance enhancement work with any resurgent interest on the part of prospective buyers.

Where associations have to make tough decisions to put off important repair or renovation projects, they have to find a way to do the work that if not completed would attract the disapproving eye of those who enforce

repair or renovation projects, they

local housing codes. “In my opinion,” said Shifrin, “they can defer discretionary and nonpriority projects, however, they must make essential repairs and replace worn amenities, no matter what.” And the big question is where do they get the money to do so if a lot of unit owners are in personal financial trouble and regular assessment collections are down thus likely rendering separate assessments uncollectible in the amount needed for essential work? There is no easy answer.

Many of Moody’s associations are hesi-

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have to find a way to do the work that if not completed would attract the disapproving eye of those who enforce local housing codes.

become significantly more vocal in rebuke of repair and restoration projects in an effort to protect their own financial conditions,” explained Hartwell.

Not As Bad for a Few On the other hand, associations served by the law firm of Arnstein & Lehr have not been experiencing any significant physical upkeep problems due to a loss of income in the economic downturn. “Our client associations have not had to defer routine maintenance or planned capital projects due to assessment collection shortfalls,” said David Sugar an attorney with the firm who attributed this to an anticipation of changing conditions in their financial forecasts. “condominium associations we are involved with have adjusted their budgets to cover foreseeable income shortfalls attributable to higher levels of delinquencies, foreclosures and bankruptcies.”

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Where to Spend What you Do Have Where they do have some money on hand for maintenance and repair, many of the associations served by KSN have begun to decline in appearance because they are financially unable to keep up both curb appeal efforts and work that is necessary to maintain the physical integrity of buildings. “The dilemma is,” said Shifrin, “since there is minimal sales activity, is it more important to move forward (for example) with water leak

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tant to raise assessments because they are sympathetic to their owners’ financial plights but also because they know the owners would oppose vigorously any increases. “In some associations, whenever there is talk of an increase in assessments or an adoption of a special assessment, the owners revolt,” she said. Ironically the angry owners are often the same ones who complain to the local municipalities about the lack of repairs or services, which then forces associations to enact separate assessments to do work the boards had

hoped to defer until the economy recovered and residents were able to afford to pay more.

Building Deterioration Causes Drop in Values Hartwell has seen the condo buildings operated by his clients deteriorate in appearance both inside and out due to the revenue pinch. “This has caused a significant drop in unit value both because the appearance and condition of the common elements materially affects unit value,” he said, and, “more savvy

buyers understand that buildings which are deteriorating are either in financial difficulty or alternatively poised for a significant special assessment, which also causes unit value to drop.” Furthermore, Chicago has been more active in citing buildings for code violations, which can be costly to remediate and may force corrective action before an association can really afford it.

Harder to Get Loans Although bankers are reluctant to admit it, their loans are harder to qualify for, according to Shifrin. “Since the credit crunch began there are much tougher underwriting requirements for bank loans to associations,” he said, “particularly since we have seen the first foreclosure of condominium association loans because of defaults.” Banks are still making loans, as managers and lenders have stated in earlier articles, but they do not market them as aggressively as in more bountiful economic times, Shifrin noted, and are, “more cautious (about) who qualifies.”

Hartwell, too, has found that banks have made lending standards harder to meet. “I have several clients with foreclosures and collection problems exceeding ten percent and banks are unwilling to lend to those associations,” he said, adding that where such financing can’t be secured the only recourse is generally a separate assessment, which they are very reluctant to impose. “Many boards believe (that) will cause financial devastation.”

The situation is much the same for the clients of Levenfeld Pearlstein, which, Dakoff noted, will also have to try to impose special assessments if they cannot bring their delinquencies down to the level banks will find acceptable to meet their loan eligibility requirements. “If the delinquencies are not too bad, associations can still get lender financing,” he said but, with more careful scrutiny, “banks are looking at a building’s finances to make sure the association can pay their debt service.”

Delinquencies Are Material Business Concern As noted above, collection delinquencies are growing for many associations. This is a phenomenon that has been bedeviling them for only the past few years. Previously, associations dealt with owners who fell behind on an individual basis because it was not a pervasive continued on page 32

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BOARD BASICS

By Pamela Dittmer McKuen

Election Issues for Community Associations

Proxies

One of the most essential responsibilities of a community association is conducting the annual election of board members. Without a board in place, the association cannot function.

T

he Association of Condominium, Townhouse and Homeowners Associations, at its 2011 Spring Conference, presented a two-part education seminar on governance. Part I, “Elections,” delved into all aspects of an election, including the frustrating issue of owner apathy and lack of quorum. The session was led by Fred Rodriguez of Heil Heil Smart & Golee and attorney Kelly Elmore with Penland and Hartwell.

Meeting Notices All associations must hold annual meetings for the purpose of electing the board members who administer the association. For the most part, these meetings are held at the same time each year. Notice of the meeting must be delivered to the owners at least 10 days before the meeting but not more than 30 days. The notice must state the purpose of the meeting as well as the date, time and location.

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Some associations allow an owner who is unable to attend the election meeting and vote in person to designate a proxy to vote for him or her. Proxy voting is not permitted if the association’s governing documents specifically prohibit this form of voting or if the association has properly adopted a rule that permits absentee voting.

Proxy forms must provide the owner with an opportunity to designate a specific person as a proxy holder and instruct him to vote for specific candidates whose names are either printed on the proxy or written in by the owner. A valid proxy form must be dated and signed by the owner and state the name of the proxy holder. The proxy holder brings the proxy to the election, obtains a ballot, votes according to its instructions and submits both documents. An election judge or whoever is counting votes must compare the two

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to make sure the proxy holder voted the way the owner designated.

“I’ve seen forms that people bring in that are a combination of a proxy and a ballot,” said Rodriguez. “They should be two separate forms.”

As a final note, proxies are valid for eleven months from the date of execution and then terminated, said Elmore.

The Candidates All association unit owners are eligible to serve on the board. Assessment delinquency and rule violations do not disqualify them.

Owners who do not live on the property may serve on the board. Common sense might dictate that you want someone who lives in the building rather than someone residing in California to make landscaping and other decisions, but that’s not the law.

“As long as someone is an owner in your association, they are qualified to run for the board,” said Elmore.

A person who owns multiple units may run for the board and appoint another individual, such as a spouse, as a representative of another unit. Both can run for the board. But

if a husband and wife together own one unit, both cannot serve on the board at the same time.

Prior to an election, biographical information on each candidate can be distributed.

Many associations provide a form for this purpose. Candidate profiles generally list their background, interests, length of ownership in the association, and why he or she is running for the board.

The board must make a reasonable effort to identify all the candidates who are running.

They cannot present candidate names and profiles in a way that suggests board preference for one candidate over another. In the interest of fairness, many associations follow a policy of alphabetical order.

Secret Ballots Perhaps a better name for “secret ballot” is “independent ballot” or “semi-private.”

Secret ballots aren’t entirely secret because the votes must be traceable. However, a properly designed and conducted secret balloting procedure does add a level of security to the election. In order for the procedure to be legal, the association needs a properly adopted rule that

provides for secret ballots. That rule must provide a procedure for verifying the identity of the owner who casts the ballot.

As an example, Elmore explained how one large suburban association handles this form of voting: Each unit has been randomly assigned a number. That number appears on the ballot which is sent to the corresponding unit. The owner votes, and sends the ballot to the law firm. The law firm brings the ballots it has received to the election for counting. If confusion should arise as to who voted a particular ballot, the association can send it to the election auditor, who will be able to say, “Number 14 is John Smith.”

Sending the ballots to the law firm rather than to a board member eliminates questions of whether they were handled properly, she said.

Other associations use bar codes for identification, added Rodriguez.

At the end of the day, voters’ identities can be known, but if the collection and counting are done by an independent party, the board won’t know who voted for whom, said Elmore.

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BOARD BASICS

Percentage of Ownership The weight of a vote is based on the owner’s proportionate share of ownership.

Cumulative voting is permitted only if the declaration expressly provides for it. If you’ve never heard of cumulative voting, if you’re not doing cumulative voting, chances are you don’t have it, said Elmore.

Owners elect board members. The board members elect the officers among themselves.

Counting Ballots and Ballot Review Because elections can be politically charged situations, many association professionals recommend oversight of the count.

Some associations assign committees of people who are not related to the candidates to watch the process, and others hire independent auditors or their accountants to tally the results. Any person who wishes to observe the counting process may do so.

“This process is meant to be open,” said Elmore. “It’s not meant to be secretive.”

Filling Board Vacancies If a board member is unable to serve out

the term and leaves a vacancy, the remaining board members can appoint someone from the general membership with a 2/3rd approval. The newly elected board member typically serves until the next annual meeting.

Rodriguez acknowledged that sometimes finding enough willing owners to serve on the board can be a challenge. “Unfortunately, nowadays, we do come across associations where there is supposed to be a 9-member board and they have only 7 members or 5 members,” he said. “You can still continue doing business. Nothing says you must have them all. You should, but the fact of the matter is, as long as you have a secretary, president and treasurer, you’ll be okay.”

Owner Apathy and Lack of Quorum A common problem in many associations is owner apathy. It’s difficult to get owners to attend meetings, volunteer for various tasks, run for election—or even show up to vote for the people who have volunteered.

Annual meetings must have a quorum of owners to proceed. A quorum is usually twenty percent of the owners, but governing

documents vary on this figure. Elmore and Rodriguez offered several suggestions to generate greater participation: • Include detailed yet simple instructions with meeting notifications, proxies and ballots. People who don’t understand the paperwork are likely to throw it away.

• Host a “Meet the Candidates” event.

People are more likely to vote if they know something about who is running.

• Send out elections materials early. In a large association, those materials might go out two months in advance. Include pre-stamped envelopes. Check the number of responses a week or two before the annual meeting, and then launch a telephone or door-to-door campaign (or both) to remind owners to attend the meeting or send in their ballots or proxies.

• Mail, email and post frequent reminders.

• Combine the annual meeting with a social gathering, such as a holiday party, so it’s not just the election. There’s more of a sense of going out to have something to eat and drink and visit with people.

“Never underestimate the power of beer and pizza,” said Elmore. Y

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By Ted Verner - The Habitat Company

Sound Fiscal Management in a Challenging E

D

uring challenging economic times, most everyone needs to discover ways to cut back on their spending. This concept holds true for condominium associations as well. As many condominium residents are experiencing unemployment, foreclosures and other financial crises, they might not pay or be able to afford their monthly condominium association dues. As a result, the association’s financial situation becomes jeopardized as well. Many condominium association board members look to replacement reserves as a strategy in which cut backs can be made.

However, there are other ways to reduce spending, that also often benefit residents.

Following are some tips for ways to maintain sound fiscal management in your condominium association during a challenging economy.

Renegotiate Vendor Contracts Renegotiating vendor contracts is a first step to maintaining a fiscally sound condominium association. The most important thing to remember during the negotiation process is not to be afraid or shy about investigating new terms and lower costs for current contracts. Vendors want to keep your business and most are very willing to provide better pricing and terms. Following are some recommended revisions to ask for when reviewing vendor contracts: Suggest free financing. Some vendors offer it for more than two years.

Lock in pricing now to avoid price increases years from now. Oil and gasoline prices affect the cost of asphalt paving, so if you lock in asphalt pricing (for parking lot

repairs, etc.) when gas prices are low, you likely will see a cost savings in years to come.

This suggestion can be applied to other services as well.

Renegotiate the terms of the contract.

When we did this with a cable provider for more than one of our properties, they negotiated high-speed Internet for residents and also received a large screen TV for their community room. Understand that vendors have some flexibility in negotiation in order to keep clients.

Ask the vendor to be responsible for more. Prior to renegotiating, perhaps your condominium association was paying for the insurance for a service. Now, ask the vendor to assume this cost. In the evening hours, when there is less activity and the concierge is not busy assisting residents, ask them to assume

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M O N E Y M AT T E R S

trusted

Economy

verb

[truhst·ed]

some of the cleaning tasks. This shift of responsibilities allows the cleaning staff and other staff to focus on other more time-sensitive projects.

Look for group pricing. For example, The Habitat Company works with some of its business partners to provide bulk-pricing for services, like landscaping, utilities, insurance, maintenance supplies, etc., in order to purchase the services at a lower price. As a result, these cost savings are passed on to condominium associations and their members.

Increase the timeframe of the work to decrease the cost. Ask for an extended contract if you can secure a lower cost for the services.

Review Replacement Reserves If, after renegotiating the terms of vendor contracts, your condominium association still needs to reduce spending, you might consider reducing replacement reserves. However, it’s important that you work with your property management company to identify and maintain the minimum reserves that are needed.

The first step that any condominium board association should take when considering reducing replacement reserves is to review their reserve study, which outlines recommendations for upcoming capital projects, along with how much should be saved during a particular period of time to pay for these projects. The reserve study typically is completed by an outside vendor. When reviewing the reserve study, special attention should be given to make sure that the current calculation of the savings forecast is accurate. Your property management team should meet with your board of directors to determine the following: 1) Identify any projects that have been completed ahead of schedule and are no longer a part of the study 2) Highlight what/if any projects can be deferred over a longer period of time so that the fees can be extended over a longer period of time. 3) Examine how a reduction in replacement reserves will affect your budget now and in the long term. For example, if you need $50,000 in replacement reserves for 10 years, but have decided to reduce this year’s replacement reserves, you will need to compensate for this year’s reduction with an increase in future years.

If your condominium association would like to reduce replacement reserves, make sure that you are in compliance with the condominium bylaws and what they require as a minimum replacement reserve total.

If you’re an FHA-certified property, you are required to have a certain amount of replacement reserves.

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Be Proactive Perhaps the biggest piece of advice is to be proactive, as vendors likely will not reach out to you to renegotiate terms. Your reserve study will not ask you to review it either. Remember that vendors need your business.

Make sure that your property management company is taking these steps mentioned above, and working on your behalf in order to keep your finances in order during a struggling economic environment. Y

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By David Mack

Important Insurance Issues for Community Ass In addition to being assured that your property/liability provider is a reputable company an association should confirm that the firm is an admitted carrier in the State of Illinois.

T

hat status is important in the event an association’s insurance company goes belly up while processing a claim. “If they file for bankruptcy and are in the middle of considering a claim, a special state fund (to cover open claims) only applies if the carrier is admitted in Illinois,” said Ron Sirotzki of Hollinger Insurance Services, Inc. This is known as the Illinois Guaranty Fund. One exists for Life/Health Insurance and another exists for Property/Casualty Insurance. It is somewhat like FDIC for banks, but it is on a state level. Only policies issued by licensed and admitted insurers in Illinois are protected

by this fund, said Joel Davis of Community Association Underwriters of America, Inc. Sirotzki then went on to discuss some other important issues that board members should evaluate when it comes to condo associations obtaining proper insurance coverage.

Section 12 of the Illinois Condominium Act is the written guide that boards should consult when trying to determine whether their associations are adequately protected.

Special Form Cause of Loss For property insurance a condo association is required by 12(a) (1) of the Act to obtain coverage for special form cause of loss, which

was commonly known as all risk protection.

Only if a cause of loss is specifically excluded in a policy will there be no coverage for that peril.

The special form provides for much more comprehensive protection than two lesser forms, the basic and broad types. Davis adds, “the advantage of the Special Form of Commercial Property Insurance coverage is that it places the burden of proof on the insurance company in the event of a claim. If no policy exclusion can be found by the insurer, they are obligated to pay the claim. In the Basis or Broad Policy forms, the burden of proof rests on the policyholder to show a covered peril occurred in order to collect under the policy.”

The Insurance limits on the common element buildings must be for 100 % of full replacement cost with no depreciation. A specific dollar limit is established in the policy. An association could opt for greater protection pro-

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RISKS AND LIABILITIES

ociations vided by extended or guaranteed replacement cost, the former of which might go to ten to fifteen percent over any specific dollar limit for simple replacement cost in the policy and the latter, which provides for complete coverage of the dollar value of a loss no matter the amount.

Ordinance or Law Coverage Sirotzki noted that changes to Section 12 enacted in 2002 require a condo association to obtain what is known in the insurance industry as ordinance or law coverage, the most critical part of which relates to the increased cost of construction arising out of new or amended building codes of the applicable governing body. If an association had a property loss, the damage must be repaired to the new requirements of an ordinance even if the previous construction had been completed prior to the passage of any new statutory

building provisions. “I’m concerned about that increased cost of construction,” said Sirotzki.

“Ninety percent of the time I see a minimal dollar limit, which is inadequate. As a rule of thumb, whatever the building limit is, ten percent should go toward the (potential) increased cost of construction.”

He also points out that property insurance can provide for, although not automatically, equipment breakdown, primarily of boiler and air conditioning equipment. “I say purchase the coverage.” This coverage fills in the gaps in Commercial Property coverage.

Some insureds may say, “But we don’t have any steam boilers”, however, 75% of these losses are electrical in nature. Every community association benefits by having this coverage.

Liability Coverage The condo act mandates that an association carry one million dollars in liability coverage to cover both bodily injury and property damage claims against the association. A major area of liability exposure for community associations are the “slip and fall” bodily injury claims.

Unfortunately, many of these claims stem from unit owners themselves who file claims against

their own community association. “In effect, they are indirectly suing themselves,” according to Davis. Numerous claims filed by the community association will eventually lead to higher insurance premiums, which in turn lead to higher monthly assessments. As expected, icy conditions make winter the most hazardous time of year for this liability exposure.”

More on Liability Coverage An important aspect of liability protection is hired and non-owned auto protection, covering vehicles used by employees or board members or hired from a rental agency that are not owned by an association. If a board member driving, for example, to an educational event causes an accident using his/her own personal auto and the connection to the association is discovered by the other party in the vehicular encounter, it is possible or even likely that a suit might be brought against the association. “It’s the old deep pockets rule,” said Sirotzki. To protect against the association having to pay for such a loss out of its own funds, it should acquire this protection, which generally carries a $100 to $200 annual premium. Employees, board members and poten-

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CONDO LIFESTYLES

tial committee members should be covered.

Vendors & Contractors Vendors and contractors who come onto a condo property for business purposes also have a liability exposure that could be shifted to the association if an incident occurs in which a vendor/contractor has liability but not coverage in its own policy. Advising boards, Sirotzki said, “you want to make sure you get certificates of insurance from all vendors reflecting that they have at least one million dollars of liability protection and that they carry workmen’s compensation.” And a board should confirm that it is named as an additional insured on those vendor policies. “The condo act says a certificate of insurance should be provided for all contracts of $10,000 or more but I say get one from all vendors.”

Fidelity Bond When it comes to a fidelity bond the condo act requires associations with six or more units to have coverage in the amount of at least the full operating account plus an association’s reserve and the policy should protect against theft or misuse of those funds

14

CONDO LIFESTYLES

by anyone who has access to them. “Make sure you have coverage to the proper legal limit,” said Sirotzki and, “make sure your property manager is a named insured under the policy.”

D & O Liability Coverage With respect to Director’s and Officer’s (D&O) liability coverage, the cost of competing proposals should not be the only criterion that a board considers. Some D&O policies include significant coverage gaps that could leave an association open to having to pay a claim from its own resources and lead to a special assessment against unit owners.

Boards should be fully aware of the extent of the protection under their D&O policies because of possible coverage gaps. For example, some policies cover non-monetary claims such as breach of contract and others exclude them. When a board wants to know what is and what is not excluded, it, “should never take a yes or no in a phone conversation but always get the answer in writing- in at least an e-mail,” said Sirotzki. The same would hold true for any questions that might be raised by a board on any other aspect of coverage in any insurance policy especially when

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a mistake in a verbal explanation might lead to unanticipated costs to the association.

Worker’s Compensation Just about every association needs workmen’s compensation insurance but many do not have it because they have no employees. “I recommend that all associations carry this coverage even if they don’t have employees,” said Sirotzki. “Someone may file a claim against an association even if that someone is an employee of a vendor.” And this insurance should be in place to cover any volunteers- board or committee members- who may be injured in the course of performing services for an association. Insurance companies and policies can differ on covering volunteers. “Most insurance companies will automatically exclude board (and also committee) members although you can get a special endorsement to include them,” explained Sirotzki. On the other hand, “some will cover them with no increase in premium.”

As noted previously, standard liability protection in the amount of $1 million is the basic requirement for a condo association but Sirotzki believes that an umbrella liability policy

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RISKS AND LIABILITIES

providing coverage for potentially larger general liability, D&O liability or workmen’s compensation liability is usually a good idea. “That million dollar liability protection comes in a package policy,” said Sirotzki. “I don’t think it’s enough.” Boards will have to use their judgment in determining the expanded limit of coverage.

Unit Owner Insurance Unit owners in a condo association need to have their own insurance that protects them against damages to their real or personal property that occur within their units as the result of various potential perils such as fire and water as well as accidental injury to a guest or visitor. While the condo act states that associations are responsible for a unit’s walls, floors and ceilings up to a primer coat of paint, whether or not an association is obliged to pay to repair damage to, for example, drywall due to a roof leak is really dependent on the size of a potential insurance claim for the damage versus the association’s deductible.

According to Martin Stone of HSR Property Services, it’s a common misconception that an association should always file a claim and they are not legally obligated to do so. Filing a claim would be reflected in an association’s loss history and could lead to an increase in the premium for a policy or, even worse, a cancellation, which action might make an association uninsurable if it has an unacceptable record of losses. In other words, a particular claim might be “the straw that breaks the camel’s back,” as the proverbial saying goes.

that files a claim and pays the deductible under the foregoing circumstances is misspending the association’s funds because of that risk of facing a higher premium or a determination of being declared as uninsurable and they should not do it. However, he acknowledged that many do, believing the association has the legal obligation to both make the repairs and pay for their expense.

Sirotzki agreed that it is up to the discretion of boards as to whether their associations pay for repairs to walls, floors or ceilings when they choose not to file claims to keep them out of their loss history. “An association has the legal responsibility to repair such damages but not pay for the cost and can charge the unit owners,” he said.

Another important point to note is that when an association does file a claim for the

repair of damages to a unit’s interior that were caused by the unit owner’s negligence, pursuant to Section 12 of the condo act the board, after a hearing, can charge the deductible to the owner. “The association can assess the owner for the entire deductible,” said Sirotzki. A standard coverage in Homeowners coverage for condominium unit owners, known as form HO-6, provides coverage for Loss Assessments up to $1,000 for both Property and Liability claims which lead to assessments against unit owners. “This can be used to offset the chargeback of the common element policy deductible to the unit owner, says Davis. Higher limits are available upon request by the policy holder. The loss must arise from a covered peril under the HO-6 policy for this coverage to apply.” Y

Managing Loss History Let’s say damages to the wall and ceiling of a unit will cost $6,000 to repair but the association has a $5,000 deductible. If filing a claim and receiving $1,000 might complicate the association’s loss history and lead to a premium increase greater than that $1,000 because too many claims had been filed previously, an association could choose to not file that claim, have the repair done and charge the cost to the unit owner. Regarding that cost, “you won’t find a law that says the association is not responsible (for the cost of the repair) but you will also not find a law that says it is,” said Stone, adding that to protect themselves against such a potential charge unit owners should obtain more coverage for property damage in their HO6 policies than simply for paint finishes and floor and wall coverings. It is Stone’s opinion that a board of directors

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CONDO LIFESTYLES

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CONDO LIFESTYLES

Industry Happenings Sudler Property Management

the new Assistant Property Manager at 800 N. Michigan.

Sudler announces that the following Managers have recently earned the Certified Manager of Community Associations (CMCA) designation: Jim Cogley, Dan Ortiz, Jeffrey Weiss, Pamela Sochor and Justin Pike.

The 48-unit Fulton Court Townhome Association, located at 640 W. Fulton recently joined the portfolio of Sudler managed properties.

In Memoriam – Allen Cain Sudler Property Management is proud to announce that its flagship property, 175 E. Delaware Place/Hancock, recently executed a 5-year Management Agreement with the firm. Sudler has managed the residential portion of the Hancock since it was built in 1969, first as an apartment building and then as a condominium. Sudler wishes to thank the Management Search Committee and the Board of Directors for their unanimous vote of confidence in Sudler.

In an effort to provide the best possible support and service to Sudler clients, the firm has retained John Downes for the position of “In-House” Engineer. John will be providing valuable added service and will office at the Sudler main office. He has been a licensed engineer since 1965 and is well experienced in all aspects of building operations; including mechanical, electrical, plumbing, and Life Safety Systems. He has been an “Owner’s Representative,” involved in the construction of high-rise buildings, including 222 N. LaSalle, the NBC Tower and 500 W. Monroe. John has also been the Operations Manager at several Chicagoland properties. We welcome John to the Sudler organization.

In addition, Sudler has retained Melissa Rosenberg as the new Assistant Property Manager at River East, located at 512 N. McClurg Court and Lindsay Weinstein as

It is with a very heavy heart that we announce the passing of Allen Cain. Allen joined Sudler Property Management in 1996. He began his Sudler career as an Office Assistant at Malibu East Condominium, 6033 N. Sheridan Road and was quickly promoted to Property Manager at The Barry Condominium, 3100 N. Sheridan Road. He was subsequently promoted to Vice President and Property Supervisor and managed a portfolio of 8 accounts. For the last 12 years, Allen was the Property Manager at Hancock, 175 E. Delaware Place. It was at his last assignment that he established literally hundreds of friends. His sudden passing has hit all of those that worked with Allen, and his clients, very hard. We are extremely saddened. Allen will truly be missed by many.

September is National Disaster Awareness Month September is National Disaster Awareness Month. In relation to this cause, QCI Restoration is holding a Disaster Planning Course geared towards building and facilities managers on September 6th from 9 – 11 at their office in Elgin. This free program will help you develop an effective Emergency and First Responder Plan and will

cover: Developing an emergency plan, identifying specific types of emergencies and their challenges,adopting preventative measures, rehearsing and testing the plan. For more information visit www.qcirestoration.com

Heil Heil Smart & Golee HHS&G announces the addition of Jeff Semler as Business Development Manager and Website Integration Specialist. Ms. Diane Esmael has been retained as the new Residential Rental Manager and Rental Portfolio Administrator. Ms. Mydraine Janvier has recently joined the firm as a High-rise Property Condominium Portfolio manager. In addition, HHS&G is pleased to announce Ms. Bozena Uryga as the On-site Manager for Birch Manor in Mt. Prospect, IL. HHS&G is moving to a new office facility. Effective August of 2011, the new offices of HHS&G will be located at 5215 Old Orchard Road in Skokie, IL (The Northwestern Mutual Building). The new 10,000+ sq.ft. facility will house HHS&G commercial property and residential insurance division as well as their personal property and casualty department. The space will also accommodate HHS&G corporate division, 10 property managers and HHS&G Homeowner services staff. In addition the new space build-out will have two formal executive conference rooms, a training facility and a gourmet kitchen. The close proximity to the interstate will facilitate access to both urban and suburban clients, in addition to providing ample indoor parking.

Heil Heil Smart & Golee is pleased to welcome the newest residential associations that have retained HHS&G for management services: Harrison Street Lofts, Chicago, IL • Ridge Davis Condominium Association, Evanston, IL, Larrabee Courtyard Condominium, Chicago, IL • Birch Manor Condominium Association, Mt. Prospect, IL • Sauganash Village, Chicago, IL, • The Courtyard in Ford City Condominium, Chicago, IL. In addition, HHS&G is providing residential rental services for the following communities: Ridgeview Townhomes, Evanston, IL • Atherton Gardens, Evanston, IL • The Metropolitan, Skokie, IL • Willow Glen, Chicago, IL • The Stratford, Chicago, IL

Community Specialists, Inc. Allan Werth has recently joined Community Specialists as Controller. Allan brings more than 30 years of experience as a senior professional in charge of financial management to his position at the Chicago property management company.. He has an extensive background in condominium accounting as a Controller and supervisory professional gained through his prior positions at several major condominium management firms. Mr. Werth holds a Bachelor of Science in Accounting degree from Northern Illinois University and is a Certified Public Accountant.

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INDUSTRY HAPPENINGS

Chicago Department of Buildings Encourages Porch Safety Issues New 101-Page Guide to Help Maintain and Repair Porches The Chicago Department of Buildings is reminding residents to use porches safely and to visually inspect porches, balconies, decks and stairs for any needed repairs. Residents are encouraged to call 311 to report deteriorated porches to the Department of Buildings.

"Like any part of a building that is exposed to the varied weather conditions experienced in Chicago, porches should be checked on an annual basis for any wear and tear," said Acting Buildings Commissioner Michael Merchant. "Any poor conditions should be addressed immediately by property owners. Residents are also encouraged to call 311 to report concerns about porches."

The Department of Buildings has created "Porch Design and Construction Guidelines," a 101-page guide that contains detailed drawings, descriptions, checklists and standards to help buildings owners maintain and repair existing porches and/or provide insights for design professionals and contractors for building new porches.

The guide is available for free on the department’s web page at www.cityofchicago.org/buildings.

"This new guide will provide helpful information to buildings owners, architects and contractors who repair and build new porches. The guide will especially help building owners, who will be able to gain useful information on how to examine existing porches for issues as well as a better understanding of the terms used by professionals when obtaining costs estimates for repairs or new porches," said Merchant.

Residents should check for the following on their porches:

The Department of Buildings also reminds residents to limit the number of people on these structures.

"Residents should check porches for issues before entertaining guests, and hosts should make sure that guests do not gather on porches and stair structures," added Merchant.

The Department of Buildings inspects approximately 5,000 porches each year as part of annual inspections of buildings. In addition, inspectors responded to 1,406 calls regarding porches in 2010 and the department issued 2,431 permits to repair or replace porches in 2010.

Thus far in 2011, inspectors have responded to more than 446 complaints and the department has issued 938 permits for porches.

As porches are replaced and updated to meet stricter code requirements, the number of 311 complaints about potentially dangerous porches has been reduced.

In 2006, 2007, 2008 and 2009, the Department received 2,433, 2,058, 1772 and 1556 complaints, respectively.

While the number of complaints has declined, the number of permits issued continues to remain above 2,000 each year, an indication that porches are being maintained. The Department issued 2,800 permits to repair and/or replace porches in 2009, following 3,468 permits in 2008, 3,190 in 2007 and 2,066 permits issued in 2006.

As a service to property owners, pre-approved designs for porch structures are readily available through the City of Chicago's web site from the Department of Buildings. Please visit www.cityofchicago.org/buildings for more information.

• Split or rotting wood, or evidence of water damage

Summer Porch Safety Points

• Loose, missing or rusting hardware or bolts

• Most porches should be used only for entering and exiting buildings, not as gathering places.

• Loose or missing anchors where the porch attaches to a building • Missing, damaged or loose support beams and planking • Excessive movement of the structure when walked on • Wobbly handrails or guardrails If problems are identified, stop using the porch, balcony, deck or stair immediately. Owners need to make repairs, as they are required by law to maintain their property in a safe condition. Renters should report the concerns to the building owner or property manager. If the problem is not quickly addressed, renters should call 311 and request an inspection.

Wentworth Management Wentworth Property Management Corp. recently announced new community management assignments at Lake Barrington Shores HOA and Talamore of Huntley HOA. Lake Barrington Shores HOA is a 1317 unit fully developed community with 13 sub associations located in Lake Barrington, IL. Talamore of Huntley HOA will be 1972 homes at full build with 3 sub associa-

▲ Talamore Homeowners Association

▲ Lake Barrington Shores Homeowners Association tions located in Huntley, IL. The announcement was made by David Orr, Senior Vice President of the National Lifestyle Division at Wentworth Property Management.

WPM also manages the active lifestyle communities of Del Webb's Sun City in Huntley and The Grand Dominion in Mundelein.

• If you notice any problems with or damage to a porch or building, immediately address the concerns.

Renters should notify the building owner or property manager immediately.

• If problems in rental units are not fixed, please call 311 to request an inspection.

• Detailed information about porch safety is available online. Please visit the City of Chicago Department of Buildings web site at www.cityofchicago.org/buildings

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07.11

CONDO LIFESTYLES

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CONDO LIFESTYLES

From the Editor

S

ummertime in the Chicago area has recently been filled with hot and humid weather. After a cool Spring, the warm weather has felt good to most of us. Hopefully you are able to benefit from

CondoLifestyles

®

▲ Mike Davids

some of the outdoor activities that summer brings.

Our cover story “Financial Crisis Causes Deferred Maintenance & Repairs” continues our coverage on the economic crisis that we are in the midst of. This provides more insight into the impact that our current eco-

JULY 2011 | VOLUME 15 | NUMBER 2 Editor & Publisher Michael C. Davids Vice President Sherri Iandolo Art Director Rick Dykhuis Special Events Coordinator Mary Knoll Contributing Writers Pamela Dittmer McKuen, Jim Fizzell, David Mack, and Cathy Walker Circulation Arlene Wold Administration Cindy Jacob and Carol Iandolo Condo Lifestyles Magazine is published quarterly by MCD Media, a wholly owned subsidiary MCD Marketing Associates, Inc. For editorial, advertising and subscription information contact: 935 Curtiss Street, Suite 5, Downers Grove, IL 60515. 630/663-0333.

Circulation: Condo Lifestyles is available for a single issue price of $8.95 or at a $30.00 annual subscription.

Distribution is direct mailing and delivery direct through authorized distributors to over 5,000 officers and directors of Common Interest Communities, 500 property managers, 400 realtors, 400 developers and 400 public officials. Total Circulation is 7,000.

Condo Lifestyles attempts to provide its readership with a wide range of information on community associations, and when appropriate, differing opinions on community association issues.

All material herein is copyrighted 2010©. No part of the publication may be reproduced whatsoever without written consent from the publisher.

nomic struggles are having on community associations. The result of record levels of foreclosures and delinquent assessments is that some associations are not able to fund planned maintenance and repairs. Each association is uniquely affected but the problems being caused are widespread to say the least.

The all-important subject of election issues for Community Associations is covered in our second story.

Elections involve a wide variety of topics ranging from voting procedures to filling vacancies to owner apathy and quorums. In the end, your elections determine who will be the leaders of your community and represent the association’s interests.

Our Money Matters column features an article on Sound Fiscal Management and provides some practical suggestions for achieving cost savings for your association. We feature a story in our Risks & Liabilities column that offers insight and an update on a variety of significant insurance issues that many community association buildings contend with.

A Special Feature in this edition is part two of Running a Perfect Meeting. This article details a number of ways you can make your meetings more productive and keep meetings shorter. Everyone’s time is valuable so it’s always a good idea to do everything you can to make the best use of this valuable resource.

Our regular Industry Happenings column can also be found in this issue. We hope that you find the information in this issue helpful in making any necessary decisions that will help you and your association(s).

MCD Media’s next special event is a luncheon in The Million Room at Arlington International Racecourse on September 15. A variety of companies specializing in community associations have sponsored tables. If your association(s) has a special need or challenge, there will be a variety of experts specializing in community association issues including many members of the Condo Lifestyles advisory board who will attend.

MCD special events provide a terrific forum for association leaders to get questions answered, meet new vendors, share a story idea, or socialize with other volunteers and professionals.

Thanks to the many new subscribers that have found our publication useful and informative. Special thanks to the firms, associations and groups that are Authorized Distributors of Condo Lifestyles. Those of

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is issued with the understanding that the publisher is not engaged in rendering legal or accounting services. If legal advice is required, services should be sought.

you who are not current subscribers can find subscription information at www.condolifestyles.net.

Advertisers assume liability for all content of advertisements printed, and also assume personal liability for any claims arising therefrom against the publisher relating to advertising content. The publisher and editors reserve the right to reject advertising or editorial deemed inappropriate for the publication.

(mdavids@condolifestyles.net). Y

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We encourage you to take this opportunity to make your association and your community all it can be.

If you have an idea that would benefit other Community Associations, a success story to share, or some advice on how to avoid a challenge or failure, please call our office at 630-932-5551 or send us an e-mail

Michael C. Davids Editor and publisher

07.11

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SERVICE DIRECTORY

ACCOUNTANTS MICHAEL J. COCHRANE, CPA (847) 301-0377

ARCHITECTS/ENGINEERS

ATTORNEYS

FULL CIRCLE ARCHITECTS, LLC (847) 564-0884

FULLETT ROSENLUND ANDERSON, P.C. (847) 259-5100

(847) 564-3880 FAX Daniel Baigelman, AIA dan@fullcirclearchitects.com Capital Improvements • Reserve Studies Engineering Reports

Specializing in Accounting Services for Homeowner Associations.

CONDO CPA

www.fullcirclearchitects.com

A Division of Schneider, Cupuro & Associates, LTD.

85 REVERE DRIVE, SUITE B, NORTHBROOK, IL 60062

CONTACT BRAD SCHNEIDER Brad@CondoCPA.com

KELLERMEYER GODFRYT & HART, P.C. (847) 318-0033

CERTIFIED PUBLIC ACCOUNTANTS

Investigations and Repair Documents for: Exterior Walls, Windows, Roofs, and Parking Garages Condition Surveys and Reserve Studies www.kghpc.com

FROST, RUTTENBERG & ROTHBLATT, P.C. 847-282-6340

KLEIN AND HOFFMAN, INC.

CERTIFIED PUBLIC ACCOUNTANTS

Structural and Restoration Engineers

CERTIFIED PUBLIC ACCOUNTANTS

Contact: Michael C. Majewski, CPA

(630) 954-1400

Building Envelope Structural Renovation/Adaptive Reuse Curtainwall/Windows Capital Maintenance Planning New Structural Design, Civil/Environmental Marine/Waterfront Structures Transportation Facilities www.kleinandhoffman.com

MILLENNIUM PROFESSIONAL SERVICES - CPAS (847) 419-1120

WALDMAN ENGINEERING CONSULTANTS (630) 922-3000

Monthly & Year-end Accounting Services Contact Ike Zunzunia – BSBA, MSA, CPA Ike@Millenniumcpa.com

CHICAGO OFFICE: 312-899-9989 30 North LaSalle, Suite 2340, Chicago, IL 60602

NAPERVILLE OFFICE: 630-369-2700 1250 E. Diehl Rd., Suite 405, Naperville, IL 60540

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LAW OFFICES OF KEAY & COSTELLO (630) 690-6446

KOVITZ SHIFRIN NESBIT (847) 537-0500 www.ksnlaw.com Covenant Drafting & Enforcement Advising & Consulting with Boards Construction Defect Litigation Collecting Delinquent Assessments

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ORUM & ROTH, LTD. (312) 922-6262

ASBESTOS/LEAD ABATEMENT

Intellectual Property Law Trademarks • Patents Condominium Law • General Litigation Contact Mark D. Roth

ARCHITECTS/ENGINEERS

IFD INC. ASSOCIATED ENVIRONMENTAL LLC 847-364-6800

CODER TAYLOR ASSOCIATES coder@codertaylor.com

(847) 382-4100 “We Specialize in Emergency Repairs” Architects • Research • Engineering Specifications • Reserve Studies

KEOUGH & MOODY, P.C. (630) 369-2700

312-251-1900

Contact: Steve Silberman, CPA

SELDEN FOX, LTD.

DICKLER, KAHN, SLOWIKOWSKI & ZAVELL, LTD. (847) 593-5595 www.dicklerlaw.com.com

630-832-2222 EXT 113

Accounting Solutions for Management Companies & Self-Managed Associations Audit & Accounting Services Income Tax Reduction & Planning

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BANKING

Asbestos Abatement • Lead Paint Mitigation www.ifd-associated.com

COMMUNITY ADVANTAGE OF BARRINGTON BANK & TRUST (847) 304-5940 Loans, Reserve Investments & Lock Box Services www.communityadvantage.com

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BUILDING RESTORATIONS

CARPET CLEANING

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BRAL RESTORATION, LLC. (847) 839-1100

R & S CARPET & UPHOLSTERY CLEANING, INC. 708-243-0635

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"We specialize in cleaning High Rise Buildings" Garbage Chute Cleaning Tile & Grout • Pressure Washing Move Out/Detail Cleaning Serving Chicagoland Area for Over 10 Years

Window and Related Masonry Interior & Exterior Doors | Siding & Gutters www.woodlandwindows.com

Masonry and Concrete Restoration www.bralrestoration.com

FORUM GROUP, INC. (773) 732-3051 Peter.Maneyski@ForumGroupInc.com

SAFE HAVEN SERVICES 815-474-9792

L E A K R E PA I R S MASONRY, CONCRETE, TUCKPOINTING, CAULKING See our ad on page 9 for more details or visit our website at: www.ForumGroupInc.com

FM&J ASPHALT PAVING, INC. 708-544-6700 / 630-279-0303

GOLF CONSTRUCTION (219) 933-3420

Concrete & Asphalt Paving Pavers & Color Stamping Drainage Systems & Sewer Repairs Sealcoating, Crack Filling & Striping www.fmjasphalt.com

CONCRETE RESTORATION

HOLTON BROTHERS, INC.

SMART ELEVATORS CO. (630) 544-6829

(847) 253-3886 TEL / (847) 253-3255 FAX John@holtonbrothers.com www.holtonbrothers.com

HARD SURFACE SOLUTIONS (847) 228-7230 / (630) 674-4520 Concrete Flatwork Specialists Asphalt Paving Curbs & Driveways | Sidewalks Footings & Foundations Colored Concrete Stamped Concrete Aggregate Finish Concrete www.hsshardsurfacesolutions.com

QUALITY RESTORATIONS (630) 595-0990

SUNDEK OF ILLINOIS (847) 392-3939 We resurface Concrete We remove & pour Concrete Waterproof Membranes “Ask about our wall coatings” Pool Decks • Balconies • Rooftops Shower & Locker Rooms “The Only 1 Stop Service since 1967”

RIGGIO/BORON, LTD. (847) 531-5700 A Total Exterior Facade Restoration Company www.RiggioBoron.net

MCD Showcases the Races

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ENERGY GAS & ELECTRIC COST CONTAINMENT INTL. LLC (877) 265-2799 Contact: Hans Herrmann www.c2intl.com

SELECT ENERGY PARTNERS LLC (312) 593-6412 Contact: Ryan Anthony www.selectenergypartners.com

FHA/FANNIE MAE CONDOMINIUM PROJECT APPROVALS

CONDO APPROVAL PROFESSIONALS LLC (847)293-2962 contact: Steve Stenger

AMERICAN DOOR & DOCK (847) 359-4296 Servicing Chicagoland for 37 years Contact George K. www.americandooranddock.com

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SERVICE DIRECTORY

FIRE SAFETY & PROTECTION

FIRE/FLOOD RESTORATION

INSULATION (PIPE & HVAC)

CONTECH MSI CO. 847-483-3803

UNIVERSAL RESTORATION SERVICES 877-864-8266 P 888-596-4966 F

ALL THERMAL INSULATION CO. (847) 698-7543

Fire Detection & Signaling Systems Fire Alarm Systems Chicago Life Safety Evaluation Solutions Security Systems/CCTV Card Access Systems See our ad on page 13 www.contechco.com

NORTHERN ILLINOIS FIRE SPRINKLER ADVISORY BOARD (NIFSAB) 866-2NIFSAB (866-264-3722) 708-403-4468 www.firesprinklerassoc.org

We NEVER Charge for Estimates

Joe Lamotte, General Manager Commercial Division

All Pipe & HVAC Insulation all_thermal@sbcglobal.net

www.4universal.com

FORECLOSURE & EVICTION RELATED SERVICES

INSURANCE

BROUWER BROS. STEAMATIC (800) CLEAN54

MESIROW FINANCIAL (312) 595-8135

Photo Inventory, Moving, Storage or Disposal www.bbsteamatic.com

SIMPLEX GRINNELL (630) 948-1235 Fire Alarm / Sprinkler Systems Fire Pumps / Extinguishers Fire Panel Monitoring Installation / Testing / Maintenance 24/7 Service: (630) 948-1200 www.simplexgrinnell.com

Serving Chicago Over 50 Years

Water, Fire and Disaster Restoration

Nancy Ayers

E.L. JOHNSON INVESTIGATIONS, INC. (312) 583-1167

HOLLINGER SERVICES, INC. (847) 437-2184 Property Casualty • Employee Benefits Workers Compensation www.HollingerInsurance.com

(312) 583-1169 FAX State Licensed Private Detectives All Types of Investigations Specialization in Foreclosure Process Service and Eviction Notices on Foreclosed Property stacey@eljohnson.com

ROCKWOOD COMPANY Myrna Ordower

FIRE/FLOOD RESTORATION BROUWER BROS. STEAMATIC (800) CLEAN54 All types of environmental cleaning.

(708) 396-1477

(312) 621-2320

GARBAGE CHUTE CLEANING BROUWER BROS. STEAMATIC (800) CLEAN54

I N T E R I O R D ES I G N INTERIOR PROJECT MANAGEMENT

(708) 396-1477 www.bbsteamatic.com

QCI RESTORATION 847-891-2929 866-832-6724

REFIND INTERIORS (773) 348-7796 SINGLE - SOURCE RESOURCE

HVAC

Corridors • Elevators • Lobbies Hospitality/Meeting Rooms • Lighting

ALTHOFF INDUSTRIES 312.332.5700

www.QCIrestoration.com

Expert Project Management www.refindinteriors.com Style - Function - Service

Mechanical - Plumbing - Electrical - Building Automation www.althoffind.com

THE RESTORATION GROUP, LLC (630) 580-5584

EMCOR SERVICES TEAM MECHANICAL (847) 229-7600

www.trgrestore.com

www.emcortmi.com

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JANITORIAL SERVICES KINGSBURY CLEAN (847) 768-1200 “GREEN” Janitorial & Sanitizing Services for hospitality businesses, health care providers and commercial, industrial and multi-unit residential buildings.

Jed Levenstein / David Melone www.kingsburyclean.com

LANDSCAPE CONTRACTORS KINSELLA LANDSCAPE, INC. (708) 371-0830 Creating Lifestyles From The Outside In…™ www.kinsellalandscape.com

SEBERT LANDSCAPING, INC. 630-497-1000

www.towerservices.net

www.sebert.com

THORNAPPLE LANDSCAPES, INC. 630-232 2076 / 800-464-3443 Quality Landscaping Since 1947 www.thornapplelandscapes.com

ACRES GROUP (888) 231-1300 / (847) 526-4554

LAUNDRY SERVICES & EQUIPMENT

Contact Andrew Neuman

UNIVERSAL RESTORATION SERVICES 877-864-8266 P 888-596-4966 F Water, Fire and Disaster Restoration

ACRES GROUP (888) 231-1300 / (847) 526-4554

Joe Lamotte, General Manager Commercial Division

LAWN CARE

Professional Landscaping and Snow Removal www.acresgroup.com

www.4universal.com

SPRING-GREEN LAWN CARE (800) 830-5914

ALAN HORTICULTURAL ENTERPRISES, INC. (630) 739-0205 www.alanhorticultural.com

MAILBOXES

BALANCED ENVIRONMENTS, INC. (847) 395-7120

MAILBOX WORKS (630) 355-9989 (773) 528-3111

ILT VIGNOCCHI (847) 487-5200

IFD, INC. ASSOCIATED ENVIRONMENTAL LLC Environmental Remediation www.ifd-associated.com

LAUNDRYLAND ROUTE, LLC. (847) 998-4050

LANDSCAPE CONTRACTORS

Mold & Water Damage Experts RESIDENTIAL-COMMERCIAL-INDUSTRIAL Asisstance with Insuance Claims Post Remediation Assessments & Occupancy Studies

(847) 364-6800

LAKE & POND MANAGEMENT

www.BalancedEnvironmentsInc.com

“All types of Environmental Cleaning” www.bbsteamatic.com

CLEAN AIR SCIENCE (847) 344-0607

TOWER BUILDING SERVICES 312-404-3943

Ceritfied Aquatic Applicator Department of Agriculture www.acresgroup.com

BROUWER BROS. STEAMATIC (800) CLEAN54

LANDSCAPE CONCEPTS MANAGEMENT, INC. (847) 223-3800 www.landscapeconcepts.com

Cost efficient Janitorial & Maintenance services for homeowners associations.

Carpet cleaning, pressure washing, snow removal, etc.

MOLD REMEDIATION

PAINTERS AAA PAINTING CONTRACTORS, INC. (630) 231-8350 www.aaapaintco.com

Large Variety of Commercial and Residential Mailboxes Intercoms and Tele-Entry Address Signage & Engraved Nameplates Installation Services Since 1989

www.MailboxWorks.com

www.iltvignocchi.com

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SERVICE DIRECTORY

PAINTERS

PEST CONTROL

PROPERTY MANAGEMENT

ABC DECO INC. 773-701-1143

SMITHEREEN PEST MANAGEMENT SERVICES (847) 647-0010 / (800) 336-3500

HILLCREST MANAGEMENT (630) 627-3303 / (312) 379-0692

Painting & Wall Repairs Hardwood Floors/ Tile Installation Kitchen cabinetry sale & installation "Serving Community Association's for over 10 Years" Contact: Mike Chinte info@abcdecoonline.com

www.smithereen.com

PROPERTY MANAGEMENT AEGIS PROPERTIES CORPORATION (773) 667-8900

CERTAPRO PAINTERS (866) 441-8259

LEGUM & NORMAN MIDWEST (312) 944-2611 www.lnchicago.com

www.aegisproperties.com

Interior & Exterior Painting • Wallcoverings Stucco, Masonry & EFIS Repair • Drywall Repair www.certapro.com bkurschner@certapro.com

www.hillcrestmgmt.com

MCGILL MANAGEMENT, INC. (847) 259-1331

BAUM PROPERTY SERVICES, LTD., AAMC (630) 897-0500

www.mcgillmanagement.com

www.BaumProp.com

THE INSIDE OUT COMPANY 630-406-3000

CARUSO MANAGEMENT GROUP, INC.

Painting, Construction & Maintenance www.insideoutcompany.com

RESIDENTIAL & COMMERCIAL

(630) 717-7188 www.carusomanagementgroup.com

PAVING CHICAGO PROPERTY SERVICES, INC. (312) 455-0107 X102

DUBOIS PAVING (847) 634-6089 (800) 884-4728

www.chicagopropertyservices.com

www.duboispaving.com

“Premier Community Management”

FM&J ASPHALT PAVING, INC. 708-544-6700 / 630-279-0303 Concrete & Asphalt Paving Pavers & Color Stamping Drainage Systems & Sewer Repairs Sealcoating, Crack Filling & Striping www.fmjasphalt.com

HARD SURFACE SOLUTIONS (630) 674-4520

NIMROD REALTY GROUP (847) 724-7850

PARAGON PROPERTY MANAGEMENT (847) 465-1483 contact: Tracy Davis tracy@paragonmanagement-inc.com www.paragonmanagement-inc.com

CHICAGOLAND COMMUNITY MANAGEMENT (312) 729-1300 www.chicagoland-inc.com

COMMUNITY SPECIALISTS (312) 337-8691 www.communityspecialists.net

PROPERTY MANAGEMENT SPECIALISTS, LTD. (847) 845-6067 “A Management Company with Values” contact: James Krech service@pmgrs.com

PROPERTY SPECIALISTS INC. (847) 806-6121 (630) 633-5450 WOODRIDGE OFFICE

www.psimanagement.net

www.hsshardsurfacesolutions.com

MAUL ASPHALT & SEALCOATING (630) 420-8765 Sealcoating / Crack-sealing / Striping Asphalt Installation www.maulasphalt.com

THE HABITAT COMPANY (312) 527-5400 www.habitat.com

SUDLER PROPERTY MANAGEMENT (312) 751-0900 www.sudlerpropertymanagement.com

HEIL, HEIL, SMART & GOLEE (847) 866-7400 www.hhsg.net

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PROPERTY MANAGEMENT

ROOFING

SECURITY SERVICES

TAIRRE MANAGEMENT SERVICES (847) 299-5740

B.T. LAKESIDE ROOFING (630) 628-0093

SEAL-TIGHT PROTECTIVE SERVICES, INC. (847) 640-2210

tsutton@tairremgmt.com

See our ad on page 31. www.lakeroof.com

VANGUARD COMMUNITY MANAGEMENT

CSR ROOFING CONTRACTORS (708) 848-9119

www.stpsguards.net

B.T. LAKESIDE ROOFING (630) 628-0093

www.csr-roofing.com See our ad on page 4.

www.vanguardcommunity.com

www.lakeroof.com See our ad on page 31.

WOLIN-LEVIN INC. (312) 335-1950

PRO★TOP ROOFING (847) 559-9119

Contact Jennifer Feldman, Tom Skweres

WOODLAND WINDOWS & DOORS 630-529-DOOR (3667)

www.wolin-levin.com

Window and Related Masonry Interior & Exterior Doors | Siding & Gutters www.woodlandwindows.com

REAL ESTATE TAX ATTORNEY

S&D ROOFING SERVICE (630) 279-6600

ELLIOTT & ASSOCIATES (847) 298-8300

50,000 roofs installed TEAR OFFS • SHINGLES • FLAT ROOFS Our experience & technical know-how gets the job done right the first time!

Serving the area since 1963 www.sdroofing.com sales@sdroofing.com

www.elliottlaw.com

REMODELING CONTRACTORS ABC DECO INC. 773-701-1143 Painting & Wall Repairs Hardwood Floors/ Tile Installation Kitchen cabinetry sale & installation "Serving Community Association's for over 10 Years" Contact: Mike Chinte info@abcdecoonline.com

ROOFING ACTIVE ROOFING CO., INC. (773) 238-0338 (708) 430-8080 Established 1965 Maintenance & Repairs Roofing/Sheet Metal/Tuckpointing www.activeroofing.com

SIDING / RENOVATIONS

SNOW REMOVAL HARD SURFACE SOLUTIONS (630) 674-4520

SUAREZ ROOFING, INC. 773-235-5455

SWIMMING POOLS

Your Complete Roofing Solutions www.suarezroofing.com

SPMS 630-692-1500

SECURITY SCREENS MIDWEST SECURITY SCREENS (800) 615-6754 Quality Security for Windows and Doors www.midwestsecurityscreens.com

SECURITY SERVICES ADMIRAL SECURITY DOOR STAFF SOLUTIONS (847) 588-0888 www.admiralsecuritychicago.com

Heaters Pumps • Repairs • Chemicals Pool Maintenance • Complete Water Analysis Pool Guards, Inc. ross@spmspools.com

TREE CARE AUTUMN TREE CARE EXPERTS, INC. (847) 729-1963 A comprehensive aboricultural firm building relationships in every season for more information, please visit our website: www.autumntree.com

KRAMER TREE SPECIALISTS, INC. 630-293-5444 Tree Pruning, Tree Removal, Cable Bracing, Plant Health Care, Tree Planting & Transplanting www.kramertree.com

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CONDO LIFESTYLES

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SERVICE DIRECTORY

TREE CARE

WASTE SERVICES

THE CARE OF TREES (847) 394-3903

LAKESHORE WASTE SERVICES (773) 685-8811

Certified Arborists, Accredited, 5-Time “Company That Cares” Honor Roll Member

WINDOWS/REPLACEMENTS WOODLAND WINDOWS & DOORS 630-529-DOOR (3667) Window and Related Masonry Interior & Exterior Doors | Siding & Gutters www.woodlandwindows.com

WINDOWS/REPLACEMENTS

WINDOW RESTORATION

www.thecareoftrees.com

CHICAGO WINDOW SYSTEMS, INC. (312) 915-0591

TV-BULK CABLE & SATELLITE

Window and Patio Door Replacement Aluminum and Wood Clad Steel UL Rated Windows Aluminum Store Fronts www.cwins10@yahoo.com

COMCAST (866) 594-1234 www.comcast.com

WINDOW WALL SERVICES, INC. THE CAULKING COMPANY (708) 361-9333 www.windowwallservices.com All Types of Window Restoration Weather Stripping / Hinges Handles and Adjustments Curtain Wall Repair Specialists

RCN (312) 955-2322 rcnchicagoapts@rcn.net www.rcn.com

For more information, visit our website at

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MCD SHOWCASES THE RACES Arlington Park Racecourse S E P T E M B E R 15, 2 0 1 1

mdavids@condolifestyles.net |

630-932-5551

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by Jordan I. Shifrin - Kovitz Shifrin Nesbit

RUNNING THE PERFECT MEETING (part 2)

How to Keep Your Meetings Short and Your Communication Breakdown Why association living is often difficult or gut wrenching boils down to issues involving communication. Take a business dispute and try and resolve it on an emotional level and you have a front row seat at a prize-fight. Resolve the communication issues and voilà, no problems. Life is beautiful.

T

he board president is a bully, the homeowner in the audience is a demagogue, the property manager is a donothing, know it all, and on and on....all the stereotypical labels. If the subject of all of this attention was better at communicating their message, there would be no animosity and their role could actually be appreciated.

Sometimes, it is not necessarily what is said, or even how it is said, as much as how a person is perceived by the listener (as I always say, “Perception is Reality”). If the treasurer is perceived to be untrustworthy, when he makes his report on the forthcoming special assessment some people will mutter he has been stealing money, even though for the past twenty years the board has refused to provide for adequate reserves.

More Effective Message How can we better deliver our message so we can be more effective? (As social guru Marshall McCluhan once said back in the ‘60s, “the medium is the message.”) How you deliver the gospel is more important than the information you are conveying. How you act before, during and after communicating will determine the level of cooperation. Whether you are the communicator or the listener, your body language and facial expressions, as well as tone of voice, may decide the outcome of your effectiveness.

Working Toward Shorter Board Meetings The bane of the board members’ existence: the four-hour monthly board meeting.

I assume that there is a certain percentage of the board member population that looks forward to this social occasion; however, it is probably the largest cause of board member burnout. Most people who are willing to

serve on a condominium or HOA board are willing to give of themselves and devote their time to promoting the best interests of the association. Most of these people, though, have lives that extend beyond the board of directors. Being a director does not define their life. If the meetings cascade out of control between coffee-klatch atmosphere and owner attack dog sessions, it makes it harder and harder to get people to commit themselves to a job where the personal detriments outweigh the greater good.

This is why it is most important for an association to have a fixed strategy in running its board and owners’ meetings. In consultation with an experienced manager and legal counsel, the board can have a game plan to follow for every meeting. Not only will this extend the shelf life of quality people, but the owners will have more respect for the board.

A meandering disorganized gabfest is an open license for difficult owners to shout out every question and hurl every insult that pops into their head throughout the meeting. If you have ever sat through one of these, it makes you wonder why anyone would want this job.

One Hour Meeting Goal The ultimate goal should be a one-hour board meeting. Since associations legally need only meet four times per year (the monthly meeting is an urban myth), if you

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n Audit & Accounting Services n Expertise in Developer Turnovers n Election Tabulations n Income Tax Reduction & Planning n Monthly Accounting Solutions for Management Companies

Call Brad Schneider at 630-832-2222 188 Industrial Drive, Suite 300, Elmhurst, IL 60126 • Visit our website at www.CondoCPA.com

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S P E C I A L F E AT U R E

Patience Long

If you are having difficulty communicating, or are observant of someone who is, ask yourself these questions and perhaps with just a minor adjustment of style, you can see a deflection of this prior hostility and a much better result. (In all instances, if someone is truly crazy, disregard any of this information.)

1. Are you consistent in your actions, and as a result, predictable? Consistency and predictability often translates into reliability. People who are not perceived this way often give off an air of untrustworthiness. Shifting of values and priorities are viewed as unpredictable and create insecurity and lack of trust.

can accomplish both objectives, your meetings will be more productive, the individual directors will have a sense of accomplishment and qualified people will want to stay involved. It is merely a question of striking a balance between efficiency and good communication versus aimlessly going through the motions.

2. Straight talkers can be perceived as honorable, direct or lacking in tact, a person of conviction or a bully. It is all a matter of how forceful the message is delivered. Is it a statement of belief, conviction, or are you trying to ram it down someone’s throat.

3. Are you exhibiting empathy; the ability to know and feel what others are feeling? “I feel your pain,” is a message that can be a trust builder. However, going overboard can come across as wishy-washy and soft.

4. Is there genuine concern being conveyed, or is it mere lip-service? If the concern is perceived to be such it will build trust. If it is perceived to be false, however, it can create the highest level of animosity.

Not only will this extend the shelf life of quality people, but the owners

5. Communicating expertise is important because the more the listener realizes the speaker has the education and background to discuss a topic, the more a listener will be at ease or will be willing to back down.

will have more respect for the board.

6. Develop a level of competency, even if it’s the narrowest of areas, and it will result in confidence in the listener. A board member who knows everything there is to know about a narrow topic like painting will not generate criticism so long as they can communicate that expertise. Hemming and hawing, being unprepared, or being unsure creates anxiety. “Never let them see you sweat.”

A meandering disorganized gabfest is an open license for difficult owners to shout out every question

7. Exhibit a level of authority without generating fear. Authority will result in respect; creating fear will result in hostility. Sometimes striking a balance is the most difficult thing of all. Be an enlightened despot, or a benevolent dictator.

and hurl every insult that pops into their head throughout the meeting.

8. Offer help because you know someone or something that will be useful. If you are perceived to be able to influence an outcome in a positive fashion you will be effective in your communication. Being conscious of how you are saying things is just as important as what you say.

When you Need a Lawyer at the Meeting… and When you Don’t!

After almost three decades of representing co-ops, condominium and homeowners’ associations, I am often the recipient of a last-minute panicky phone call or email to attend a meeting. More often than not, it’s a meeting where the owners will be present, en masse, boiling tar and pulling feathers.

How did the association get to this point, anyway? Considering that boards do not generally meet that often and very few people ever show up, why is everyone so angry? Further, what can the association attorney do about this?

If the board consults with its law firm on all legal matters, uses its property manager effectively and the board communicates regularly with the membership, things should not reach the ignition point of spontaneous combustion. As we have learned, every association has a personality, so people in the community may not get upset about something

9. Body language gives cues to your listeners that they pick up and you are not even aware you are sending. If you are making a presentation to the homeowners and in response to a pointed question, you fold your arms, no matter how sincere you appear, your body language has delivered a message that you are not listening to a differing point of view and have already made up your mind.

By studying these dynamics and thinking about how you come across and better understanding what a speaker is saying, it will result in less hostility and better understanding; ergo, better communication, better meetings and the perception of a well run association.

Dickler, Kahn, Slowikowski & Zavell, Ltd.

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~ concentrating in ~

Condo & HOA Representation Corporate • Real Estate • Litigation • Wills Personal Injury 85 W. Algonquin Rd., Ste #420, Arlington Heights, IL 60005

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that drives people in another association to distraction. Whether it’s a special assessment, a bank loan, changing the declaration or clamping down on rule enforcement, all of these events can generate an insurrection if not handled properly.

However, the association’s legal counsel is not a policeman to be summoned to meetings with an ax handle at a moment’s notice to put down an insurrection and protect the board of directors from bodily harm. If events have accelerated to this point, and you cannot strategize a rational game-plan, cancel the meeting! The following recommendations are to encourage pre-planning and can eliminate these types of situations: 1. Whether past boards neglected to set aside reserves, failed to raise assessments sufficiently, or buildings deteriorated faster than anticipated, if a Board does not keep its members informed, the president may wake up to a burning cross on his/her lawn.

www.carusomanagement.com

Baum PROPERTY MANAGEMENT

Professional Community Management

In an age of cyber-communications, a community website is now a necessity.

Newsletters or just plain mailers periodically will inform the huddled masses. For those that do not or refuse to read, talk to them. Invite them to meet one on one with the board in a closed session or just call them up. A “strong” personality should not be given an audience to launch an attack on the board, especially when it’s not the current board’s fault. Experience shows us that these types of people have their own agendas, anyway.

A more effective use of your counsel’s time is to seek advice on how to address the situation. It is not the lawyer’s job, nor should it be to field questions attacking the board or providing a “stonewall” defense.

If the board has consulted with counsel on the important issues, then they should at least be confident in their position, that it is based on firm legal grounds.

2. If the meeting is going to proceed, have a procedure in place before you commence. (a) Set a limit for homeowner comments and questions. (b) Set up a microphone in the middle of the aisle, where each person must step up, identify themselves and ask their question. (c) If the Board President does not have an iron disposition, appoint someone to run the question and answer session. Attorneys who fill this void are often asked questions contrary to the board or the association’s interest and may be giving the door for a potential conflict of interest. (d) Have people who wish to speak, sign up in advance.

The biggest mistake the novice board and manager make is sensing a storm is brewing, deny it, ignore it, stonewall it and hope it blows over. The leaders or spokespersons must have their day in court, but it does not have to be at an open meeting. If an uproar breaks out at a meeting, there is little the lawyer can do.

C O N TA C T

Michael D. Baum, CPM, PCAM

630-897-0500 www.BaumProp.com

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S P E C I A L F E AT U R E

(e) Do not respond to people blurting out comments from the audience. Stick to the procedure and tell the people who are refusing to abide by decorum, that they are “out of order”. (f) You can have people submit their questions in writing in advance so the board can prepare an informed response, as opposed to an instant, spontaneous answer steeped in emotion and fear. (g) With several minutes to go, announce the time has almost expired, try and identify several people who have not spoken and then let them wrap-up.

Remember, the person who tries to dominate, keeps raising their hand and shouts out their question out of turn is only there to hear the sound of their own voice.

3. When serious Board matters arise, call a closed session with the attorney and if appropriate, the property manager and try to settle the issues so the board, which may be split, can at least present a unified front in terms of being on the same side, even if people disagree.

4. In a perfect world, people at open meetings should raise their hand, speak only when called upon and wait for someone to finish before they start speaking (in a “Bizarro” world, you have people who are half loaded shouting out anything that pops into their head and who don’t listen to the facts because they already have their minds made up).

The bottom line is, meet only when necessary, don’t take on a role unprepared, use your attorney for advice, and do not have he or

Here are some basic rules to avoid common pitfalls and a lot of them are tied to good communication.

1st - All meetings of the board are open to the members (except the closed session exceptions).

Since one to a hundred owners may be in attendance, it is always important to: (1) introduce the board and guests, and (2) go over the rules of decorum. If this is explained “up front”, there is a good chance that most people will obey the rules. That limits the problems and the timeline for the meeting considerably.

2nd - Many people come to the meeting not necessarily to hear the board conduct business, but rather to have their say about a personal issue. If it is clear: (A) the board will hear comments during an “open forum” before the meeting commences, (B) will limit the time to 20-30 minutes, tops, and (C) request that no maintenance requests be made during the session, but called into customer service, this portion of the meeting will go much smoother.

3rd - The open session is then closed at the specified time and then the board meeting is called to order. Owners will then be advised they are welcome to stay, but it is a board of directors’ business meeting and there will be no discussion with or questions from the audience. If the board president can get these last three points across, you have now eliminated one to two hours of that four-hour marathon. Now, you only have to get the board members in line.

4th - You must have a written agenda that follows the same format every meeting. This is not just a game of owner expectations, but directors, as well. The president, with the assistance of the manager, sets the agenda. Each month, most of the agenda is identical. The fill-in the blanks part is the new and old business portions. Everything else from call to order to adjournment is identical. Also, a packet of information is prepared for every meeting which the board members can review in advance and come to the meeting prepared. This includes current financial reports, minutes of the previous meeting, the agenda, the management and delinquency report and any other relevant documents like contracts to be voted on at the meeting. If the board members have this information in advance, they can prepare their questions; and answers can then be precise and on point. Also, there is no need to read this information out loud, verbatim, since a written report is in hand and has been reviewed in advance. Thus, time is saved and boredom has been avoided.

5th - A capable board will have someone with a basic working knowledge of parliamentary procedure (adopted from Roberts’ Rules of Order). Please note that Roberts’ rules are erroneously cited as the ultimate authority in many operating bylaws. No Association I have ever been associated with was ever capable of fulfilling this requirement without the necessity of hiring a professional parliamentarian. However, there are many “how-to” manuals adapted from Roberts’ Rules that provide basic guidelines which are suitable and are an effective guide to running meetings correctly. The most important thing to always remember is, “less is more”.

6th - t is up to the chairman of the meeting to keep everyone in line. If the board president does not have a strong enough personality to do so, then a sergeant at arms should be appointed for each meeting. Hopefully, the term “you are out of order” is not a weapon in the arsenal that has to be pulled out too often. As a gentle reminder, the chairman must politely ask periodically, “Does anyone have anything new to add which has not already been said?” Over the course of time, it will become less and less a necessity to ask this question and meetings will be a more economical use of time. There is also no limitation on the ability of the chairman to set time limits for discussions on certain issues and gently ask for closure of discussions and to tactfully wind things down. This is the third area where meetings have a tendency to meander along.

7th - Through some media or means of communication, the members need to be informed of what the board accomplished after every meeting. Traditionally, most associations use a newsletter, or at least posted minutes, but now association websites are becoming more popular. The main thing is communicating with the owners as to what is happening. This will eliminate a lot of the typical false accusations of the board acting in secret and conspiring against the owners.

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she come to sit at a meeting when their presence is a distraction rather than a solution.

Associations and Open Meetings One of the great truths of the association culture is that the board shall not conduct its’ business behind closed doors or have “secret” meetings as this deprives the owners of their rights. In concept it sounds like a fine principled idea. In practicality, there are more exceptions than rules and more urban myths than exceptions.

Beginning with the minimum legal obligation, we can dispel the biggest myth first.

Illinois does have a law called the Open Meetings Act. It is set forth in Ch. 50 ILCS 120, et seq. of the Illinois Statutes. It requires open meetings for public bodies only. Public bodies are duly elected or appointed governmental bodies such as village boards, park districts, etc. It does not apply to private organizations such as condominium and homeowners associations. All of the scuttlebutt about violations of the Open Meetings Act at association meetings is not applicable.

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Associations are subject to certain “open meetings” requirements set forth in other statutes and often in their operating documents.

The following requirements appear in the Illinois General Not-for-Profit Corporation Act, the Illinois Condominium Property Act and many declarations and bylaws: 1. All meetings of the Board where business is conducted are open to the members; 2. Notice of a Board meeting must be sent to all members no less than 48 hours in advance; 3. Board meetings are to be conducted in accordance with the basic rules of parliamentary procedure (adopted from Roberts Rules of Order); 4. Members have a right to be present, but shall not participate in the discussion or voting on board business (most associations hold an open forum for the owners to speak before or after meetings); 5. All votes are recorded in the minutes; 6. Minutes are a short summary of board votes, not a verbatim transcript of discussions or owner comments;

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7. Minutes are available upon request.

They do not have to be sent out to all owners after every meeting; 8. The president runs the meeting and directors may only speak when called upon; 9. Minutes are not official until approved at a subsequent meeting; 10. Minutes must be kept for seven years.

Where there is confusion and often controversy is when the board meets without owners being present. There are three statutory exceptions and one implied condition of when a board meets in a closed session.

1. No notice to the owners is required.

2. No business can be conducted; i.e. no votes can be taken.

3. No minutes are kept.

4. The board can discuss: a) The hiring and firing of contractors and personnel. b) Disciplinary action against an owner such as fines and delinquencies (and implied that a board can also discipline its own members for violations as a director).

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S P E C I A L F E AT U R E

c) Confidential discussions with legal counsel about pending or threatened litigation. d) Where no business is actually conducted.

The old myth about three directors on a five person board riding an elevator, constituting a meeting, is dispelled.

Sometimes boards find it necessary to have planning sessions acting as a committee of the whole, such as developing a budget. For condominium associations, once the “proposed� budget is hammered out, then the statute has protections built in for the owners, i.e. it must be sent to all owners 30 days prior to adoption, owners must receive notice of not more than 30 nor less than 10 days prior to the meeting where it will be adopted, owners have a right to be present, the board votes on the budget at the open meeting and it is recorded in the minutes.

In the event the budget exceeds a 15 percent increase over the prior year, then the owners can file a petition for a referendum and could reject the budget if more than a majority of all owners deem it so.

As you can see, there is a balance in this instance. The board has a right to meet and crunch numbers without interruption; the owners are protected with the right to be present and even reject a large increase in assessments.

This is just an overview and there are exceptions to the exceptions.

The most important thing to remember

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is board members have rights to act like directors of a corporation, owners have rights to be informed as members of the association and the Illinois Open Meetings Act protects the taxpayers by imposing criminal penalties on public officials that knowingly violate it.

There are no such sanctions for private organizations, nor, in my opinion, should there be. Y

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Financial Crisis from page 6 problem. The vast majority of owners met their assessment responsibilities. “Now, since just about all associations are facing increased delinquencies, some of which are very significant, boards have been forced to address the matter as a material business concern,” said Hartwell, whose firm advises boards to pursue a policy of initiating legal action no later than sixty days after the inception of a delinquency, pretty much the industry standard now, and to enforce that policy equally against all owners who fall behind. “This will help optimize amounts collected, minimize losses and ensure that claims of discrimination are avoided,” a charge sometimes levied against associations that do not act uniformly against property owners.

The associations Keough and Moody represent are moving more quickly than in the past to move their delinquent cases for legal action and, before, when they have negotiated payment plans with non-payers they are becoming more strict in setting them up and

enforcing their terms, said Moody.

Although the associations advised by Arnstein & Lehr are getting by relatively well in the operation of their properties because of their prudent budget projections, they are not without some collection problems. As a result, “boards and their managers (have to be) more diligent and aggressive in pursuing collections than in the past and we are handling more collection matters than in the past,” said Sugar.

Collection difficulties escalated for the clients of Levenfeld Pearlstein in 2009 and 2010 but have receded slightly this year. This is, “mostly because unit delinquencies have been resolved and many associations are leasing out investor owned units with large delinquencies after obtaining an order for possession,” said Dakoff.

Foreclosure Takes Priority Over Assessment Lien “When lenders initiate foreclosure, that action takes priority over any assessment lien that an association has against a unit and the lien is wiped out, explained Shifrin. All of those

previous uncollected assessments through the association’s lien rights are lost to an association although they can eventually collect six months of the amount from the purchaser, other than the lender, at a foreclosure sale or afterwards when buying from a lender that has taken initial possession. An association could proceed against the unit owner in a separate lawsuit for breach of contract (declaration) for the lost assessments; however, spending more money to try and collect money from someone who most likely has no more money may not be economically feasible/worthwhile.

Lenders Can Contribute to Collection Problems Lenders that do take possession of units at a foreclosure sale are, at least on a short- term basis, contributing to the collection problems of associations. “Because lenders are being stuck with so many units, some are paying late or not paying at all,” said Hartwell, although, he added, “ultimately all past due assessments are usually collected from lenders.”

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COVER STORY

has been much the same at Dakoff’s firm. “Payment might be delayed but associations are not writing off bad debt because of it,” he said.

Paying assessments going forward, but not past delinquencies, after taking possession is a legal obligation of lenders just as it is for a conventional unit owner but, said Sugar, “from time to time certain lenders need a ‘nudge’,” to get them to ante up. “The larger problem is that it is taking longer and longer for condominium units to be sold in foreclosure proceedings and associations are routinely sustaining assessment losses far in excess of the six months of assessments that can be recouped after a foreclosure.”

Moody hasn’t seen any collection losses from lenders to this point and most are also not paying late. “The lenders generally pay when they are looking to close on the unit (with a buyer) or the association takes an aggressive collection stance,” she said.

lost.” In some cases, such an unrecoverable loss can be significant, possibly amounting to well over $200,000 because of the extended period of time it takes a foreclosure and bankruptcy to be completed.

Not New But More Common Such a defensive action by a unit owner is not new to the condominium field, just more common now. “Filing bankruptcy to forestall collections or foreclosure is not new,” said Shifrin. “We have just seen a dramatic

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Pursuing Former Owner After Foreclosure There is other action, however, that associations can take to collect back due assessments even if there is a foreclosure on a unit.

“Associations can still go after the former owner under a breach of contract theory unless the individual files personal bankruptcy,” explained Shifrin.

Said Moody, “I have seen more associations pursuing collection of a personal judgment through wage and other garnishment actions, following the foreclosure of the unit.”

Some associations have also now turned to leasing units which they possess when previously they had been against allowing rentals.

increase, although, I believe it has peaked and is starting a downward trend.”

Dakoff, however, doesn’t believe that such personal bankruptcies are a large-scale problem, he believes that it is used only “sporadically” as a tool by unit owners. “They are usually used as a last means by a financially desperate individual,” he said. But bankruptcy filing does not relieve the petitioner from the responsibility to pay assessments while he is still in the unit following the filing of the suit.

“The debtor still owes assessments post peti-

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Personal Bankruptcy and Collection Efforts Potential bankruptcy proceedings are a sword of Damocles hanging over an association that might try the breach of contract approach to collection. “Bankruptcy filings by condominium owners are becoming more frequent and (they) create additional collection problems for associations,” said Sugar.

“Once a bankruptcy has been filed, the association must cease all efforts to collect unpaid assessments, no matter where they are in the process,” said Hartwell, which, “can be devastating for an association because a majority, if not all, unpaid assessments accruing at the time of the bankruptcy will be

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CONDO LIFESTYLES

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tion.” But, Sugar noted, “enforcing payment of post-bankruptcy assessments typically requires additional proceedings in the Bankruptcy Court.” And there is no certainty that that debt will be any more collectible than pre-filing assessments.

Moody echoed Dakoff’s observation about an owner’s liability for assessments post bankruptcy. “In 2005,” she said, “Congress amended the bankruptcy code to provide that owners are personally responsible for their assessments following a bankruptcy discharge for as long as they have an interest in the property.”

Leaving Keys and Walking Foreclosure actions are often the result of owners simply giving up on their personal obligations. “There (has been) an epidemic of people leaving their keys and walking,” said Shifrin. “Many of them were either out of work and/or underwater, so (in their view) there was no sense in fighting the inevitable.”

Hartwell has run up against the same phenomenon in his practice. “We have seen numerous owners walk away,” especially, “at newer developments that have significant

investor owners,” he said, a situation that Sugar has also encountered. Old lending standards, during the real estate boom, frequently didn’t require buyers to put much money down, sometimes as little as two and one-half percent. As a result, when an assessment delinquency becomes so large that it exceeds a buyer’s equity, it tends to make better personal financial sense for an owner in that predicament to just pack up and move on.

Adverse Implications of Walking Away Dakoff knows that some owners let their units go into foreclosure by purposely halting mortgage payments but doesn’t believe it is a “huge problem.” There are serious adverse long-term financial implications in doing so.

“The downside of walking away outweighs the benefits in that their credit is destroyed and banks may pursue them personally if they have other assets.” But that is not a deterrent to the most despairing.

Moody wonders why unit owners have been acting so precipitously. Even though she recognizes that many are in the drink over their heads on their mortgages she doesn’t see

the immediate advantage of leaving so quickly.

“Lenders are not promptly foreclosing on units,” she said. “We’ve had some units where the owners walked away four years ago where the foreclosures are still pending.” And even though the owners may no longer have the obligation to pay their mortgages they are still responsible for their assessments, “until the title transfers back to the bank.”

More Blame for Lenders Shifrin believes that if lenders had been more proactive in working with unit owners, they could have prevented some from tossing in the towel. They could have negotiated a deed in lieu of foreclosure or worked out terms for a short sale but for whatever reason they failed to act. If they had moved promptly on this front that would have put properties in the hands of lenders more quickly and likely reduced assessment losses to associations where it was done since paying these monthly charges would have become the burden of the institutions then. And as we have seen above, while they may be tardy in paying, they eventually do.

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COVER STORY

Not Giving Up So Easy Moody noted that associations are no longer routinely giving up, as they once were inclined to do, on recovering overdue assessments if an account is seemingly lost to foreclosure and bankruptcy. They and their attorneys, instead, are now looking more closely at the facts and circumstances of each situation.

They, “are evaluating the specifics of each case to determine whether it is cost effective to stop collection or whether it makes financial sense to press forward,” she said.

Large Inventory of Unsold Units Because of economic conditions, a number of developers of condominium buildings have been unable to sell those units still in their inventories when the downturn hit. “There are many instances where the developer walked away, defaulted on obligations or filed bankruptcy,” said Shifrin, which has hurt owners in buildings with large numbers of unsold units.

Some of these residents have become quite creative to protect their investments, from providing services that would normally be under-

taken by the association to obtaining personal loans, “to keep the(ir) asset afloat.”

As with some of Moody’s associations, some relatively new buildings have turned to rental for financial relief. “Numerous newer projects have backed away from the condo model and gone rental to produce a revenue

stream,” said Hartwell, who added that we also,” have several clients, primarily conversion projects, which have gone into receivership.”

Receivers have, in some cases, chosen to hold auctions to sell units, which has tended to depress unit prices.

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CONDO LIFESTYLES

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numbers, that may come into conflict with government financing standards. “With the new rental mix, buildings are likely to not be FHA or Fannie Mae approved, so prospective purchasers will not be able to get financing, which means prices go down,” explained Dakoff, who added that pursuant to Section 15 of the Condo Act, 75% of the unit owners can approve the sale of all association property, including units, to a third party, even over the objections of those who dissent to the transfer. This, in effect, would amount to a de-conversion of a building(s) to a multifamily rental arrangement.

Fee Simple Ownership Option Also, under Section 16 of the Condo Act, with 100% approval of the unit owners along with concurrence by all lenders, a property can be removed from the jurisdiction of the Act. “The property then returns to fee simple ownership and each condo owner then becomes a joint owner with the other owners of what is now an apartment building and each owner rents an apartment,” said Shifrin.” This is not

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too difficult with smaller buildings but it could be quite messy with larger properties.”

Crisis Not Over, But Is Worst Over?

What is the financial outlook for associations? Will they continue to be plagued by foreclosures and assessment collection problems? A couple of the lawyers interviewed for this article believe that the nadir of the crisis has passed but associations can still expect, at best, a problematic future, at least in the near term. The struggle is still up hill but perhaps the slope is less steep.

“I think the worst is behind us,” said Dakoff, “but how long it will take to get better from the current position is the question.”

Shifrin echoed the same sentiments about the severity of current conditions. “I believe that the worst is over, but the entire crisis is not,” he said, due mainly to the fact that a number of foreclosures were deferred for various reasons but as they are processed and the backlog shrinks new cases will be filed. “Lenders will begin a new wave of foreclosures, although the volume should be con-

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siderably less.”

Hartwell is not as optimistic as his two colleagues in the legal profession. He senses that for many the economy has not improved despite the fact that the recession has statistically ended and that foreclosures are likely to increase based on the opinions of experts on the subject. “I suspect that delinquencies will continue and for some associations they will rise,” he said. “Moreover, foreclosures are now taking significantly longer, which only adds to the delinquency amount.”

Sugar is similarly pessimistic about foreclosures. “We see little or no reduction in the number of new foreclosure lawsuits and many foreclosure lawsuits filed in 2010 and prior years are still pending and unresolved,” he said. However, as mentioned above, most of Arnstein’s client associations have anticipated continuing financial problems for some of their unit owners and planned for likely revenue shortfalls. They, “seem to have adjusted their budgets to recognize the realities of the poor current economic climate.” Y

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