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july 2013 | vOlume 17 | numbeR 2





Is the Worst Really Over? Checking the Financial Health of Community Associations F E AT U R E S

Why Does Fraud Happen? Proactive Approach to Exterior Maintenance Should Be Routine Electronic Communication: Think Before Hitting the Send Button Illinois Supreme Court Rules in Favor of Chicago Condominium Ordinance Condo Associations Have Authority to Regulate Common Areas Elevator Code Updates

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table of contents COVER STORY

03 is the Worst Really over? Checking the Financial Health of Community Associations By David Mack BOARD BASICS

09 Why does Fraud Happen? By David Mack MAINTENANCE MEMOS

12 Proactive Approach to exterior Maintenance should Be Routine By Michael C. Davids 18 editors Message 19 directory Advertising 26 industry Happenings Compiled by Michael C. Davids & Sherri Iandolo S P E C I A L F E AT U R E

31 electronic Communication: think Before Hitting the send Button By Gabriella Comstock 窶適eough & Moody, P.C. L E G A L U P D AT E

33 illinois supreme Court Rules in Favor of Chicago Condominium ordinance 34 Condo Associations Have Authority to Regulate Common Areas 34 elevator Code Updates





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By David Mack

Is the Worst Really Over?

Checking the Financial Health of Community Associations

As part of the research for this article i went to an early spring board meeting of the condominium association in which i live to get an idea about how it was doing financially in the distant aftermath of the collapse of the housing market and the ensuing financial crisis.


n attendance were four board members and a representative of the management firm as well as about ten residents of our seventy two unit community, which is laid out in six, three story, twelve unit buildings. A number of mundane issues were discussed including landscaping, parking lot resurfacing and a scheduled power washing of the buildings. It was a fast moving session that seemed likely to end in no more than one half

hour despite a number of comments and complaints from the homeowner’s gallery that had been invited, welcomed and responded to. Then just as the meeting was drawing to a conclusion I brought up a matter that the board apparently was reluctant to discuss in the open forum. “How are collections coming?” I asked.

Collections are Sensitive Subject We in the audience quickly learned why


this was a sensitive subject as the Treasurer, sheepishly and somewhat uncomfortably squirming in his seat, admitted the association was owed a substantial amount of back assessments, including attorney fees. The assessment roll is a little over $14,000 a month and delinquencies came to around $22,000, in excess of 150% of the total regularly due each month. The Treasurer added that the association was in court with several unit owners and that one of the best collection attorneys in the business was plying his trade for us. I didn’t perceive a lot of optimism regarding the timely collection of a good part of the debt but liens had been and would continue to be placed on units in an attempt to


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Condo liFestyles

recover debt through that process. I don’t know if maximum pressure is being applied through legal channels open to the association as I detected a seeming note of sympathy in the discussion for unit owners who were still out of work because of the recession.

Units are Selling The Chairman then happily announced that two units had just sold at around the $100,000 level, which exceeded by several thousand dollars what I had paid for my unit a few years ago at the bottom of the market so apparently value was trending in a positive direction. but not nearly enough to reflect the approximate $140,000 one of my sons had paid at the top of the market just before the real estate bubble burst five or so years ago.

Evictions Send a Message I brought up the subject of evictions with the possibility of the association taking temporary possession and leasing units to recover delinquent assessments. This appeared to be an approach the board had not given much consideration to because of the concurrent likeli-

hood that lenders were moving toward possession through foreclosure. but the Chairman did indicate she would look into eviction possibilities with the association’s attorney. A visible first eviction might send a message to other delinquent members, especially those who are just deadbeats and unwilling rather than unable to pay, that they might soon find their possessions in the parking lot too if they didn’t satisfy their debt or at least enter into some form of payment plan directed toward a more gradual reduction of what they owed. So the association where I live is struggling although not insuperably with its finances. At this point creditors are not apparently hounding the association to pay its bills but the future is problematic. We may be looking at another assessment increase next fiscal year to make up for lost revenue and to stay viable financially. And that may just mean more uncollected assessments.

Some Associations Hurt More than Others many associations seem to be having similar difficulties. Few escaped financial

injury. “I think the crisis has, in some manner, affected all of the communities we represent,” said attorney Patrick Costello of the Wheaton law firm of Keay & Costello, P.C. Keith Hales, President of Chicago based Hales Property management agreed but noted that some have been impacted less than others. “We’ve seen that associations in relatively nicer areas of Chicago tend to be quite a lot less affected from the financial crisis than ‘up and coming’ areas,” he said.

Regaining Financial Health but how are associations generally doing in the struggle to regain or maintain their fiscal health? Costello has noted some degree of improvement in the circumstances of his clients. “I see that most associations we represent are doing somewhat better,” he said, but that progress is not necessarily due to financial conditions outside the association field. “I attribute it less to the economy and more to boards and managers budgeting better and anticipating a certain level of delinquencies and foreclosures when determining their budgets.” They are taking the initiative in

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addressing their problems. From the perspective of mike baum, President of baum Property management in Aurora, housing is much like the rest of the economy in that it is governed by the same conditions that control elsewhere. “I think housing is following the overall economic trends in the country, “he said, pursuant to which the upper class is continuing to make great strides while “the middle and lower classes are sinking.” The result in the association field is that those communities sitting at the low end of the spectrum, “are still struggling,” while those positioned at the luxury end have regained any financial stability they may have lost.

Good Momentum for Real Estate Sales One sign of improving conditions at many associations is that sales of units are beginning to occur, as the chairman of my association had exulted about, and while not moving as readily as they did before the housing bubble burst, after which transactions slowed to a trickle, some momentum seems to be building. “We have seen a 300% increase in

closings thus far and expect that number to climb even further by fall,” said Hales. “And prices seem now to be climbing somewhat,” which, “obviously will add value to all units in an association.”

are selling in weeks.” Growing sales transactions can have the additional advantage of bringing in new owners who may be replacing, in some situations, sellers who had fallen behind in their assessments.

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This is probably, in large part, due to sellers and their real estate agents becoming more realistic in accepting what the true market value of their units is at listing and in subsequent negotiations with prospective buyers. but as Hales noted, that still represents a growing increase in value and sales price from what they were at the bottom of the market. Gail Filkowski, vice-President of Portfolio management at Chicago based First Community management, has also seen improvement in the condo marketplace due to homeowners becoming more willing to accept offers somewhat less than what they might have been at the peak of the real estate boom. They are, “coming to terms with what their places are really worth and pricing them accordingly,” she said. “units are no longer languishing on the market for months (but)

but similar conditions do not exist everywhere in and around the City. “The properties that we manage in less prominent areas of Chicago unfortunately have not seen as much growth activity (in sales) versus the buildings in (better) areas,” said Hales. “We are actually seeing an increase in short sales and/or foreclosures for these properties.”

Collections & Delinquencies Vary Sources for this article reported differing experience with assessment collections and delinquencies. non-payment is still hurting the associations to which Rosenlund provides legal services. “Delinquencies remain quite prevalent,” he said, noting that some boards are hesitant to pursue legal action, making their financial problems worse. “Our office continually reminds our clients to adopt and diligently

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apply assessment collection policies.” Costello has not observed any significant decline in assessment collections during the economic crisis but where there has been some loss of revenue because of non-payment, that shortfall has been offset by providing for unrealized income through thoughtful budgeting. “I think this is critical,” he said.

Some See Gradual Improvement While Hales has noted that delinquencies are still problematic for some associations, others are beginning to show gradual improvement in members paying in a timely fashion. “We have seen a slight decrease in assessment delinquencies thus far and expect this issue to slowly get better as home values (continue) to rise,” he said. Foreclosures are helping with collections. They, “are improving as many foreclosed units have been sold and are now occupied by new owners who are paying assessments monthly,” said Filkowski. For baum’s associations it is again a matter of what income level they serve, with delinquencies being a continuing problem for low end organizations but not those whose


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residents are well to do. He agreed with Costello on the need for thoroughness in budgeting when it comes to accounting for diminished income streams. ”I think it is absolutely necessary to budget a realistic amount for uncollectible assessments- usually 5-10%,” he warned, to which he added a caveat on reserve funding that is affected by owners not keeping up with their dues. “Some reserves are not being adequately budgeted as a result of delinquencies.” The same holds true for foreclosures, which continue to regularly occur in the low and middle parts of the association range but are “lessening” where incomes and housing quality are at the upper end, baum noted.

Foreclosures Still Happening elsewhere foreclosures have not abated significantly yet.” Our firm has observed mortgage foreclosures- including new filingsremaining very commonplace with many association clients,” said lawyer Scott Rosenlund of lake Zurich based Fullett Rosenlund Anderson, P.C., an assessment with which Costello agreed. “I would say that foreclosures have continued


on pace,” he said, with recent times.

Some See Foreclosures Declining Hales, on the other hand, has begun to note an apparent diminution in such lender activity in the associations he manages. “We are seeing a decline in the number of foreclosures,” he said, but even when unit owners have been ousted this is proving to be a positive situation for associations as financial institutions taking possession are fulfilling their obligations to associations that defaulting owners had become remiss in meeting. “banks are realizing that they are responsible for assessments,” Hales added.

Some See Surprising Approach Filkowski has seen a surprising phenomenon when some unit owners are involved in a foreclosure action. “Today many owners go through a foreclosure while staying current with assessment payments,” something which she attributes to, “years of educating homeowners in the importance of paying assessments,” even when their lenders are moving continued on page 8

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from page 6

Is the Worst Really Over? against them. “In those cases, the association is hardly affected by a bank foreclosure.” more associations should be so fortunate.

Putting Off Maintenance & Repairs Will Have Long Term Impact Ongoing financial problems will be a stimulus for associations to find ways to shave outflows of shrinking funds. “many associations have cut back on expenses, putting off major projects and dealt with maintenance issues on a piecemeal basis” said Costello, noting that one of the favorite ways to do this in summer months is to cut back on recreational expenses. For example, some, “associations are temporarily closing pools if they can no longer keep them running.” likewise at some of Rosenlund’s clients’ properties, which are delaying repairs. In one case, “an association has let its streets fall into serious disrepair because the board does not have the will to increase assessments to the extent necessary to properly maintain the prop-

erty,” he said. Others have been shortchanging reserves and also keeping pools dry. “ultimately these approaches usually work to the overall detriment of the association, resulting in dissatisfied owners, decreased property value and possible exposure to liability.”

Other Areas Being Cut Some of baum’s associations are reducing landscape watering and other grounds maintenance expenses. “I am seeing associations cutting back on lawn irrigation and some even eliminating lawn irrigation systems,” he said. “mulch also seems to be a discretionary expense being cut back a bit.”

Volunteerism On the Rise? Filkowski, too, manages associations that are constantly looking for ways to spend less, “and it’s not limited to associations with high delinquencies.” board members at several associations are taking on tasks that are normally completed through a contract. “everyone wants to stretch their money as far as possible these days.” In financially strapped associations Hales has also seen board members contributing

their labor to accomplish work that would normally be done by outsiders. “We have found that, especially in some of the smaller buildings we manage, more people are chipping in to help with snow removal, landscaping and cleaning to help keep expenses to a minimum,” he said.

Bank Loan Option bank loans might be an alternative funding source under some circumstances and Rosenlund said this has been a course of action some of his clients have taken but that approach to keeping up with necessary repairs can be difficult to pursue. “To obtain a bank loan, an association will have to meet a certain threshold of financial stability and a loan is likely not a realistic option for an association under serious financial distress,” he explained, which disqualifies most of those with excessive shortfalls in assessment revenue.

Don’t Use Fines to Increase Revenue Sometimes a board member will go to an extreme in his enthusiasm to bring in more continued on page 28

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BoARd BAsiCs

By David Mack

Why Does Fraud Happen? in opening his presentation at the 2013 ACtHA Winter Conference, Brad schneider, President of Condo CPA, inc., and a Certified Fraud examiner, pointed out that when it comes to the stealthy theft of money it is hard to distinguish perpetrators in their public images from the normal population. Looks Can Be Deceiving “you can’t tell by looking at somebody’s appearance if they are a crook and will steal your money,” he said. Community associations all across the country have been bilked of their funds by errant board members, managers and management companies who didn’t look the part. it has happened a few hundred times in recent years.

The Fraud Triangle “Why does fraud happen?” schneider queried his audience and then referred to what is known as the fraud triangle, the three sides of which each represent a different aspect of the crime- pressure, opportunity and rationalization. Pressure comes to bear on a person in the form of such financial dilemmas as the inability to pay bills, a drug or gambling problem or an irresistible desire for status sym-

bols such as a bigger home or a new car. Professional problems can also contribute to pressure. “these are actual things that are happening,” said schneider, referring to a handout citing several cases of embezzlement at associations across the nation. He also spoke about a small management company in Chicago whose principal had access to all of an association’s certificates of deposits and cashed them, stealing approximately $600,000. “He was a very nice man who told me he had a gambling addiction that he had to feed,” schneider added. the 2nd side, opportunity, relates to access to funds. An example would be an on site manager who has individual signature authority on all of an association’s accounts. ”that’s too much power in one person,” leading to an abuse of the trust placed in the fraudster who perceives little danger of detection because others are not cognizant of

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the threat posed by their inadequate oversight. the third side, rationalization, often involves the thief finding justification for his larcenous actions in the idea that he is underpaid, his employer has cheated him or perhaps is perceived as being dishonest to others and deserving of reciprocity by the embezzler. or the crook might justify his illegal actions on the basis that he was only borrowing the money and intended to return it later. “A gambler might say he is only going to borrow the money and is going to win and pay it back later,” said schneider.

Internal Controls and Oversight Associations need to be on the alert to protect themselves against fraud. “the two most important issues to address to avoid fraud are strong internal controls and close oversight by the board, management (assuming those first two have clean hands) and outside accountants,” said schneider. one internal control that is important is the avoidance of acceptance of cash. schneider cited a local association where cash coming into the on-site office was received by the sole staff person who saw the opportunity to appropriate it. “i don’t think an association should ever take cash,”

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he said. “there should be a sign in the office saying ‘cash not allowed’.” However, if cash has to be accepted the person(s) receiving it should not be permitted to do the accounting for it.

Lock Box Option A good internal control is the use of a lock box, which is a P.o. Box at the post office, the access to which is only open to an association’s bank. “lock box usage is very common,” said schneider. Checks are mailed by residents to the box and,”are picked up by the bank and then deposited directly into an association’s bank account. if i had a choice with any association i would prefer to see a lockbox.”

Controls for Automatic Withdrawal or Checks Another way to protect against the misuse of funds is through automatic withdrawal from a unit owner’s account (which is the way i pay my assessment). “When this method is used the management company must have controls set up so that only authorized automatic payments can be approved,” said schneider, who added that the least efficient way to pay assessments is through checks sent directly to the management company. “this procedure will need a whole set of additional

internal controls to avoid checks being taken by the management company’s staff person(s) who process the bank deposits.” to prevent the misuse of funds - a board member – generally the treasurer- should review and approve all bills before payment and there should be at least two check signers. “you need multiple levels of approval,” said schneider.

Financial Statements Review Monthly or at least quarterly financial statements should be provided to the board and they should be reviewed. “it doesn’t take more than 5 or 10 minutes to look over a financial statement,” said schneider as long as board members understand what a financial statement discloses. All involved should be trained in their analysis. the general ledger will show every individual invoice so the board as a whole can determine who is being paid and how much, so as to confirm a treasurer’s conclusions. “if something doesn’t make sense, that should come as a red flag to the board.” the annual audit required by illinois Association law should turn up evidence of fraud if any has occurred during the year.

Bank Reconciliation An association’s bank account(s) should be

reconciled each month. one person should do the reconciling and another person should review the work to substantiate its accuracy. “An indication of sloppy bookkeeping or possible fraud is deposits in transit that do not clear the next month or multiple adjustments to the bank reconciliation that bring the bank account into balance with the books,” said schneider. “if these items do not clear up quickly, questions should be asked to understand why they are happening. if the bookkeeper is not competent or there is a fraudster involved, the bookkeeper will not be able to explain these items very well.”

Small Associations Be on Guard small associations offer a good opportunity for fraud because they may be self managed and individual board members may have excessive authority over the control of funds. “only 1 person may write and sign checks,” said schneider. “this is real opportunity.”

Reduce Opportunity Fraud can be considerably curtailed if the proper steps are taken and effective procedures are in place.” if an association develops strong internal controls and oversight, then it will be very difficult for a fraudster to have the opportunity,


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BoARd BAsiCs

which is the most important side of the triangle,” explained schneider. “Close down that side and there cannot be fraud.” that absoluteness is hard to achieve, however, but with diligent oversight fraud goes down about 70%.

Detecting Fraud schneider cited numerous ways to detect fraud, some of which are unusual financial or related activity, stale items on bank reconciliations, excessive purchases, large payments to individuals, employee overtime, ghost employees, write offs of account receivables, a P.o. Box as an association shipping address, duplicate payments and employee expense accounts. the abuse of an association’s credit cards is an increasing problem. “i’ve seen a lot of fraud with credit cards,” said schneider. “in many frauds i’ve seen (someone) is asked to sign a credit card payment without the back up invoice. never pay a credit card bill unless the invoice is attached.” Almost every time schneider has seen this type of fraud there has been no invoice attached to the credit card.

Background Checks to have more confidence that those employees who will have access to association funds are honest, background checks should be made of all job applicants. “you’ll want to know if they not only have a criminal record but whether they have bad credit,” schneider warned.

Fraud Examples schneider cited some other specific types of fraud that he had seen. • a property manager set up a fictitious company, invoiced the association for phony work and deposited payment into a fictitious account. • prices were changed on bids so a favored bidder got contract. • checks written to an association were endorsed by an employee and deposited in her personal account. • treasurer signed blank checks and another person filled in false payees and amounts and deposited in his account.

Cyber Fraud Growing Cyber fraud is a growing dilemma. “it is a huge problem in electronic banking,” said schneider. one of the ways this is done is by clicking on a link in an email that, unbeknownst to you, downloads a program to your computer that ‘sees’ your keystrokes and snares those that relate to banking, especially account numbers. “never click on an unknown link in your e-mail even from a friend for it might download one of these keystroke programs into your computer,” warned schneider, adding, though, that if this does happen or to prevent it from happening there are software programs you can acquire that will tell if your banking and other important key strokes are being recorded by another outside entity.

Final Alert As a final alert, schneider advised his audience to, ”never use a debit card online as it will take forever to get the money back ,” when the use was erroneous and the debit card issuer is liable to reimburse you for the transaction.

Report Fraud and Get Insurance Associations should report theft of their funds to law enforcement agencies but that won’t necessarily lead to recovery. the best way to protect themselves against misappropriation of their money is through insurance. if the larcenist is apprehended an association can seek restitution but the stolen funds may have already been used. therefore,” the most important thing is to have fidelity bond insurance,” said schneider. “People with access to funds should be covered,” and management should be asked to furnish evidence of its coverage for all its employees who handle money. Y

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By Michael C. Davids

Proactive Approach to exterior maintenance When buildings are new they generally are quite appealing even if critics find fault with or flaws in their design or appearance.


ewness is almost always eye catching and attention getting. but even building facades that may be very striking at the outset will diminish over time as climate, the elements and normal wear and tear eventually cause some type of deterioration. left unattended, buildings will age ungracefully and their attractiveness as well as their functionality will suffer.

Act Before It Get Serious The goal of every property owner should be to arrest or at least slow this inexorable tendency of their structures to decline as they mature. Preventing building façade decline can be done with a program of regular (this

term will be used interchangeably with routine) maintenance for the major exterior components and even some of the lesser, not as noticeable ones. Routine maintenance is performed on minor problems when they are detected to prevent them from growing into more serious complications that will require extraordinary corrective measures.

maintenance, which is a program of action that foresees problems before they occur and establishes a series of steps to ensure that they do not materialize or are deferred for as long as possible.

Determine Proactive Solutions Such a program is a planned attack on the forces of decay and should encompass each and every major constituent part of a building or development. “Preventive maintenance is the act of reviewing a component (and all collectively) and then determining a proactive solution either in whole or a series of visits over a predetermined time frame,” said Dever-Sutton. “Proactivity is less expensive when tasks are spread over a period of time. Failure to follow this approach will lead to major breakdowns of components due to gradual, unchecked

Regular Vs Preventive Maintenance However, “regular maintenance is reactive,” said Tairre Dever-Sutton of Tairre management. Corrective action is taken only after someone discovers a problem and informs ownership or management. She distinguishes this form of maintenance from preventive


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MAintenAnCe MeMos

ce Should be Routine deterioration, resulting in the likelihood of major financial outlays for extensive and premature repairs or replacements.

When Preventive Maintenance is Routine When attempting to correct minor problems that have already occurred, routine and preventative maintenance actually overlap and become essentially one and the same. In these situations, Cathy Ryan of Property Specialists, Inc. sees routine maintenance as involving both the inspection that uncovers a minor problem and its subsequent remediation, citing such examples as nail pops or worn or missing flashing or shingles on a roof or worn caulking along window frames or elsewhere. but in keeping those minor issues from degenerating into major dilemmas, acts of preventative maintenance are performed.

“making sure thorough property inspections are done is routine maintenance,” said Ryan. “Repairing the items found in the inspection would be both routine maintenance and preventive,” because in the case of roofs their useful lives would be lengthened. minor repairs such as fixing nail pops or replacing missing shingles is both, “routine maintenance and preventive maintenance as action has been taken to stop the continued deterioration, which if not repaired would ultimately result in (premature) total replacement.” bob Wankewcyz of Style Construction, which specializes in building restorations, agrees with Ryan. “Preventive maintenance and regular maintenance are the same because maintenance (whatever it is called) should be done on a regular basis,” he said. However, in his business he has seen that early mainte-

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nance is often disregarded with unfortunate consequences. “Some association boards tend to forget about it and instead of a simple and relatively inexpensive maintenance program, large scale and expensive repair programs have to be implemented.”

Slow the Process of Degradation Although they may hold slightly different views on maintenance terminology depending on their perspective, experts who, one way or another, make their livings dealing with the deteriorating condition of buildings are on the same page when it comes to recognizing that timely human intervention is needed to slow the process of degradation. buildings will not take care of themselves. With that in mind let’s look now at various exterior building components and see how routine/preventative maintenance can extend their useful lives.

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Check Roofs Regular inspections are essential on an annual or biannual basis depending on the age and condition previously noted. A new or recently replaced topside should still be examined in the first year to identify any problems that might emerge early during the warranty period. On the other hand, “properties with older or problematic roofing systems could benefit from increasing the inspections to three or even seasonal,” said Dever-Sutton. many consider the most favorable time

for an annual scramble up top is in the spring or early summer and if a second visit is called for it should be made at the end of summer or in the early fall. “Check for lifted flashing, damaged or missing vents/covers, broken or missing shingles, caulking around stacks, nail pops, soft spots and cracked or broken flat roof membranes,” said Ryan. necessary repairs should be made when defects are discovered.

Siding For wood siding that had not previously begun to show signs of wear, an annual inspec-

tion should be sufficient to determine the visible condition of the siding, according to brian Kelly of Terrace Square Condominium Association. A manufacturer usually recommends a painting cycle that will stay ahead of wear and prevent premature deterioration of the wood and it should be followed. However, “sometimes due to (poor) workmanship (in the original application), manufacturers’ recommendations have to be accelerated,” he said. For siding- whatever the type- that has been in place for a number of years or had previously begun to display defects, more frequent walkabouts by maintenance staff or property managers to check on condition should be made. loose or missing shingles or deteriorating wood will admit water to the underside and can lead to the degrading of insulation or structural members. Replacing bad wood sections is easier, Kelly has found, than aluminum (or vinyl areas - because the color of the existing siding) is easier to match. A smart thing to do is to keep and store properly, original siding panels to be applied where the product hanging in place needs to be removed/replaced. However, this approach may only be good for so many years, Kelly noted, because the environment may have affected the color while the stored panels retain the original unaffected hue. Wankewycz recommends power washing healthy siding annually so that it continues to look its best but added a word of caution. “If your siding is not in good shape, power washing may damage (it more) or create interior damage and should not be considered until repairs have been done.”

Painting/ Products During periodic visual inspections, “areas that are beginning to deteriorate will present themselves fairly quickly and (if attended to early) can save thousands of dollars in wood replacement, damaged areas and homeowner aggravation,” said Ryan. Once a contractor is hired, the manager and/or a board member should walk the property again with a company representative so that everyone is on the same page as to what needs to be done prior to any work being started. “Walking with a selected contractor can enhance the knowledge of everyone who participates in the walk,” said Kelly, who added that this will also help prevent questions after the fact.”


Condo liFestyles


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You Get What You Pay For by education and research via computer, library, paint store or contractor, boards can learn what product will work best for their buildings’ specific circumstances, Wankewycz noted. “The old adage, ‘you get what you pay for’ is very true,” he said. An inferior paint will lack durability. “every effort should be made to use higher quality products. This will enhance the life of any paint job.” With small-scale maintenance painting, caulk should be applied around the edges of painted surfaces. This will prevent, “moisture from penetrating the sides or the back of a painted surface,” Wankewycz explained.

Patios/Decks/Balconies/Porches Anything that is made of wood and is above ground level may have safety issues as the result of rotted wood members, rusting metal or loose nails, bolts or railings. “Periodic inspections should be performed every 2 years to determine condition of structural members or a porch system,” said Wankewycz, who also added that water repellant should be applied to porches and decks every 3 to 5 years

depending on the condition of the lumber. Dever-Sutton warned that the concrete in balconies (as well as pools and parking structures) will begin to slowly crumble if periodic inspections are not made to detect any rusting of embedded steel reinforcing rods and the corrosion removed. “eventually the problem will get worse and can no longer be ignored,” she said. “The cost of the repair will have increased exponentially.”

Examine for Pitch & Settlement It’s important to detect any balcony, patio or deck that is,” badly pitched towards the building (because it) can create foundation water problems in basements or drywall and carpet water damage to the unit below,” said Ryan, who favors regular inspections of exterior building accessories. Dever-Sutton noted also that settlement of patios could produce trip hazards, “either remove and replace the patio or have cracks filled with self leveling concrete caulk,” she said. This maintenance may reduce liability insurance premiums or prevent them from rising especially where the problem is wide-

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spread on a property.

Windows Caulking only lasts so long and annual inspections are needed to determine its condition wherever it exists but especially around windows in mid and high rise buildings. elevations facing a direction that is more subject to heat and driving wind and rain (e.g. east near Chicago’s lake front) should receive the most attention. “Failing to stay ahead of bad caulk can significantly decrease heating and cooling effectiveness,” said Dever-Sutton, “badly caulked windows can bleed heating and air conditioning money.” Also broken seals should be replaced. In residential buildings where unit owners are responsible for window care, an annual inspection should be made by owners/ boards/ property management and/or other professionals so notices can be sent to the residents to correct their individual window problems, ideally giving a deadline for repairs or replacement, Dever-Sutton added. “bad windows show a prospective buyer that property value is not a priority and they should look elsewhere.”

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Condo liFestyles Editor’s Note - Chicago buildings over 80 feet in height must undergo periodic critical inspections of their facades by licensed architects or engineers to determine their structural integrity. The cycle is 4, 8 or 12 years depending on the materials used to construct the exterior walls. More frequent short- term reports are also required. This is not optional for building owners, but compulsory.

Window Washing Window washing is an important part of a comprehensive exterior maintenance program. There are several things that building managers and their staff should keep in mind for an effective window washing according to Dever-Sutton. “using a bosun’s chair, if at all possible, is the most cost effective way to wash windows. The use of scaffolding or an aerial lift platform (swing stage) often adds not only additional costs for the equipment but also adds manpower hours in terms of set up and removal of the equipment. Also, using scaffolds can add wear and tear to a building in addition to limiting the coverage area of the washers.” Finally, many believe a bosun’s chair is safer. make sure your window washing company has safety as the number one priority, as the job has its dangers and you want to make sure the company you work with takes all necessary safety precautions. Ask to see a current certificate of insurance and make sure that it meets the needs or requirement of your property in terms of liability. make sure your window washing company conducts regular drug testing for employees and background checks. and, what type of emergency Response program does your window washing company have in place to deal with any accident. “be sure to consider window washing as part of construction cleanups,” adds Dever-Sutton. “Any construction or renovation job, no matter how small, almost

always comes with an enormous amount of dirt and debris that finds its way onto not only the floors but the walls and windows. So, make sure to anticipate and include a final window washing in any construction contract such as tuck pointing, balcony restoration or other façade work etc.”

Asphalt/Parking Lots At least an annual inspection is necessary to determine the need for seal coating, filling cracks and patching, according to Ryan. Although seal coating will not usually be needed every year, in northerly climates such as in this area it will almost always be needed on a triennial cycle. Patching and/or filling cracks, of course, should be done first but, depending on the nature of a building or complex, the material used by a contractor for the work may be important and should be checked with him beforehand. Ryan said that liquid filler that blends in better with the surrounding asphalt environment will be more suitable for a residential setting because of a less contrasting appearance whereas in a commercial parking lot use of a heavier, darker and more noticeable sealant would be appropriate.

Swimming Pools & Water Features Swimming pools, fountains and other water features such as waterfalls, etc. are usually best handled by professionals who can then assess any immediate needs and make repairs. Specialty vendors can also train and provide staff working at the pool in the proper care and maintenance of equipment during the season to better assure long term viability of the facilities.

Landscaping/ Trees It goes without saying that where there is a significant amount of landscaping, its appearance and condition are very important and should reflect the character and image of a property. Good landscaping should blend in well with the buildings which it surrounds. Ryan and Property Specialists, Inc. have a formula for keeping it in tip-top shape. Do, “a spring walk to determine conditions of plant materials and to identify dead or dying trees,” she said, as well as shrubbery. That would also be a good time to bring in an arborist for, “an annual crown inspection to determine if pruning or crown trimming is needed.” Require weekly inspections by your landscape contractor. If there is an active landscape committee, they can assist in watching over the appearance of your grounds. Set up an outside professional service for an integrated pest management program at this time as well. monitor trees, shrub and lawn areas throughout the season for insect and disease damage. It is also important to set up with a professional to apply fertilizer and weed control for lawn areas. Plan for seasonal flowers and make arrangements for damaged turf and plants to be replaced as needed before the onset of the busy summer season.

Light Fixtures/ Playground Equipment/ Outdoor Furniture Clean exterior lights at least semi-annually. Repair broken fixtures when noted. Furniture should be power washed before using unless this was done just prior storing in the autumn. Playground equipment should be inspected frequently to ascertain if any repairs are needed and for other safety issues. broken equipment can lead to injuries to users and liability claims or lawsuits.

Professionals & Inspections Properties that have maintenance personnel on staff can handle much of the inspection and preventative/routine maintenance work internally. We’ve already noted that professionals are strongly recommended when it comes to facades, roofs, swimming pools, tree care, and other areas. Professional building inspectors, architects or engineers should be called in to check the integrity of above ground building adjuncts such as wooden porches and balconies because of the potential hazards they pose to human beings when in disrepair.


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“It is better to use a qualified outside source on repairs that affect the safety of your residents, employees and guests,” said Kelly. Wankewycz had a more general observation regarding outside help. “Professionals should be contacted where a problem is encountered that they (on-site staff) have little or no expertise in solving or when a problem that they have been addressing becomes more severe.”

Original Construction Defects Wankewycz also added that he has found on numerous occasions that it isn’t only maintenance issues that cause problems. “Often times there can be problems from improper original construction methods and building deficiencies that are responsible for major damages to the building exterior as well as the interiors. usually the defects and deficiencies aren’t found until interior leak problems occur or premature deterioration of exterior building components surface.” Once the problem is uncovered on multiple units and locations it would be wise to perform an inspection specific to the problems occurring from the defects and deficiencies to correct them. “most commonly,” he continued, “it’s a lack of or improperly installed air and moisture barriers and flashings which are the problems. Construction defects and deficiencies are a little different than maintenance issues. If problems are uncovered soon enough the association may be able to get the builder/developer involved and be responsible for correcting the problems.

Owners Have an Interest All property owners have an obvious interest in maintaining their buildings and grounds. now more than ever, curb appeal is

important. A shabby, run down appearance is a turn off to prospective buyers. Association members should want to preserve their buildings and environments to support individual property values and attract buyers. but is this always the case? Routine/ preventative maintenance costs in associations are paid by everyone through the regular monthly assessments. Too often such maintenance is sacrificed by property owners in the interest of budgets and cost cutting in these challenging economic times. Although it may cause some residents to grumble and ask questions, struggling to pay for necessary maintenance when it can prevent more costly repairs in the future is prudent and should be done to the extent possible.

Heads in the Sand Dever-Sutton refers to owners that put off maintenance as having their heads in the sand rather than being alert and proactive. When, “a property’s ownership (group) has a laid back, don’t fix it until it is broken (or seriously broken) approach to maintaining the building (s), that can lead to eventual out of control costs,” she said. The same is true if they use band-aid methods for maintenance. eventually someone will have to pay the piper. big time.

What Can Happen Without Preventive Maintenance now that we’ve gone over many of the routine/preventative steps that should be taken regularly to preserve the integrity of exterior building components, let’s look at a few examples of what can happen when property owners are derelict in attending to maintenance. Ryan described a condo association that for a period of 15 years did nothing more than continued on page 25



Professional Community Management C O N TA C T

Michael D. Baum, CPM, PCAM


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From the Editor




july 2013 | vOlume 17 | 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. 630-932-5551 or 630-202-3006. 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, 800 property managers, 400 realtors, 400 developers and 400 public officials. Total Circulation is 8,500. Condo Lifestyles attempts to provide its readership with a wide range of information on community associations, and when appropriate, differing opinions on community association issues. All material herein is copyrighted 2013©. 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. 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.


Condo liFestyles

e can be very thankful that we do not have hurricanes or wildfires here in the Chicago area and that tornados are rare here too. However we are far from immune to severe and extreme weather. Having just endured a snow packed February and March and a ▲ Mike Davids cool, wet spring, the start of summer has been very rainy. in fact, we set a record for rainfall here in June and flooding has been a serious problem in many suburban and outlying areas. A number of community associations have experienced flooding this year. Reports of flood damage to community associations have come from Palatine, Hinsdale, des Plaines, Buffalo Grove, Fox lake, McHenry and other areas. We hope that all those impacted by the challenges of excessive rain will receive needed assistance and recover as soon as possible. Record rains also caused many other challenges (that pale in comparison to flooding). Roof leaks, long grass, abundant weed growth and mosquitoes are some of the other ways that community associations have been impacted by the heavy rain. this season has been especially difficult for landscape maintenance contractors as mowing and weeding tasks have been ominous. in the midst of flooding issues and rainy days, we were given a terrific positive distraction – World Champion Chicago Blackhawks thrilled us with exciting hockey games and brought the coveted lord stanley’s Cup back to Chicago. the Hawks won with outstanding effort and teamwork. those two ingredients will help make any organization a winner. Congratulations and thank you to the Blackhawks! our cover story asks several industry experts about the financial health of community associations. the short answer is yes for many and no for some. the consensus is that the worst of our financial problems may be over but there are still many associations with serious challenges from delinquent assessments, evictions and mortgage foreclosures. A discussion about how and why many Associations have resorted to renting out units that have been foreclosed on in an effort to generate funds is also covered in this story. the good news is that in general, CA home sales have increased and in certain areas prices have increased as well. several updates on important legal issues are provided in this issue. electronic communication, regulation of common areas, dealing with requests for financial documents (& related Chicago ordinance), and updates to state and Chicago elevator codes are covered in brief articles. if you have an opinion and would like to share your feelings on these or other subjects of concern, please send us your comments and we’ll include your views in a future issue. visit or ask your management and legal counsel about these and other legal issues. they should be able to provide you with current and more complete information. We have an informative article on why fraud can happen that appears in our Board Basics column this issue. Unfortunately, there are people in the community association world who will lie and steal to advance themselves at your expense. Be careful not to fall prey to these unsavory characters. our Maintenance Memos column offers an article on the importance of exterior maintenance. Proper maintenance is a key to extending the useful life of your buildings and grounds. Property managers emphasize property maintenance almost as much as they emphasize proper financial management. of course, professional management of your money and of your property are intertwined. MCd Media’s next special event is a luncheon at Arlington international Racecourse on August 29. A variety of companies specializing in community associations have sponsored tables at this event. 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. We appreciate all of our readers as well as our sponsors. special thanks to the companies, associations and groups that are Authorized distributors of Condo lifestyles. those of you who are not current subscribers can find subscription information on our website 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 problem or failure, please send me an e-mail ( Y

Michael C. Davids Editor and publisher


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Audits Reviews Compilations Income Taxes Board of Directors Training Monthly Services: Collection of Assessments Paying of Bills Monthly Financial statements Consulting for developer turnover and Major projects

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KELLERMEYER GODFRYT & HART, P.C. (847) 318-0033 investigations and Repair documents for: exterior Walls, Windows, Roofs, and Parking Garages Condition surveys and Reserve studies


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Reserve studies & transition and Condition Assessment Reports Facade/ Roofing / Windows Garage evaluations, Water infiltration investigations Fire escape/Balcony/Porch evaluations, life safety evaluations





Contact: steve silberman, CPA




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A total exterior Facade Restoration Company


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For Display or Professional Services Directory Advertising Info, Call (630) 202-3006 20

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OCEANS ENERGY (312) 600-5820


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OCEANS ADVISORS (312) 508-3032


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JANITORIAL SERVICES DJR CLEANING ENTERPRISES (773) 640-1588 “GReen” Janitorial & sanitizing services for hospitality businesses, health care providers and commercial, industrial and multi-unit residential buildings. David Melone




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

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Condo liFestyles

ABBOTT PAINTING, INC. (312) 636-8400 (773) 725-9800


Professional landscaping and snow Removal



Contact Paul Anzell



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HEIL, HEIL, SMART & GOLEE (847) 866-7400

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





Contact Tom Skweres


Contact Asa Sherwood or Elena Lugo


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PROPERTY MANAGEMENT WERK MANAGEMENT (630) 241-0001 For All your Property needs


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RCN (312) 955-2322




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Proactive Approach to exterior maintenance Should be Routine from page 17 have cheap caulk applied to badly leaking windows and the interior drywall damage repaired where water penetrated. The kinds of maintenance steps that should have been taken were to install additional flashing and ice and water shield on the roofs above the window frames, completely remove the old caulk and put on a high quality product as well as replace siding adjacent to the windows that had been undermined. because owners relied on inadequate, stopgap measures, the association eventually paid a high price to correct what became a major problem that could have been contained

by acting proactively when it first surfaced. “The structural integrity of the building was seriously compromised,” said Ryan “Windows had to be removed and replaced and structural framing replaced.”

25 Years of Neglect Dever-Sutton recalled an association that almost totally neglected maintenance of its highrise building in Chicago. “There were no repairs or maintenance for 25 years,” she said, which led to an eventual need for a major repair effort that was recently completed and cost upward of $1,000,000. “This could have been avoided if a

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proper maintenance program was in place.” Such a financial disaster is not that uncommon. Dever-Sutton summed up what should be foremost in the minds of all building owners - commercial, residential or other. “every building ages from the moment it is built,” she said. “It needs preventive maintenance from birth to keep maintenance costs reasonable.” Y

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industry happenings In Memoriam

Kovitz Shifrin Nesbit

Anita Lovkvist

Chicago area law firm, Kovitz Shifrin Nesbit, is pleased to announce the celebration of its 30 year anniversary.

We want to remember Anita Lovkvist who passed away on April 4, 2013 after a brief, yet difficult battle with cancer. Anita is remembered for her smile, her sense of humor, her love of family, her love of gardening and her passion for property management which she enjoyed for more than 25 years. Anita was a great asset to our team at AlMA Property Managment. she will be and is missed by all who knew her. May she Rest in Peace.

ACM Community Management ACM Community Management is pleased to announce that Tom Skweres, CMCA has recently joined their staff as Regional vice President. tom brings over 30 years of association management experience to the downers Grove based company. He is immediate past president of ABoMA and has served on the Advisory Board for Condo lifestyles and Chicagoland Buildings & environments for 17 years. the announcment was made by Karl Kulhanek, President of ACM Community Management

FirstService Residential Firstservice Residential is pleased to announce that, effective April 26, 2013, Asa Sherwood has been appointed President, Chicago for our illinois market. Asa takes over from Jennifer Feldman who has decided to relocate back to south Florida this summer to raise her twin girls.

on May 1, 1983 the firm that grew to be kovitz shifrin nesbit opened its doors upon the premise that a great law firm needs more than a downtown address. Jordan shifrin described the core values that formed kovitz shifrin nesbit as “provide personalized hands on service, do good work, charge a fair fee and be nice to people.”

Asa will be overseeing company operations and business development. His goal is to ensure that each associate has what they need to deliver memorable service and value-added solutions to our clients. Great New Name. Same Great People and Service on June 27, 2013 Wolin-levin officially changed its name to Firstservice Residential. so what does the name change mean? When it comes to Firstservice Residential, it means quite a bit.

Five locations, 35 attorneys, and thousands of clients later, core values, forward seeking employees and innovation have solidified the firm’s success. As founding partner Robert nesbit describes, “in my 25 years with the firm i have been continually amazed at the quality of people we have working here. We seem to attract naturally talented people who want work in a challenging but collegial atmosphere.” kovitz shifrin nesbit continually strives to grow by investing in technology that includes custom web portals and launching comprehensive educational webinars and seminars that are available to both clients and the public at no cost.

Firstservice Residential is north America’s largest residential property management company supporting more than 6,000 communities and serving more than 1.5 million residents throughout north America. our client base includes: • Homeowner associations, cooperatives and condominiums • large-scale master-planned and active adult communities • townhouse and garden-style home communities • Rental properties; and • More luxury high-rises than any other property management company on the continent

"30 years is really a long time to be working together, providing excellent legal services and satisfying clients,” said founding partner Alan kovitz. “i’m proud to say that the people in our firm are personable, intelligent, and able to analyze issues, think independently and assist others in solving problems. We look forward to continued progress while remaining true to our past.”

Firstservice Residential also means giving our clients added benefits gained from access to an expanded core of corporate resources, including: • Aggregate purchasing power on national resources to reduce costs, improve operating efficiencies and increase real estate values. • FSRConnect™ – a fully integrated community management system uniting resident communication with property-specific amenities, security and management functions under one simple interface. • Customer Care Center – A 24/7 call center and database populated by more than 500 community-specific questions which allows more than 90% of your questions to be answered on the very first call.

this commitment to delivering prompt and exceptional service, dedication to the practice of law and providing innovative solutions is still embraced today. “We look forward to providing legal services for community associations, individuals and businesses in Chicagoland and beyond for many years to come,” shared Robert kogen, Managing Principal of kovitz shifrin nesbit. “We recognize that our success can be attributed to our dedicated attorneys and staff, and our loyal clients, many of whom have been with kovitz shifrin nesbit for all of our 30 years.”

The More Things Change, the More They Stay the Same As you see the Firstservice Residential name pop up take heart in knowing that this a change in name only, and things will remain “business will as usual.”the day-to-day operations of your current property management teams will remain the same, and your management teams will still be made up of the right people - caring, smart, trained, dedicated, and experienced – who are local experts that live work and play where you do.

About Kovitz Shifrin Nesbit kovitz shifrin nesbit offers legal services in the areas of Condominium, townhome and Homeowners Association law, Association Collection services, landlord/tenant law, litigation, Corporate and Business law, Commercial Real estate, estate Planning and Family law from locations in Chicago, Buffalo Grove, naperville and lake Forest, illinois as well as Racine, Wisconsin.

Tom Engblom

Larry Myers


Assistant Regional Account Executive

Vice President/Regional Account Executive

779.435.2937 Toll Free 866.800.4656 ext. 7429 larry.myers@

312.209.2623 Toll Free 866.800.4656 ext. 7498 tom.engblom@



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National Corporate Member of Community Associations Institute.

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indUstRy HAPPeninGs

industry happenings Lieberman Management nearly 150 employees of Lieberman Management Services took over a Feed My starving Children meal-packing facility in libertyville, ill., on thurs., April 25, to help the non-profit organization with their fierce fight against hunger and to promote team building and the spirit of charity within lieberman Management services. Working a two-hour shift, lieberman employees filled and sealed bags of food, enjoying a fun atmosphere and the satisfaction of making a dent in world hunger. they set a group packing record of 231 boxes packed in a session. this amount will feed 137 children for a year! “We wanted to do something a little different for our company’s quarterly meeting this time around,” said lieberman Ceo Carla young kennedy. “As a company, we encourage each employee to volunteer with the charity of their choice but we also wanted to use the strength of our group to assist in a worthy cause. FMsC is a wonderful organization and provides the opportunity for our employees to work together as a team, and to experience the positive impact just a few hours of our time can have in the worldwide fight against hunger. Feed My starving Children is certainly a worthy cause and we are thrilled to be able to assist in their efforts.” Feed My Starving Children’s new 18,000-sq-ft mealpacking site in libertyville recently joined facilities in Aurora and schaumburg. it opened its doors on november 14 and is an ideal site to host large corporate groups. Feed My starving Children produces nutritious meals designed to restore malnourished children to full health. volunteers hand-pack meals, which are shipped to missions and humanitarian agencies in 70 countries around the world. Chicagoland volunteers have packed more

than 80 million meals distributed to hungry families in Haiti, kenya, nicaragua, swaziland and many other developing nations. each meal costs 22 cents to produce and 92% of all donations directly support the food program. All meals are packed by volunteers, who, along with donors, pay for 100% of FMsC meals. FMsC receives no government aid. service work is a big part of the lieberman identity. lieberman Management services strongly encourages its own employees to participate in charity and service work that is close to their hearts. they allow employees to take paid time off each year to complete charity work, and is also working to donate to and spread the word about the local school district 54 Food Pantry in May.

lieberman Management services, a full-service property management company, has been serving community associations, high-rises and co-ops since 1971. Based in elk Grove, ill., lieberman currently serves more than 40,000 residents and more than 220 associations in downtown Chicago and the greater Chicagoland area.

Tairre Management Tairre Management has recently been named managing agent for 227 East Walton Place Apartment Building located in Chicago’s streeterville neighborhood. the thirteen story, twenty-four unit apartment building designed by famed architect Harry Weese.and built in 1956 has just been designated as a Chicago landmark. Weese and John Baird, then president of Baird & Warner developed the building as partners. the building was converted to condominiums in 1969.


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Condo liFestyles

from page 8

Is the Worst Really Over? money to the association’s depleted coffers. One that Filkowski worked with tried to increase revenues by issuing excessive and nitpicking rules violation notices to residents with fines attached but the good sense of his colleagues on the board led to the repudiation of this tactic. “Increasing fines for rules violations created ill will within the community and since the other board members were not in agreement, the fines were never approved,” she said.

Leasing Units of Evicted Residents As noted earlier, when nothing else works to maintain financial equilibrium, associations can resort to evicting residents delinquent in their assessment payments and then leasing the units to others on a temporary basis. “In the past several years we have seen more and more associations availing themselves of the remedies provided by Illinois law by obtaining possession of units and renting (them) out to recover unpaid assessments and other expenses,” said Costello.


Condo liFestyles

The same holds true for Rosenlund’s associations. “many of our firm’s clients have evicted owners and are successfully renting (their) units,” he said but a lack of funds and serious disrepair issues in units can make this strategy unfeasible. “A primary obstacle to an association renting a unit can be the poor physical condition of the unit and the upfront costs required to make the unit rentable.” Hales has worked with several associations that have gained possession and leased units. “In some instances the board updates the rental restriction rule so that (such) units being rented would not be counted toward the restriction,” he explained. “Homeowners were pleased that the association was able to recover past due assessments,” in this way. (It should be noted that because an association’s taking possession of and leasing units is a statutory remedy provided by law, any rental restriction policies in effect do not impede its implementation, according to both Costello and Rosenlund.) Filkowski has seen boards grow steadily acceptant of the act of taking over units and renting them out. “As recently as 3 years ago,


the idea of renting out an association’s possessed units was off-putting and foreign to most board members,” she recalled. “Today it is standard operating procedure and homeowners see that the benefits- the recovery of funds- far outweigh the negatives.” baum’s clients have also pushed evictions against seriously delinquent owners, which has worked to their financial advantage. ”What we have found out is that units can be leased on a month to month basis fairly easily,” he said. “I am amazed at how easily we are able to lease,” them. “In fact we have a following of folks just looking for rentals as they tend to be great deals.”

More on What Evictions Mean to CA’s Can evictions serve as an example to others seriously delinquent in their assessments to get them to pay their debts to their associations because they may feel their future residence may be in jeopardy? Costello is not sure evictions have made any real impact on other debtors but Rosenlund believes they have in certain situations. “It is our firm’s continued on page 30

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from page 28

Is the Worst Really Over? experience that setting an example can be very effective,� he said, primarily, though, with single family homeowner’s associations where assessments are required to be paid only once or twice a year and boards had not previously applied any pressure to get delinquents to pay up. “Once it was made clear that the payment of assessments is a serious financial obligation and it was demonstrated that there are serious legal consequences (eviction) for failure to uphold this financial obligation, the delinquency levels were reduced dramatically.� baum said it is difficult to determine if evictions serve as a warning to others to pay their delinquent assessments but, “I would guess that word does get around the neighborhood when someone is evicted for not paying assessments.� In any event, he added, “associations should not be afraid to utilize the forcible method of collection.� just the threat of eviction, he has seen, works 85% of the time and all the delinquent funds are collected.

Challenges From Developer Woes Filkowski brought up another important

point with regard to unpaid assessments in properties in which developers still own a few units that have not sold and for which they have never paid assessments. That can place a significant financial burden on those associations that are now run by the unit owners. “I’ve worked with several associations where the developer leaves a handful of unfinished units, does not pay assessments and also defaults on (his) bank loan,� she said. Where a bank is moving slowly on foreclosure, “the assessment (delinquency) can grow,� and with, “4 or 5 units that adds up quickly,� making, ‘it nearly impossible for other homeowners to sell their units.� Sometimes such associations have taken the developers to court over the unpaid assessments and obtained an order of temporary possession while the lender is delaying on foreclosure. but, is it, Filkowski asked, a prudent expenditure of funds for an association to build out these uncompleted

units with a goal of leasing them to paying tenants when foreclosure of the developer’s loan may have happened at any time? “Probably not,� was her answer.

Diligent Efforts Required for Turnaround Is the situation hopeless for associations mired in a financial morass? That may be so in a few extreme cases but diligent effort can achieve an eventual turnaround. “If an association gets serious about delinquencies and tight on its budget, we have seen success,� said Costello. Y






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

By Gabriella R. Comstock - Keough & Moody, P.C.

Electronic Communication: think Before Hitting the send Button With technology we all can communicate quickly with more than one person. in the association world, it allows board members to discuss issues well in advance of a board meeting so that business can really be achieved at the meeting. Just as easily, technology also permits owners to communicate with board members.


uestions can be submitted so answers can be given quickly. owners can submit complaints, in writing, to the Board. yet, the convenience that technology enables for other parts of our lives also creates problems for association living. electronic mail has become the primary means of communication. As such, its use has created a new source of challenges for associations. Ask any board member how often he/she gets an e-mail from an owner who is submitting a request or a complaint, and the answer will likely be, “too often to keep track.” then ask the same board member how often before an answer is given to the owner does the board member stop and think “how will this response affect the

Association?” likely, the number of times that occurs can be counted on one hand. the following are some common problems created by the many ways we communicate. » Board Member Statements Affecting an Association. How does what a board member say affect the Association? is the board member speaking in his/her capacity as such or simply as a neighbor? often it is a distinction without a difference. if a dispute or litigation develops centering around such statements, admissions made by the board member may be used against the Association and/or part of the owner’s defense. » How does what a board member says expose the board member to individual liability? tortious, reckless or discriminatory commentary imperils both the board

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member and the association. A board member has a fiduciary obligation to uphold for the association. » What should and should not be said in an email? if you cannot say it in an open meeting, do not say it in an email! Further, assume that such communication will get into the “wrong” parties hands. Avoid personal commentary. other issues raised by communicating via email include (a) Attorney-Client Privilege; (b) discovery in litigation; (c) saving e-mail communications; and (d) deleting e-mails. Boards are advised to adopt a policy governing e-mail communication addressing each of the foregoing. Caution is advised to each board member that communicates orally or in writing on behalf of the association he/she represents. Cavalier statements have no place in the administration of board business and may serve to prejudice its interests. Periodically assessing the manner in which a board conveys information to the homeowners whom they serve is good practice. Y

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l e G A l U P d At e

by Sheli Lulkin - ASCO

Illinois Supreme Court Rules in Favor of Chicago Condominium Ordinance Recently the illinois supreme Court ruled that Chicago Condo owners can use the Chicago Condominium ordinance for redress of grievances. this option may be an easier and probably cheaper recourse to requests for an association’s financial records than what is called for in the illinois Condominium Property Act. the decision in Palm vs. 2800 lake shore drive Condominium Association brings some good news for affected Associations.


ccording to attorney michael Kim, “The Association has 10 business days to provide the requested documentation. Weekends and legal holidays are not included. There may be a difference between Federal, State and local holidays.” Kim explains: Specifically, Section 13-72-080 of the Ordinance entitled “examination of records by unit owners” provides that “no person shall fail to allow unit owners to inspect the financial books and records of the condominium association within 10 business days of the time written request for examination of the records is received.” If there is a refusal or failure to allow inspection, under Section 13-72-100 of the Ordinance, the unit owner may bring a private lawsuit seeking to enforce compliance with the Ordinance and the “prevailing plaintiff ” (unit owner) shall be entitled to recover damages and reasonable attorney’s fees.” either the board, management company or both can be held liable. Fines may be levied and no charges may be levied against the unit owner. In the decision the Illinois Supreme Court “focused on whether the City of Chicago had the ‘home rule’ authority to enact the Ordinance and even if that Ordinance contradicted provisions of the Condo Act and the not for Profit Act.” Y Editor’s Note: This article is not legal advice. Consult an attorney for legal advice specific to your association. If you are an individual planning to file you must locate an attorney who represents individuals and not your association’s attorney or consult with City of Chicago Dept. of Consumer Protection which is responsible for enforcing the ordinance.

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Condo liFestyles

By Michael C. Davids

By David Lewin, lewin law Group and Of Counsel at Querry & Harrow, ltd.

elevator Code updates

Condo Associations Have Authority to Regulate Common Areas


ew elevator code enforcement regulations went into effect starting January 1, 2013 for hydraulic & traction elevators. Building managers and owners should be aware of these changes and make sure they are in compliance. in the City of Chicago, single bottom cylinders must either be replaced or have a safety brake added by January 1, 2013. in the state of illinois, single bottom cylinders must either be replaced or have a safety brake added by January 1, 2015. By January 1, 2014, in the City of Chicago and in the state of illinois, elevators must have: • Restricted opening of hoistwaydoors or car doors on passenger elevators • Car illumination • emergency operation and signaling devices • Phase reversal and failure protection. • Reopening device for power operated doors and gates • stop switch in elevator pits • Pit ladder installation if you have any questions about your compliance with these regulations it is a good idea to consult with an elevator professional. Y

In a decision that seems to be at odds with the illinois Condominium Act, the illinois Appellate Court has found that even where declarations and Bylaws were not recorded, a condo association has implicit authority to regulate common areas. in Ripsch v. Goose lakes Association (3rd dist. 2013), a unit owner claimed that an association could not enforce a rule barring certain types of boats from an association lake.  According to the owner, the recorded documents did not grant the association any rule-making authority. in response, the association argued that it had implicit authority to regulate the lake as common property, with the only limitation being that the regulation must be reasonable. the Association operated under a set of bylaws.  neither those by-laws nor any amendments were recorded.  the association did provide the unit owner with a copy of the by-laws. in 2007, the Association amended the bylaws to prohibit use of the boats in question.  the unit owner objected, and litigation followed. the Appellate Court ruled that a condo-

minium association has inherent authority to manage the common elements. As such, it could make reasonable rules for use of the lake. the Appellate Court did not discuss section 17 of the Condo Act, which provides: “no modification or amendment of the declaration or bylaws shall be valid unless the same is set forth in an amendment thereof and such amendment is duly recorded.” Further, the Court seemed to strain to limit the decision to the common elements. the Court left open the possibility that something like a leasing restriction may be treated differently to the extent that a common element is not involved. the bottom line is that although this is good news for the association in question, a better practice would have been to make sure the proper documents were recorded in the first place. Had the documents been recorded, the unit owner would not have had any basis to make a claim. litigation like this can be expensive. it is best to take the appropriate steps early so that it can be avoided. Y

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