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JULY 2010 | VOLUME 14 | NUMBER 2





Health Club Revitalizes 400 East Randolph F E AT U R E S

Training Community Association Boards Complaint Management: Minimizing Liability Commonly Asked Questions for Community Associations Purchasing Property Management Services Smoking Out Your Neighbors

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photos: © Steinkamp Photography 2009

Our cover photo shows 400 East and its new presence with the lit dome – IN THE NEIGHBORHOOD – where it has become a draw and a beacon of light that has announced the building revitalization and enhanced activity. Cover and story photos compliments of RADA Architects.

table of contents COVER STORY

03 Health club Revitalizes 400 east Randolph By David Mack

12 industry Happenings Compiled by Sherri Iandolo and Michael C. Davids S P E C I A L F E AT U R E


06 training community Association Boards By David Mack

13 complaint Management: Minimizing liability through effective Response to Resident complaints By Sema Lakhani L E G A L U P D AT E

16 smoking out your neighbors By Howard S. Dakoff 18 From the editor 21 Professional directory BOARD BASICS

26 commonly Asked Questions for community Associations By David Mack M A N A G E M E N T TA L K S

30 Purchasing Property Management services By David Mack






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Health Club Revitalizes 400 East Randolph

buyers have found the location and amenities a real positive and this has helped our building weather the real estate downturn and helped maintain the value of our homes.”

the 400 east Randolph condominium Association building is an imposing structure, rising majestically 415 feet and 40 stories above its ground address just across the outer drive from lake Michigan.


t was this location and the building’s standout appearance that attracted Jim Jacobsen, current President of the board of directors, who was searching for a second home in the City for business and recreational purposes to complement his primary suburban residence. “I was looking for an in-town unit for use during the week for those times when work and meetings took me to the City and also for use by myself and family who enjoy the many offerings of Chicago,” he said. Of all the condominiums and neighborhoods

he surveyed, the Lake Shore east location and the building itself had most to offer. “The choice was an easy one.” New Eastside Neighborhood It is for these same reasons that so many other buyers have continued to opt for 400 East Randolph, which has helped sustain property values, according to Jacobsen. “The new eastside neighborhood has been generally stronger than some of the other city neighborhoods or suburbs,” he said. “Many recent

Background & Overview 400 East, whose 5th floor is actually positioned as the main entrance point along upper Randolph with the first four stories situated below that street level, began its existence in 1963 as a rental complex known as Outer Drive East. It was designed by architectural firm Hirschfield, Pawlan & Reinheimer for the developer Jupiter Corporation. A decade later it had metamorphosed into a condominium association over which its unit owners assumed control in 1973 and is now managed by the Habitat Company. The building has a glazed brick façade supported by a poured concrete and steel superstructure topped off by a conventional built up roof. There are eight passenger elevators serving different arrays of floors and two


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© steinkamp Photography 2009. these images are copyrighted.

Shown here is reception area at 400 East Club Offices and Recreation, renovated as part of Phase II completed November, 2009

service lifts that make the complete run from the main floor to the fortieth floor. Approximately 2000 residents live in the building, which consists of 760 owner occupied and 180 rental units along with 15 commercial condos. The residential configuration is in studios, 1 and 2 bedroom layouts and 2 penthouses. All units are held in fee simple ownership. Residents assume responsibility for


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their own utility costs with the exception of water, which is paid by the association along with television and Internet service. “The cable service is part of the general assessments and is not optional,” said General Manager Phil Pritzker of the Habitat Company. Parking Spaces and Commercial Units The building has 645 total parking spaces distributed over 3 heated indoor floors and 1


outdoor level at the 5th or ground floor on upper Randolph. The last is open for public use. None of the parking spots for residents is deeded. “All are owned by the association and rented to unit owners,” explained Pritzker. The commercial spaces are individually owned. “The association does not own those units,” said Pritzker. “They are condominiums, similar to the residential units. Some of the owners are also residential unit owners (while) others are owned by non-residents.” Assessments are paid to the association. No one entity can own more than 10% of the residential units. “The ten percent, to the best of my knowledge, refers to the original sale at the time of conversion from the original apartment status,” said Pritzker, “however it may (also) carry forward to ownership rights currently.” At this time the most one person owns is four units. Association Operations To serve residents and facilitate the smooth operation of the association’s physical plant the property has both on-site management and engineering offices, as well as a staff of mainte-

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nance personnel, sixteen-hour door persons and twenty-four hour security. Management is provided by the Habitat Company, which takes direction from a nine-member board presided over by Jacobsen. Directors’ and other meetings are televised live to residents over closed circuit TV or can be replayed at their convenience. While there has been no determination as to how many residents tune in to the board sessions electronically, “typically there may be between twenty to forty people at the regular monthly meetings,” said Pritzker. The association also has a website,, at which residents can view and print, among other things, governing documents, service requests and suggestion forms, answers to frequently asked questions and parking tickets. In addition to that communication source, a hard copy newsletter is also circulated to occupants of the property featuring current information and photos on numerous topics. The building is pet friendly but only for owner occupants. Two pets, both cats and dogs, per unit are permitted, subject to height and weight maximums. There are restrictions on leasing. Rentals must be for at least a year

and time-sharing arrangements are prohibited. Amenities The first floor of 400 East is the location of the receiving room and dock area as well as a bike storage room. On the second the amenities begin with the Grand Food Mart, a combined grocery, deli and video rental facility. Also situated there are a twenty-four hour laundry and a dry cleaner/tailor/valet establishment. Resident storage lockers and a community bulletin board take up some of the remaining space. The fifth floor is also one of the main hubs of building activity, serving as the lobby, reception point and pedestrian entrance overseen by the door and security staff. The resident mailboxes, package room, vending machines and additional bulletin boards can be found on the fifth floor also. Commercial Spaces The Lakefront Children’s Academy occupies some of the sixth floor. “It’s a private facility serving pre-school children,” said Pritzker. Additional commercial enterprises lease space on the seventh floor, including the

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newly renovated 400 East Fitness & Spa facility, the Seven Season’s Restaurant &Bar, a hair salon and more as well as the management office, a newly upgraded library and hospitality room, which is available to rent by residents. 400 East Swimming Pool, Fitness and Spa The recent building revitalization efforts for 400 EAST pool, fitness and public spaces represent a model of 21 century modernization – through sustainability and use of innovative materials and spaces. In Phase One – for the Pool Renovation RADA Architects used kinetic LED lights that make the glass geodesic dome shine as a beacon in the Millennium Park neighborhood and the nearby Lake Shore Drive. A fiber optic accent light runs the entire perimeter of the pool accenting its unique shape. New landscaping, pool furniture and a large green canopy umbrella in the center of the pool deck – have anchored now the space which has become a favorite spot for residents and guests. Phase Two of the Renovation included the fitness club, spa, winter gardens, children’s continued on page 35

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Training Community Association Boards training needs for the boards of directors of community associations fall into three primary categories.

irst there is training which is needed for a new board in an association transitioning from developer control and second, the education needed for an inexperienced director elected to an existing board. thirdly, of course there is also ongoing training, continuing education so to speak, that all board members can use as laws and practices in the field change. continuing education is secondary to getting up to speed as quickly as possible for those venturing into the business of running an association for the first time.

Running a Corporation Most new board members won’t be able to function successfully unless they are provided with this early guidance. it is necessary for them to be able to act, “in the best interests of the association (through their) temporary stewardship,” said lou lutz of legum norman Mid-West. tom skweres of Wolin-levin, inc., echoed this sentiment. “For board members to do the job that they were elected to do, it is imperative that they understand their role in running their corporations,” he said.

Knowledge is Power new board members should assume their positions with the intention of becoming broadly familiar with their duties by tapping in to all potential sources of information. “they say knowledge is power,” said James Krech a property manager with Property Management specialists, ltd. “therefore new board members should act like they are starving for knowledge, especially knowledge about the laws that govern association boards.” that drive to learn will serve them well and facilitate their growth in becoming fully functioning participants in their boards’ deliberations and actions.

Self Study initially board members can inform themselves through individual effort, although some management people don’t believe this approach to learning will accomplish much. “i am not sure boards (and individual members) will take the time to do self study,” said sal sciacca of chicago Property services, inc. Krech, however, tries to encourage members to learn on their own. “i like to give (them) a book by Jordan shifrin called Guilt by Association,” he said, to get them started, adding, though, that he doesn’t attempt to teach from that text. “Reading the book is up to the new board member.” they must motivate themselves from that point to learn. other books are available as well as publications such as condo lifestyles to provide informative guidance.

Workshops and Seminars But to reach the level where they can con-


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BoARd BAsics

tribute competently to decision making new board members will usually have to be afforded appropriate training opportunities to complement what they may have learned through individual enterprise. “new board members benefit from training as quite often these selfless volunteers have never experienced serving in this capacity before,” explained tracy Hill of Property specialists, inc. And it should be provided as soon as possible. “Without early training (in) what to expect and what is expected, many (new) board members become frustrated.” “they should be attending workshops, seminars, joining industry organizations and interacting with their peers,” said skweres, noting, though, that if they are served by a community association management company their participation in such outside activities doesn’t have to be as extensive. Added sciacca, “the idea is to make board members as productive as possible (early on) so that they can spend the least amount of time possible while being most effective.” that cuts down on the frustration level as board members avoid getting bogged down on association business, trying to figure out what to do, to the detriment of the other areas of their lives.

there are many areas in suant to the same legal To reach the level where they can which new board members guidelines and constraints, contribute competently to decision must be educated. Hill cited time will be wasted in their a number of them, deliberations and the making new board members will including the role of the potential for mistakes will board members and propincrease. Furthermore, conusually have to be afforded erty manager; underfused debate will draw out standing their legal docuthe length of board meetappropriate training opportunities ments; the purpose of and ings. “Boards don’t meet freto complement what they may have how to prepare for and run quently so it is very imporboard meetings; dealing tant that they are an effeclearned through individual with homeowner issues; tive decision making body obtaining and reviewing when they do meet,” lutz enterprise. bids; reserve studies; budgadded. “How to run an eting and recruiting new effective board meeting is a board and committee members. critical segment of board training.”

Illinois Condominium Act

Effective Board Meetings

lutz emphasized the importance of novices becoming familiar with the illinois condominium Act and their governing documents, the legal bases for the formation and operation of their associations. “Board (members) that are untrained in these areas will (want to) take actions that may be inappropriate and expose the association that elected them to unnecessary liability.” if all the directors on a board are not discussing issues pur-

sciacca also focused on running board meetings as an area that will be improved by proper training. “Most board meetings are very informal and very unproductive and last longer than needed,” he said, due to the lack of advance planning. “We provide the board training on well run board meetings.” But even with this guidance boards can lapse back into their previous meandering ways and this is when the constant rein-

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forcement sciacca referred to earlier is essential. “it is challenging when board members are doing this part time and on a volunteer basis and it is hard to get them to focus sometimes.” His company also offers training in preventative maintenance, emergencies, special projects and five-year capital planning along with many of the topics Hill identified.

board members have attended meetings as interested observers before their elections and followed and understood the proceedings. Under those circumstances the existing members could provide at least training in the fundamentals. But, “all too often board members are elected without any previous exposure to their association’s governance,” he said. “in those instances or when new Like Running a Business board members are elected in protest to skweres emphasized the true nature the current board policies, outside assisof associations and what the overall pritance in training is very important.” mary focus of training should be. “the in sciacca’s experience it is a matter biggest area is running the association of how much time the sitting members like the business that it is,” he said. to have to devote to guiding newcomers. accomplish that objective, he also underRetired board members should have All too often board members are elected without any previous exposure to scored many of the main components of more of an opportunity. those with full their association’s governance. In those instances or when new board memoperation which his management counbers are elected in protest to the current board policies, outside assistance in time jobs, families and other interests terparts at other companies said must be training is very important. and responsibilities will usually be hard stressed in training board members, pressed to accommodate the learning Experienced Board Members including having regular meetings with prepared needs of new arrivals on the board. Generally, he agendas, understanding financial statements and How effective can sitting and experienced believes they fall short in this area. “it seems most their governing documents and knowing how to board members be in providing training to their boards are dedicating the bare minimum (of time establish and implement rules and regulations. new associates who are representing unit owners to training) and sometimes even less than the bare this will enable them to have a better, “underfor the first time? Krech feels they are a good minimum required,” sciacca said. standing of their role as a board member and be source of information for those just starting out. in skweres’ opinion it is a matter of how knowlprepared to make decisions (when) meeting.” lutz goes along with that view as long as the new

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BoARd BAsics

edgeable sitting board members are when they attempt to train their new partners. “i think any training is good as long as the trainer understands what (he/she) is doing,” he said, although he conceded that outside trainers, especially if from management, will have more expertise in what needs to be taught. And, as sciacca pointed out, other life demands may not permit board members to contribute very much to the education of new directors. “there may be less resistance to the time commitment from an outside source.”

second segment is geared toward association finances, budgeting, reserve studies and understanding financial reports. the final segment of the class focuses on legal documents, communication with owners and how to adopt and enforce rules.

Community Association Managers as Training Source

As noted above sciacca feels that most new or other board members probably lack the motivation to indulge in self-education so when his company assumes management, especially of new Transition Plans & Mentoring associations, personnel provide training very soon thereafter. We, ”provide Hill believes that effective training The ability of board members to make sound decisions can be enhanced training to boards within the first sixty within a board can best be accomplished through training in how to most effectively go about that important process. days of taking over a new account,” he if a transition plan is in place that proThose who are given guidance as to the importance and the proper procesaid, “and then we train the board after vides, in part, for sitting members to edudure of good decision making are more likely to make better decisions and each election.” cate those joining the team for the first feel more confident about what they are doing, lutz has found that managers do the time. in fact, he is of the opinion that may best job of educating board members. be the best way to teach newcomers the such as those Psi offers. “in my experience a manager who has in depth ropes. the, “best training incorporates the current Hill’s company offers a Boot camp series, which knowledge of condominium procedures will be board meeting with new members and assigning a consists of three formal training sessions, the first the best trainer,” he said, and should be able to mentor to each new member,” he said, but also of which covers such topics as the role of property provide at least starter information in a two-hour complementing those efforts by, “encouraging management, the role of board member and how period. But he advocates an expanded presence new members to attend outside training sessions,” to conduct productive one-hour meetings. the

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condo liFestyles for the association at such workshops. “if it is possible, a training session including the association attorney and auditor will familiarize board members with the team that they will be working with on behalf of the association and would be my recommended approach.” Beyond that initial brief period, legum norman also offers a more elaborate formal board training program, which covers many of the same topics that other firms offer with emphasis on the illinois condo Act, governing documents, committees, board powers and duties, financial reports, audits, collections and insurance. “We strongly recommend that new community management accounts go through our training program,” lutz said and it is offered for both new boards and those that have been up and running for some time. “in most instances these boards have never received any prior training.” While much early training can be general, especially for condominium associations, because they have so much in common in the way they operate, there can be differences that require tailored instruction, “that is personalized to the needs of the client property,” said skweres, who added that the number of participants should be limited to facilitate interplay between them and the expert conducting the session and reference material should be provided. “small groups where ques-


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tions are encouraged and handouts are available are important.” Wolin-levin offers a variety of training opportunities for its clients, both new board members and veteran directors. “our company is currently providing formal, quarterly training geared to new board members but where experienced board members are also encouraged to attend,” said skweres. A monthly lunch & learn program at Wolinlevin is open to their managers, board members and residents considering board service. the company employs a director of training and education who conducts sessions both at company offices and at client locations. “We also have a proprietary web-based communication program where information is readily available to board members and we have a training program designed for this also.”

Measuring Effectiveness lutz has found that his firm’s training has been effective in teaching boards how to run meetings. “the training program cuts down the time that a meeting takes and the meetings become more productive and decisions are made on a timely basis.” For sciacca’s clients, how effective training is depends on each individual case. “We have seen many boards become more effective immediately after a training session (but) other boards seem to


never change,” he said, failing to improve noticeably. to get better feedback on the effectiveness of its training, the company is currently developing an on-line test to check on how well their clients have absorbed the instruction. Psi measures knowledge increase by doing impact evaluation analyses. “A recent Psi survey of board members who have attended one or more of our (Boot camp) sessions found that 93 % felt it has helped them better serve as a board member,” Hill said. Wolin-levin has received a similar response from those associations it serves as well as expressions of gratitude for providing the assistance. “the feedback that we have received from our clients makes me believe that our training is relevant to them and has assisted them in their jobs,” said skweres. they have let us know that, “the time we spend with them is beneficial and appreciated.”

Other Training Sources other training sources are available. “Harper college has a good class for board members,” said Krech. Both ActHA and cAi hold trade shows, part of each of which is dedicated to training seminars. they also hold periodic educational meetings at other times throughout the year at various locations. the topics they cover are similar to those pre-

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BoARd BAsics sented by management companies but more general. A favorite ActHA session is entitled ten things a Board Must Know. Favorite all day cAi gatherings focus on community governance and community leadership. condo lifestyles holds an annual state of the industry seminar near the end of each year that provides boards and managers with knowledge and resources on the most pressing current issues facing community associations. Managers generally have a favorable attitude toward training programs of ActHA, cAi and other such groups, with only some reservations. lutz noted one training session of the latter in particular. “i think the day long ABc course offered by cAi is very effective,” he said. it “is led by experts in management, law, insurance and auditing.” skweres likes the trade-group training format. “i am a big fan of (such) pertinent and timely educational opportunities,” he said.

Mandatory Board Training? Will training for board members ever become mandatory? “i think it would be great to require board members to prove that they have a minimum level of understanding of their duties,” said sciacca. lutz is of a similar mind on this, pointing out that directors have a lot of authority over some important aspects of their constituents’ lives but aren’t required to have the background and understanding of their roles to exercise this authority wisely. “even though condominium (and other association) owners throughout the state elect board members that have significant power to

affect the homeowners’ property values and quiet enjoyment of their homes, there is very little legislation that controls how board members must conduct themselves,” he said, or prepare themselves for assuming their duties. “compulsory training would at least be a start.” Hill spoke for others in his profession when he stated that many of his colleagues would love to see compulsory training. “However,” he said, “we do not see this as something that could be accomplished in the near future, given the length of time it has taken to get mandatory licensing with continuing education and testing just for managers.” Y

Small Group Sessions “i think it definitely helps board members to attend trade shows,” said sciacca, “and the smaller scale seminars help as well.” But, he added, “i think in the end management can provide the most value as they can customize the training for a particular association.” Hill is of the opinion there are limits to the effectiveness of such training. ”While i believe that attendance at these training sessions is somewhat beneficial, these tend to be primarily lecture type settings,” he said. the presentations are often very general and not directed toward specific properties. “We have found that smaller groups (such as in Boot camp) in a more intimate setting provide for a more productive learning experience.”

Decision Making Increases Confidence the ability of board members to make sound decisions can be enhanced through training in how to most effectively go about that important process. those, “who are given guidance as to the importance and the proper procedure of good decision making are more likely to make better decisions and feel more confident about what they are doing,” said Hill. lutz feels the same way. “decision making can be taught,” he said. “We focus on how to do effective planning prior to a board meeting and the effective procedures for debate on a motion.” Proper preparation lays the groundwork for getting things done in a timely and efficient manner.

Leadership is Key sciacca, however, places more emphasis on the ability of those in charge rather than training for creating conditions that facilitate sound decisionmaking. “i think it boils down to good leadership,” he said. “if the board president is not a solid leader, the board tends to be more dysfunctional.”

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MCD Showcases the Races

Community Specialists

Wolin-Levin, Inc.

community specialists welcomes the following new employees: lea Relias is the new Property Manager for commonwealth Plaza replacing the retiring debra Gibson. todd Keene is Property Manager for the sterling Private Residences. todd has worked for community specialists previously at both properties and the corporate office. Kate Brindise is rejoining community specialists as the new Property Manager for carl sandburg village ii. Zijada lavrovic has joined the staff at River Plaza as Assistant Manager. Julia Butler is the new Assistant Manager for 777 Michigan condos. tamara Pagel began May 1 at the Parkshore condominiums as their new Assistant Manager. christina Garcia is the new Administrative Assistant at 1111 s Wabash condominiums. larry Byrne is the new it Assistant at the corporate office of community specilaists.

Wolin-levin, inc. has recently promoted daniel chalifoux, cPM, natalie drapac, cPM, Randy Grimes, ARM, deanna Hicks and scott oblander to the positions of director of Portfolio Management. nicholas Bartzen, cPM, has also recently joined Wolin-levin as a portfolio Property supervisor.  Judy Pierson has recently been named as on-site Property Manager at 1400 Museum Park and erika villareal and daniela dato have been named as Property Manager and Assistant Property manager respectively, at University village HoA.

Also, two community specialists employees moved to new positions. Mary Walker is now working as the Administrative Assistant for south commons condominium and Katara Waits is the new Assistant Manager for the sterling Private Residences.

AAA Painting Contractors AAA recently announced that carol Brien has joined the company as a customer service/Marketing coordinator. in her dual role carol will be responsible to help AAA continue to exceed the customer service needs of its growing customer base, as well as assist the company’s marketing efforts in its current and expanding markets.

Mcd Media’s next special event is a luncheon at Arlington international Racecourse on september 2, 2010. A variety of companies specializing in community associations have sponsored interactive 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. For more information, call 630-202-3006 or visit

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s P e c i A l F e At U R e


Complaint Management: Minimizing liability through effective Response to Resident complaints complaints in general are indicators that something is not working as it should. some complaints are legitimate and some are frivolous. erving as a property manager or on a board of directors can be a thankless job. Much too often, complaints far outnumber compliments. experience and training can be very helpful in determining which complaints are legitimate. not surprisingly, there are occasions when management or a board will make the wrong determination about the legitimacy of a complaint or fail to respond to a complaint at all. this can occur for a variety of reasons including burn out (hearing too many complaints over time), prior bad behavior by the complaining resident or other seemingly understandable reasons. to be safe however, all complaints should be taken seriously and given due process as set forth in the Association policies and governing documents regardless of other factors..


Resident Concerns are Inevitable Resident complaints may occur for any number of reasons. complaints reflect “real-life” situations to the individual, and should not be neglected or ignored. Generally speaking, most residents “complain” in an effort to get answers. if a response to a complaint is timely and accurately addresses the concern, the issue can be resolved before it develops into a more serious action: namely, a liability claim or lawsuit. All complaints do not result in legal action. However, in light of the current trend in the liability arena, a building must be prepared to respond quickly and effectively to resident concerns.

Undue Exposure to ignore the danger signals that “complaints” represent can subject a building, association and

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management company to an undue exposure to loss. this exposure can be reduced and controlled with proper attention to complaint management. in regards to liability, complaints can be construed as notice of a defect or problem that could cause harm or damage. the occurrence of complaints can be detrimental to the defense of a claim or lawsuit. naturally it is in the best interest of the association and management involved to avoid having to defend a lawsuit from a resident or any other party. in the unfortunate situation where an Association is required to defend itself from a lawsuit, having a good complaint management system can pay great dividends.

All Complaints Are Important the existence and nature of previous complaints could be a proper subject for pretrial discovery, because it may be relevant to the issue of whether the defendant had notice of any dangerous capabilities. Whether or not a resident’s

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complaint is valid is not the issue. the fact that the complaint establishes notice to the building of a “problem” in the eyes of the resident should be the major concern.

Good Complaint Management Serves Both Resident and Building the way a building manages complaints is a reflection of the quality of its services, and of its desire to retain and satisfy its residents. As undesirable as complaints can be, they are a crucial communication tool between resident and building. complaints offer several opportunities, if handled in a professional manner. they represent opportunities for: • correction of immediate problems; • constructive ideas to improve services; • Adapting marketing and management practices; • improving resident services; • Modifying promotional material, building information and governing documents. complaint management has the added benefit of saving buildings’ other unwanted costs, in addition to reducing the potential for liability claims or lawsuits. Adverse public opinion from dissatisfied residents can result in a negative impact in the real estate values of the association. in addition to potential lost revenue, this will usually also result

in additional expenses and time associated with attracting new residents (buyers), or revision of current publications and documents. The complaint that goes unreported can be as costly as the one that is mismanaged or unresolved.

weigh the facts to resolve complaints in a manner that is satisfactory to both the resident and the building.

Developing an Effective Complaint Management Process

the degree of complaint management necessary for a building can vary depending on the size of the operation, the nature of the service, the actual use by the resident, etc. there is no single plan that will work for all situations. A formal complaint management program should be developed and implemented to reduce the liability of loss exposure. Taking no action may increase the potential for liability claims and lawsuits.

Research indicates that only a small portion of dissatisfied residents register complaints. this is due in part to the perception that buildings are unwilling or unable to make the corrections or resolve the problem. this perception emphasizes the need for an active, well-organized complaint management procedure that has the endorsement of Board members and Management and is well publicized and easily accessible by all residents. the complaint management policy should be in writing and should assign responsibility. in larger operations, this may involve the formation of a separate department or a committee that implements the policy and keeps Board members and Management informed of events and actions. in smaller buildings, a single individual, easily accessible to the public, could be assigned. Whoever is assigned the responsibility of handling resident concerns should have the attribute of patience, should be articulate, and should be able to fairly

Complaint Management Should Be Specific to Your Operation

Outline of a Complaint Management Program Location Residents need to know where and how to register complaints, and must be able to do so easily, whether in person, by postal mail, or via e-mail or on your website. Be sure that your Board members and Management know about these methods and can communicate them clearly to residents. Record Keeping develop standardized forms to ensure consistent capture of essential information for all complaints. An additional benefit of a standardized

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form is the ease of categorizing the complaints for analysis. the record keeping system should include the following functions: • communication to top management; • identification of and communication to responsible party; • trending to develop marketing research; • Monitoring effectiveness and efficiency of the program. Processing • Record all relevant complaint information, as reported by resident, in a log. these logs can be as simple as three-ring notebooks or as sophisticated as a computer database; • Prompt handling by a designated individual; • Forward to the next level of authority for resolution, if needed; • Be fair. Get both sides of the story; • immediately notify the resident once resolution is reached. Notification Registering a complaint is time-consuming, inconvenient, often unpleasant, and sometimes expensive for the building. When responding to the resident: • Personalize the communication; • communicate by phone or in person; • Use a mailgram or letter, but avoid form letters; • Work quickly, but do not make time a factor; complete the transaction to the resident’s satisfaction; • Use easily understood language (dialect and non-technical terms).

Employers Face Massive Changes under Health Care Reform Law As the smoke clears from the passage of landmark health care reform legislation, employers are starting to sift through the final provisions and prepare for significant changes. the Patient Protection and Affordable care Act, signed by President Barack obama on March 23, 2010 ushers in a swath of changes to employer-sponsored health care plans — one of the biggest being a new coverage mandate for employers. starting in 2014, the legislation requires employers with more than 50 employees to offer affordable coverage to their workers or face a tax of $2,000 per full-time worker (although the first 30 employees would be excluded from the count). in 2013, the law eliminates the employer deductible subsidy under Medicare Part d and places a $2,500 annual cap on flexible spending accounts. in 2014, the law calls for the states to create exchanges to facilitate the sale of plans to individuals who aren’t enrolled in an employer’s plan and prohibits insurance companies from denying coverage for preexisting conditions. While many of the law’s complex provisions won’t become active for years, others will have an effect on employers’ plans sooner rather than later. some of these provisions are: Immediately • the federal government provides a tax credit for qualified small employers. this credit is retroactive for premiums paid in taxable years beginning after dec. 31, 2009. • employers who wish to keep their policy on a grandfathered basis can do so, but only if they make no changes to the plans except for adding and deleting employees and dependents. • the limit for employer-sponsored assistance for adoptions increases to $13,170, and the credit is extended through 2011. Plan Years Beginning Six Months after Enactment • insurance companies will be prohibited from canceling coverage except in cases of fraud. • lifetime benefit limits will be abolished.

Investigation and Analysis • investigate all complaints to determine validity and the conditions responsible;

• Plans must cover dependents up to age 26. (For grandfathered plans, this applies only to dependents that do not have another source of employer-sponsored coverage until 2014).

• categorize complaints to identify trends; define distinct categories;

• small businesses that develop wellness initiatives will be eligible for grants for up to five years.

• trend complaints to determine areas that need further study;

• Plans will be required to cover preventive care at no cost.

• Analyze complaints to identify high-frequency categories; • develop action plans for complaint prevention; • communicate analysis results and proposed action plans to Board members and Management. Follow up Find out if the resident is satisfied with the solution. This may be the most important element! Y

the final regulations and disclosure requirements for this new law remains weeks — if not months — away, but many people are already pondering the massive impact of this legislation. Most employers harbored serious reservations about the government’s plans before it was passed. Ultimately, the only thing we can do now is look at ways in which we can meet the challenge to deliver health care to the population. As Wharton professor Arnold J. Rosoff says, “change brings pain to people who are too heavily invested in the status quo, but it brings opportunity to everybody else.”

Dickler, Kahn, Slowikowski & Zavell, Ltd. ~ 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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B Y H O WA R D D A K O F F - L E V E N F E L D P E A R L S T E I N , L L C

Smoking Out Your Neighbors… What is a condominium Board supposed to do? With increasing frequency, condominium boards are receiving complaints of cigarette smoke and cigar smoke transmitting into units adjacent to a unit owner who smokes in their unit, and many times, into the common elements smelling up an entire floor. exacerbated unit owners are demanding condominium boards (“Boards”) take definitive action to give them back “quiet enjoyment” of their unit.


iven the recent smoking ban in public places in some major cities1 and the proven harm of second hand smoke, associations are desirous of becoming more aggressive about addressing the transmission of smoke from unit to unit or unit to common elements. Notwithstanding the Board’s legal options discussed herein, there is no legal precedent requiring/allowing the Board to take action against a unit owner for smoking in his or her unit. Very few, if any, condominium declarations and by-laws prohibit a unit owner from smoking within his unit. As such, Boards are adopting smoking rules and regulations (“Smoking Rules”) to be able to take affirmative steps to abate smoke infiltration into units or the common elements.

court. It is well settled law that an amendment to the declaration/by-laws is stronger authority to accomplish restrictions on the use of units or common elements in a condominium association - and less likely to be successfully challenged in a court of law or equity - but condominium boards routinely adopt reasonable rules restricting use of the units and common elements. Declaration/by-laws amendments requires unit owner approval (difficult and costly to obtain) whereas Smoking Rules may be adopted with only a majority Board vote. Despite possible issues of invalidity, and thus, enforceability, it is for this reason, Boards may choose to adopt Smoking Rules rather than attempt a declaration/by-laws amendment on the issue.

Legal Principles Pursuant to Illinois law, rules and regulations must be reasonable and are subject to judicial review by a judge if challenged in

Rationale for Smoking Rules Under Section 18.4 of the Illinois Condominium Property Act, the Board is bound to follow and enforce the provisions of the

declaration/by-laws and the rules and regulations. Most by-laws contain a prohibition on noxious and offensive activities (or nuisances) and the determination of whether a particular activity, including smoke transmission, is a nuisance is within the objective determination of the Board. Noxious activities are those defined as physically harmful or destructive to human beings. A nuisance is an unreasonable, unwarranted or unlawful use of one’s property that invades the use and enjoyment of the property. In determining whether a particular annoyance constitutes a nuisance, a court would consider the affect of the annoyance on the ordinary reasonable person, rather than an affect on a person who is abnormally sensitive. Thus, the determination of whether the conduct is a nuisance is based upon an objective standard. In a condominium context, the Board determines whether a nuisance exists by ascertaining whether the conduct is unreasonable for the average person residing in the particular type of building. The dangers of second hand smoke have been sufficiently established in medical circles for the Board to reasonably conclude that it is justified in imposing Smoking Rules. After the approval of Smoking Rules, the Board would be in a stronger position (than not having any Smoking Rules) to fine a unit owner for creating a nuisance or noxious and offensive activity or violating the smoking regulations. And possibly, have a reasonable basis for a mandatory permanent injunction lawsuit (albeit a difficult case to prevail) preventing a unit owner from smoking in his or her unit or where the smoke emanates to another unit or common elements. Legal Options There is currently no legal precedent that specifically holds that the act of smoking in a condominium unit is a nuisance or offensive activity in violation of an association’s use and


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l e G A l U P d At e

occupancy restrictions. The existing case law dealing with smoke transmission in a residential living context focuses on damages available to the offended unit owner/tenant, or available legal claims, but not Board authority to prohibit or restrict smoking in a unit. To address an association’s ongoing smoke transmission issues, Boards may consider adopting various levels of well drafted Smoking Rules. Legal counsel should be consulted to draft the Smoking Rules to mitigate the possibility of the rules being held unreasonable, and thus, invalid. The most aggressive Smoking Rules may constitute a smoking ban in units to less restrictive smoke abatement Smoking Rules, which would deal with ongoing smoke smells. In the event different levels of Smoking Rules are adopted, a severability clause is recommended so in the event a portion of the Smoking Rules is held invalid, the other Smoking Rules are still valid.

ment on the merits of the Complaint, it does present an interesting development in the efforts of condominium associations and unit owners to react to the problem of second hand smoke. Additionally, on March 19, 2010, the Illinois Senate introduced senate bill 3175, which expressly allows condominium associations to

amend their by-laws to prohibit smoking and tobacco products. This bill has not yet received legislature and governor approval, and thus, is not yet law. 1

Chicago Clean Indoor Air Ordinance of 2005. We note this statute applies to public and/or governmental buildings, but expressly exempts private residences.

Possible Game Changers A recent case filed by the Illinois Attorney General merits attention. On June 10, 2010, the Disability Rights Division of the Attorney General’s office filed a Complaint on behalf of unit owner Loretta Barborek against The Timbers in Palos Condominium Association, its association president and managing agent. In the Complaint, the Attorney General alleges that the unit owner suffers from chronic obstructive pulmonary disease; and her breathing difficulties from this disease makes her very sensitive to cigarette smoke, including second hand smoke emanating from an adjacent unit. Ms. Barborek and the Attorney General claims that the association has failed to accommodate her disability by taking action to stop the transmission of second hand smoke. The Complaint seeks relief that includes an order for the association to implement a ban on smoking in Ms. Barborek’s condominium building. The Attorney General is also seeking to recover damages and attorneys’ fees arising from this alleged civil rights violation. While we are not aware of the particular facts of this case, and cannot therefore com-

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From the Editor


he summer season in our area is typically filled with anticipation

and excitement. the warm spring gave us some early opportuni-

ties for outdoor activity. the beloved chicago Blackhawks bringing


home the stanley cup in professional hockey provided most of us with a much®

s Mike Davids

needed diversion from the oil disaster in the Gulf of Mexico and our ongoing economic woes. our cover story profiles how the renovation of the building’s health and fitness club has revitalized the 400 east Randolph condominium Association. the impressive dome shaped facility has helped the Associa-

JULY 2010 | VOLUME 14 | 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.

tion regain its prominent status in the new eastside neighborhood through the use of sustainable designs that have earned the property a number of significant awards. our second story on training of community association board members offers a variety of perspectives on the best approach for new and experienced cA board members to acquire the knowledge and skills needed to be effective and successful in their duties and responsibilities. We hope our sources on this subject are helpful to you and we welcome your ideas and thoughts on this topic as well. our article on complaint management offers some great advice on this important and sensitive area. Personality differences and rules violations are typically at the root of disputes in community associations. Although there are so many other things that seem to exhaust all of our resources, it is important to make sure you are doing all that you can in regard to the policies and programs that your association may need to address in regards to resident complaints. Many medium and large community associations engage the services of professional management. Good management can make or break an association. some managers are responsible for almost every aspect of community association operations so it’s important to try and understand your management’s role. An article in this edition on “Purchasing Property Management services” is intended to help you when you are in situation that requires you to purchase management. Keep in mind that it can be very costly to make a change in your management and oftentimes associations overlook the cost of losing records and historical knowledge when they change management. We also offer a story in our Board Basics column that provides insight and perspective on a variety of common questions issues that many community association buildings contend with. our regular industry Happenings column can also be found in this issue. We hope that you find the information in this issue helpful. Mcd Media’s next special event is a luncheon in the Million Room at Arlington international Racecourse on september 2. 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 ven-

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

dors, share a story idea, or socialize with other volunteers and professionals. thanks to the many new subscribers that have found our publication useful. special thanks to the firms, associations and groups that are Authorized distributors of condo lifestyles. those of you who are not current subscribers can find subscription information at 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 630-202-3006 or send us an e-mail

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.


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( Y

Michael C. Davids Editor and publisher


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Commonly Asked Questions for Community Associations Attorneys chuck vandervennet, Pat costello and Joon Ho yu took turns answering questions from an audience of people in the community association business at a recent ActHA conference. Before the session began, vandervennet cautioned those in attendance to not assume the answers applied literally to similar situations they might be experiencing. For accurate legal advice they should consult their own lawyers. Q/ What are the pros and cons of being an FHA approved building (for insured mortgages)?

A/ The limit has actually been expanded to 50% and will be able to go as high as 100% this year.


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A/ Board members can see all the records under Section 19 and shouldn’t be charged for doing so. Only non-board members can be charged a reasonable amount and that should be for copying and the person’s time doing the copying.

Q/ Must board approval be given to a board member who wants to look at other records than covered by Section 19?

A/ If you are an FHA approved property, buyers can obtain FHA approved financing to buy units. If a property is not approved, lenders can’t make FHA approved loans there. This only applies to condominium associations.

Q/ What is the status of the FHA rule that limits its insured loans to 30% of a building?

Q/ What is a reasonable cost to board members if they want to look at association records (under Section 19 of the Condo Act)?

A/ Only if they relate to some litigation the association is involved in.

Q/ If there is a vacancy on the board, can a previously terminated board member be reinstated as a nominee?

Q/ What is the process for getting FHA approval of an association? A/ You must submit a package of documents to the FHA office and then wait for approval, which might take six to eight weeks. The approval is good for two years.


A/ If the declaration allows that, it can be done. (Or if the declaration is silent on the matter.)

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BoARd BAsics

Q/ What can a board do if a former board member changes the landscaping outside his unit without approval? A/ It can apply whatever remedies it would apply to any unit owner. If the person modified the landscaping in the common area, the board can redo it and charge the cost back to the unit owner.

Q/ Can boards hold closed meetings? A/ Meetings should be open except for discussion of certain matters relating to employment and employees, litigation and violations of rules and regulations. Transparency of board actions is necessary under the law for all other matters and is important for the comfort and knowledge of unit owners.

Q/ What should a condo association do to ensure that it will receive assessments on a foreclosed unit?

Q/How does a condo association become involved if a unit owner becomes involved in a foreclosure?

A/ To receive the up to six months of delinquent assessments unpaid by the owner who was foreclosed on, the board would have to take legal action to have recovered those assessments from that delinquent owner. You would have to file an eviction action to qualify. (If the bank takes the unit at the foreclosure sale, the association should be aware of this and take immediate action to collect current assessments from that institution.)

A/ A condo association is always named as a party in the foreclosure but must file an appearance to assert its lien. In doing so, if there are surplus proceeds from the foreclosure sale, the association would be entitled to recover (up to the amount owed to it). There is seldom any such surplus, however. But it is important for an association to file an appearance and to monitor what goes on so that when the sale is completed the association can collect the up to 6 months of assessments it is entitled to and to know who it is that must then pay the ongoing assessments.

Q/ In a townhome association that is set up as a condominium who is responsible for repairing a sewer line connecting a home to the main line?

Q/ What are the requirements for converting a townhome type community that is a condominium to a townhome association? A/ The approval of 100 % of the unit owners is necessary. As a practical matter, I don’t see why you would want to do that.

Q/ In a townhome association, what recourse does a board have when a unit owner insures the interior but not the exterior of his property? A/ First you would need to look at the governing documents to see if insuring the structure is required of the unit owner. If it is, the association could compel the owner to seek insurance. It would probably even have the authority to purchase the insurance and bill the cost back to the owner.

Q/ When a condo unit owner is behind in paying assessments an association can have him evicted and then rent the unit to someone else until the back assessments are paid. Is there any other recourse for the association to collect this debt?

A/ Look at your governing documents to see if the line from the home is a common element or a limited common element. If it is a limited common element and serves only one unit, the cost can probably be billed back to the owner but only if the documents have a charge back provision, If the line serves more than one unit, it is probably a common element and the association should pay for the repair.

A/ No, that’s the recourse. There really doesn’t need to be any other if the full amount is collected in this way.

Q/ Through a significant math error an excess under a contract was paid to a vendor ten years ago and just discovered. Can this money be recovered? A/ If management had made that calculation error, the association would probably have to pay more than $10,000 in legal fees in an attempt to recover from management. The statute of limitations would probably prevent recovery from the vendor and even if it didn’t, it is doubtful recovery could be made if the vendor was not guilty of deception.

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condo liFestyles


condo liFestyles

Q/ We are replacing plumbing risers that are common elements. We need to open the walls in some units. Who pays for the walls?

Q/ When does a change in the rules go into effect?

A/Again this depends on what the governing documents say. Usually the association is responsible for paying for the opening of the walls and from the primer coat of paint outward in closing them. The unit owner is generally responsible for the finished paint cover. (But since the unit owner probably was not responsible for the need to replace the risers, it might be a good idea for the association to cover the whole cost of the repair to maintain a harmonious relationship between owners and the board.)

Q/ One of our owners is a single parent with teenagers who congregate and block common doorways. One of the other owners wants us (the board) to do something. What can we do?

Baum Property Services, AAMC Professional Community Management CE LE BR AT IN G OU






Contact: Michael D. Baum, CPM, PCAM


A/ There should be a rule in place that would pertain to such a situation. The association can send out a warning and then a notice of violation of the rule if the behavior continues. A fine can be levied after a hearing. But no one should attempt by force to break up the congregating. The police can be called to intervene if necessary when there is no cooperation from the violators. As an alternative, in extreme situations it would also be possible for the association to go to court to seek injunctive relief to stop the behavior. Whether a court would grant such relief is not certain.

Q/ How does a board reconcile smoke free law with use of balconies to smoke? A/ The board is responsible for administering the common elements, including the limited common elements which balconies are. The board could pass a rule prohibiting smoking on the balconies. (Inside the units is another matter. A few associations have taken action to ban smoking in units by amending their governing documents but the issue has never been tested in court.)

A/ After the notice to the owners and the meeting. Don’t begin to enforce them until the final notice of actual adoption goes to the owners.

Q/ How hard is it to amend an association’s governing documents? A/ Any amendment has to go back to the owners and 2/3 must approve it. This could be very hard and in a large associations might take 6 months to get all the votes necessary for passage. (Also if an amendment is controversial such as to ban smoking or renting, this can further complicate and lengthen the process.)

Q/ What is the process for amending rules? A/ A notice should be sent to every owner that the rules are being changed or adopted, a meeting must be held with the owners to go over the rules and then the board adopts them unilaterally with or without changes that might have been suggested by the owners.

Q/ Is there any liability for an association with respect to ads in its newsletter by contractors and something bad happens? A/ The association might have some liability but it would be very low just as for any other receiver of advertising.

Q/ What liability does an association have for those kids’ bouncing games at a block party sponsored by the association? A/ If the association is overseeing the game, it had better be sure that is liability insurance provides coverage in the event something happens. If the vendor operates it, the association should be sure the vendor has the proper insurance for its liability and that the association will be indemnified by the vendor for any injuries to users because the association will likely be named a party to any lawsuit.


condo liFestyles


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BoARd BAsics

Q/ What liability does an association have if it doesn’t require muzzling of pets in common areas and someone or another animal is attacked? A/ The board should have a rule in place to require muzzling or the control of pets in common areas. It should then send out notices of violation and further enforce the rule by assessing fines. The board should show that it is taking steps to control any such pet problems and if it does it shouldn’t be liable. If it fails to take reasonable steps to enforce the rule, it could be liable. But no board member should physically try to enforce the rule. In any event, it is likely the board will be named as a defendant in any suit about uncontrolled pet aggression because it has the deeper pockets.

Q/ What is the liability of an association for damage to the interior of a unit because of a roof leak?

Q/ What liability does an association if something such as a beer bottle is thrown from a common area? A/ Just as with pets, it depends on what the association’s actions have been when such incidents have happened. If this is a common occurrence and the board has done nothing, it may have exposure. If this is a first time event, there probably won’t be any liability as long as the board takes action to prevent future such problems. (But, again, the association will likely be named in any lawsuit if someone is injured by a thrown projectile.)

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A/ As a general answer, if the board has taken reasonable action to maintain the common elements, and the roof in this case, it would probably have no liability for interior damages. But if this has happened frequently and no satisfactory corrective action has been taken to make proper repairs, the association would likely be liable. Or if the board knew about a specific leak and didn’t act to repair it, the association could be liable. (Again it would be good public relations for the board to work out some agreement on the cost of the interior repairs with the unit owner even if it might not have any liability because the owner has been victimized by a faulty common element.)

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condo liFestyles


Purchasing Property Management Services the board of directors establishes the policies and procedures, within the framework of the governing documents, for a community association and has the responsibility for decision making and administration of the association’s operations.


he board, however, has the power to delegate a good part of that authority to whomever it selects to manage the property, although the buck skips over management to the board when it comes to ultimate accountability for what happens.

The Face of Administration since management is usually the face of administration on a day to day basis, especially in large associations, a board must exercise great care in deciding who it wants on the front lines encountering unit owners and others while implementing policy to limit negative feedback about the way things are done.

Management Options A board has options for management, including volunteer self-management by the board and other unit owners, self management with employed staff, the use of management consultants or contractors to provide select services in supplementing either of the first two approaches or by use of a full time professional management company. “Whatever form it takes, management implements the decisions of the board,” said Bill de Mille, President of chicagoland Realty & Management. there are various factors that generally influence the type of management a board chooses to have, although on a nation wide basis, the vast majority prefer to go it alone. “i saw a statistic that was surprising,” said deMille. “seventy five percent of all associations in the United states are self managed.”

Factors to Consider the principal criteria that determine the type of management include community size, financial resources available, the complexity of the physical plant, the availability of volunteers, legal requirements and the extent of services and amenities to be provided to unit owners. in some cases, though, an association may not have a choice in how the property is managed.. “some governing documents require professional management,” said de Mille.

Volunteer Self Management there are both advantages and disadvantages to each type of management approach that should be evaluated by a board when it has the freedom to make the selection. volunteer self-management has no out of budget management agent costs, provides direct control of service performance to the association, and facilitates an even further reduction in management expenses because of the “sweat equity” manner of getting things done. it is usually very small associations that opt for this management style because of the lack of adequate funding resources to hire staff or a professional management company.


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M A n A G e M e n t tA l K s

there are negatives related to solely relying on volunteers for management. “People want to divest themselves of the responsibility of taking care of the property,” said deMille so it is often difficult to find enough volunteers to equitably share the burden of tending to the business of the association. Unnecessary costs can be incurred because of the inexperience of those who do pitch in. there can be a lack of continuity of performance due to high volunteer turnover. equipment or supplies that would be provided by a management company must be paid for by the association. Also, it would be prudent to have workmen’s compensation for volunteers in the event they are injured while working on association matters.

Ala Carte Services service contractors, which often are management companies that offer a menu of ala carte services, may perform a limited number of tasks such as accounting. A board can delegate those which are time and labor intensive, said deMille, to fill in the gaps in the abilities and availability of volunteers. outside service providers also relieve the board of the cost of acquiring certain kinds of equipment they would bring with them if hired. on the con side of such arrangements is the requirement that the board would have to nego-

tiate each contract for the various services provided and provide its own supervision and monitoring of each contractor used.

Self-Management with Paid Staff An association might choose to self-manage but hire staff to carry out its policies and to deal with the unit owners. that allows for direct board control of management staff who should be more responsive to the board because of the employer/employee relationship and the closer oversight than is generally had with a management company. there can be full time manager presence on site if the property is of sufficient size to provide funding for such an employee (and related staff). But utilizing a paid staff will require the board to deal with personnel issues. it may have difficulty finding and keeping the staff with appropriate skills to handle the numerous management tasks. if it needs only part time staff there may also be difficulty finding individuals willing to work less than full time. the board will also have to find substitutes for regular staff on leave. “Generally (this option) works best in a well funded association or in a development of many hundreds of units,” said deMille.

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Professional Management there are clear advantages to hiring professional management. companies in the business can provide personnel with the varied skills and expertise needed at any time. they have tested systems and procedures ready to use. there are no personnel problems for the board to deal with. large firms can provide substitutes quickly for those normally assigned to an association but forced to be away at a critical time for an association. A management company’s independence gives it a more neutral position when implementing and enforcing board policies and its employees can serve as a buffer between owners and the board when problems arise. Professional management does require a company’s fee which may be in addition to any costs for staff located at the property. some associations find the cost associated with professional management a challenge to fund. Another challenge can be finding and selecting a qualified firm that is a good fit for an association. “it is very important that a board do its due diligence in learning about a management company before hiring the firm,” explained deMille. check references by visiting them to see whether those clients are satisfied with the agent’s performance. And an association must be sure that it under-

condo liFestyles


condo liFestyles

stands what services are included in the fee because those provided outside the contract can be expensive. An association should, “put in the contract what it wants management to do and take out what it doesn’t want it to do,” deMille cautioned.

Visit to view a sample Community Association Information Sheet

Selecting a Managing Agent Having gone over the types of management that an association can have, let’s now focus more closely on the process of actually selecting a professional agent when that is the option chosen by an association. Michael d. Baum of Baum Property services, described the procedure. First of all, in commenting on the business he is in, Baum said, “property management is an imperfect science,” especially when it comes to management companies trying to determine what any particular association needs in the way of services when it requests proposals from competing agents. A company is shooting in the dark if it doesn’t have an accurate and detailed description of the property and its needs in a format that goes into more depth than can be gained in a visit to the site and an observation of

the exterior of the physical plant. Much remains out of sight. An association must have bidders proposing management based on uniform information. “the key is a Request for Proposals (RFP) telling guys like me what you need,” said Baum.: “An association describes its facility and what it needs,” although an, ”RFP shouldn’t be an encyclopedia. some i don’t bid on because the RFPs are

too long.”

Information Sheet

Baum likes to provide prospective clients with a community Association information sheet that can serve as the nucleus of an RFP. Without such a uniform document provided to bidders, an apples to apples comparison of bids won’t be possible and proposals to manage are likely to vary in price because of different assumptions about the property by bidders thus making an equitable comparison between them difficult to make. Baum’s four page information sheet asks for data on community size, number of units, gross assessments, number of directors, board meeting requirements, committees, capital reserve amount and other finances, whether on-site management will be necessary or desired and accommodated with an office, existing employees of the association, existing service contracts, insurance claims, lawsuits, recreational facilities, physical problems and more. Having all those details enables bidders to frame their proposals around the same characteristics without having to guess.

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M A n A G e M e n t tA l K s

Time Requirements one of the main details upon which Baum bases his bid price is how often his property manager must sit down with the board after the work-day is over. “the biggest variable in our fee is the number of evening meetings,” he explained. “We like to go to meetings but they cost more.” When there’s a management company, an association doesn’t have to meet as often. And he cited other means of communication that can be used between management and the board such as e-mail.

Management Service Questionnaire Baum also provides clients with a Management service Questionnaire which can be included in the RFP and which each bidder must complete with facts about his/her company. Among other things, information is requested on the age and experience of the management company and the size of its client inventory, the insurance it carries, about who the property manager will be and his/her experience, the same about any site manager who will be assigned, separate fees, if any, for board meetings or other matters and about financial issues such as frequency of financial reports, handling of funds and check signing. this questionnaire filled out by each bidder gives a board a common basis on which to evaluate each prospect.

Interviews After a board or a committee assigned to the bid review task pares down the proposals to the few it considers the best qualified to provide the services it wants, Baum recommends that association representatives be sent to interview each finalist at the company’s headquarters. they should talk with the president and key staff members. Baum spoke about alternative models of management companies might follow. “some prefer a model with several people involved but i like the model of one person knows all,” when it comes to a relationship with an association. An association should determine which arrangement it prefers.

References Also, as part of the selection process, client references should be requested from the bidders the board favors. “Actually,” said Baum, the association should, “go to a company’s website and pick three references.” Management might be inclined to provide only references that it’s sure will give good recommendations. References should be picked that are as close as possible in size to the associa-

tion doing the evaluation. it is probably a good idea to also ask for vendor references and verify their satisfaction in dealing with the management companies. if possible, the association should also try to ascertain each company’s client retention ratio when contracts have been renewed.

Evaluate Price After the interviews and reference checks, those responsible for the selection should evaluate price. “Remember,” said Baum, reiterating what so many others have pointed out when choosing almost any service or product, “the lowest bidder is not always the best. you get what you pay for.” that’s why comparing fees should be just part of the consideration along with reputation, experience, interviews, references, vendor opinions, etc. in looking at the comparative fees, keep in mind that some companies have add ons for a lot of little items that are not specifically included in the main fee stated in the agreement. “some companies charge one amount and that’s all,” but, “too many charge you for extras.” He recommends that an association set up a grid on which to plot all of the possible extra costs to determine when they may be excessive and the reason a company is charging a lower main fee than its competition. “Understand what you are looking at and then determine the best overall fee for the association,” in conjunction with the other criteria that should be weighed in the selection process. the final decision should await a legal review of the contract, which will be covered below.

Transition Between Management Companies once a board has made its selection and will be replacing one agent with another there will be a transition period between companies. Baum said

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that all of his competitors in the management business know that they will win some and lose some in vying for clients so they tend to get along and the handover of management is usually reasonably smooth. “We pretty much cooperate in transition,” he said. However, capturing the money from the preceding management company is occasionally an aggravation for Baum when he takes over, not usually because of the recalcitrance of the outgoing agent but because the association doesn’t follow through to see that it is transferred. Associations should not expect him to get the funds from his predecessor. “it’s up to the treasurer to tell us what money they have and he has to capture it because we can’t.” the money plus a list of all of the unit owners,” are the two things we need from the association.”

Orientation Meeting once the contract is signed the board and new manager must meet as soon as possible to discuss methods of operation, especially on such issues as financial reporting, check signing procedure and whether e-mail or phone communication is preferred. “We have to meet to discuss how you want us to make soup,” Baum said, to go over the nittygritty details of management.

Legal Perspective Pat costello of the law firm of Keay & costello provided a legal perspective on the management selection process, especially how an association can protect itself legally when considering and entering a contract.

Know Yourself in determining what kind of management company an association wants it should first know itself, what its needs and preferences are. What is good for one association-may not be good for another even though they may be somewhat similar in nature. “truly know yourself,” he advised associations. “What is important to you?” look for a management company that can best satisfy your needs at the most reasonable price, whether it is a large or small, local or national company.

Illinois Condominium Act in addition to the criteria that Baum said should be evaluated, costello referred to section 18.7 of the illinois condominium Act, which currently applies to all condominium, townhome and homeowner associations and to both management companies and direct employees of an association. Manager licensing becomes effective on July 1, 2010 but until implementation with direc-

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condo liFestyles

tives and regulations in place, 18.7 sets forth the legal requirements a manager must meet. As others have, costello referred to this section of the law as “manager licensing lite.” A manager must be a minimum of 21 years of age, a citizen of the United states or permanent resident, must not have been convicted of certain financial felonies, have a working knowledge of community associations and must have fully cooperated with legal authorities in any investigation. there are also certain fidelity bond requirements to be met. “it’s not a bad idea when interviewing management companies,” costello advised associations, “to ask whether all of its managers comply with section 18.7,” and with full licensing when that law kicks in. licensing will add additional requirements such as education and testing.

Contract Review costello has reviewed a lot of management contracts. like any other legal agreements, he feels the best kind are those that have to be read only once and are completely understandable. “if you have to read it a second time, there will be questions,” he said, adding that any contact should be in written form. “it seems obvious but you’d be surprised how often they aren’t. Get it in writing and have it reviewed by your lawyer.”


condo liFestyles

Terms and Conditions Following are a number of terms and conditions that should be in any such contract and which a board should be able to understand, especially if it unwisely chooses to sign one without a legal review to save money. » the term of the contract. How long is it? » Will the fee remain the same at renewal or will it be adjusted upward and will any increase by automatic? » is the renewal process automatic or subject to renegotiation and approval by the association? “if you don’t understand the renewal process, you can be in trouble,” costello warned. » can the contract be terminated by either party with a specified number of days notice or can it only be terminated for cause? it is preferable that the former be the case. » Are the duties and of both the manager and the association clearly described so there is no question who is responsible for what? » is it a full service contract or ala carte with extra charges for services not specifically identified in the main fee? if the latter, there should be a schedule included of additional charges. » charges that will be billed back to the unit owners for services such as paid assessment letters should be spelled out.


» How much unilateral authority the management company has versus what approvals are needed from the board before action is taken should be set forth. » the frequency of attendance at board meetings should be stated and agreed to. » it should be clearly understood that the association will not indemnify management for actions that are willful or wanton, if it is sued and loses. » the contract should indicate if management can turn it over to a third party. it, “shouldn’t include a provision that allows for assignment to a new company without approval by the association,” costello emphasized. » there should be language regarding the transition of management to a successor company and who is responsible for which actions at that time.

Contract is Just a Start “Remember,” costello advised associations,” that the contract is just a start.” the board must meets its obligations under the agreement and monitor the agent’s performance as well. “the board sets policy and gives the agent direction and,” then lets it carry out its responsibilities under the contract.” Y

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coveR stoRy

from page 5 room, office of the building and new public spaces. The old club with dark and closed off rooms has given way to large open and lightfilled spaces. Clerestory windows were punched through the old walls and transparent partitions were installed so natural light could for the first time pour into the exercise area. The lighting along the glass perimeter is on sensors thus achieving daylight harvesting – a good energy saving measure. RADA designs maximized the daylight also by using translucent resin materials with plant inter layers – for partitions and decorative backlit panels. Innovative landscaping elements – dried and natural - were integrated with the transparent resins, bringing the outdoor indoors – as a main design tool to create a feeling of relaxation for residents. Special furniture groupings relating to Mid-century modern style and the use of eco friendly seating selections created more opportunities for interaction and socializing.

The design transformation of the spaces already brought awards and recognition to client and team: 2010 Good Neighbor Award, 2009 3-Form Award for sophisticated revitalization, 2009 Lighting Award and 2008 Design Award of the Association of Licensed ArchiShown here is the swimming pool at 400 East Club tects. The design work at 400 East Randolph done by RADA Archimonth, according to Pritzker. The reserve curtects was also published in International rently contains over $1.8 million. architectural magazines as a model of sustainCapital Improvement Program ability in urban renewal. A five-year financial projection of capital Solid Financial Position improvements has been put in place by the The association is in a solid financial board for the period 2008 through 2012. position. Its budget this year is just over $7 Planned expenditures for improvements, in million dollars including a deposit to the addition to the already completed $2 million reserve of $2.5 million. Assessments begin at upgrade of the health club, include $10 mil$375 per month and top out at $880 per lion for plumbing main replacements, approx-

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© steinkamp Photography 2009. these images are copyrighted.

400 E. Randolph

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imately $4.7 million for mechanical system repairs, $2.9 million for life safety measures and $1.5 million for renovations of the sun deck and swimming pool. “This capital program will be funded by a $14 million special assessment approved by the board on March 17, 2008 as well as by contributions to the association’s reserve fund from monthly assessments over the next five years,” explained Pritzker. Forward Looking Plan This is a, “very forward looking five year plan designed to ensure that our great property is positioned to suit the changing needs and desired amenities of residents for the 21st Century,” said Jacobsen. “Our residents already enjoy the best location in the City and the work underway will meet their needs well into the future.” Real Estate Sales As with any large condominium association, there is ongoing change of ownership as residents come and go for the reasons that motivate all homeowners to change their addresses. With the market slowdown, it is


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taking longer to sell units in the building than previously when buyers were more aggressive in pursuing new property acquisitions. This year, 2010, ten units have changed hands from January to mid-May with market times generally being up. However, said Jameson, “when units are priced correctly they can sell within ninety days. “It is the improvements the board has made and planned that has kept buyer interest relatively high. We’ve, taken advantage of the down economy to invest smartly in the property in a way that enhances the appeal of our property.” Residents Mix Well The residents of 400 East mix well together, a situation, which is in good part attributable to the 16,000 square foot 400 Club fitness facility. It is used by a wide cross section of persons ranging from nine months to ninety years of age. “We also have a couple of large social events each year along with a number of piano nights and smaller events scheduled throughout the year,” said Jacobsen. “These events are great fun and really help in getting people out of their units and promotes a sense of community.” Because of the famil-


iarity the residents have with each other and the concern they show for their neighbors, Jacobsen compared the building to a small town in its human characteristics. “That is what I like best about the property. The people and sense of community remind me of the small, rural Illinois community where I grew up- just turned vertical.” Reiterating his praise of the location voiced earlier, he added, and it’s, “surrounded by a great City, beautiful lake front setting and with Millenium Park, The Art Institute and Orchestra Hall nearby.” Movie Scene An interesting added note is that the building served as a movie set for a couple of films that brought big name cinematic stars to town. Scenes from both the 1986 presentation “Nothing in Common” with a young Tom Hanks and an aging Jackie Gleason in his last film and “Eyes of an Angel” released in 1991 starring John Travolta in one of his non-violent roles were shot there. While confirmation was unavailable for this article, it is possible that some of the then residents had a chance to appear as extras. Y

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0510.4939 CL[0710]40pgr_FNL  

Training Community Association Boards Complaint Management: Minimizing Liability Commonly Asked Questions for Community Associations Purchas...

0510.4939 CL[0710]40pgr_FNL  

Training Community Association Boards Complaint Management: Minimizing Liability Commonly Asked Questions for Community Associations Purchas...