Devil's in the dues

After 22 years in a condominium in San Mateo, it's not the mortgage payments that are weighing on Moxi Posner.

[Edgewater Homeowner]

Dues increases like this are outrageous. I live in Edgewater Isle and am tired of special assessments for things we were supposed to have covered in the reserve funds. Once we had 2 special assessments concurrently!

And why won't Nick Pargett identify himself? He is the property manager. Why won't he stand by his own comments? That makes him appear untrustworthy.

[Geri Kennedy]

While I can understand Ms. Posner's financial concerns, the article does not mention the increase in property value that Ms. Posner has realized over her 22 years in the association.

Boards of directors are stuck between the membership saying they do not want to increase assessments and the buildings that are deteriorating.

All associations have mandated requirements to perform a reserve study every 3 years. The board then determines how much money to set aside, but is also required to disclose to the membership if they are not saving enough. Members get this information at least once a year with their budget.

The members are in charge - they elect the board from their own ranks. The board members must pay the same assessments as the general membership.

Single family homeowners living in older homes must also pay to renovate their property - often they just get a home equity loan, but in essence, it is a special assessment to themselves. Property ownership requires property maintenance and the unit owners must take responsibility.

When buyers make their choice of association by looking at a lower assessment rate, they should look more deeply at the financial statements to see when, not if there is a special assessment in the future.

[Securitize condos]

Assemblyman Mullin is right in noticing the financial risk to the homebuying public posed by condos. Since they are essentially closely held, publicly traded real estate holding corporations, they should be regulated as securities as they originally were in California. As such, they should be required to file publicly available financial statements signed by the current directors and their management agents acting as fiduciaries. Those who make a market in condos should be held to a suitability standard as with other investments to ensure only those buyers whose real estate investment risk tolerance level and ability to pay HOA assessments are appropriately matched to a given condo.

[Homeowner]

While #2 Ms. Kennedy is right that the condos have appreciated, one only realizes that when one sells. And while single family homes also require maintenance, the owner can choose the vendor, the method, the payment options, etc., while an owner in an HOA cannot.

And not ever board election is done legally or ethically. There are plenty of examples of that.

[Former Edgewater Resident]

Ms. Posner has been unhappy with the board since her late husband was pushed out as President of the Homeowner's Association. She even accused the board of causing her husband's heart attack. They both have a history of filing complaints with the city over various things. The board should get tough and stick by their own rules and force Ms. Posner to remove her four cats...since Edgewater owners are not to have more than two.

[Edgewater Homeowner]

Former Edgewater Resident wrote:

Ms. Posner has been unhappy with the board since her late husband was pushed out as President of the Homeowner's Association. She even accused the board of causing her husband's heart attack. They both have a history of filing complaints with the city over various things. The board should get tough and stick by their own rules and force Ms. Posner to remove her four cats...since Edgewater owners are not to have more than two.

Doesn't sound like a "former" owner but a current board member.

[Current condo owner]

As a former board member who also does not like to see the dues increase or assessments charged.. as we all have to pay them equally, I would like to make one observation. Keep in mind that every year the cost of all services goes up. Maintenance and repairs, management services, landscaping, security, insurance (a huge one here), utilities, payroll, etc. The people who perform these services generally get increases on a yearly basis, or the cost of doing business (workers comp, insurance, taxes etc.) also goes up and must be reflected in what the associations must cover. I don't think there is ever going to be a time where we cannot expect to see some increases, that is not realistic and these increases in cost have to come from somewhere. I would expect to see much larger dues increases if associtions are going to be mandated to build up reserves over time. Can you imagine what you would have to pay in dues if you only had 10 years to get your reserves up 4-5 million dollars? Also, historically, reserves were based upon the replacement value of the original buildings, the replace cost has gone up so quickly, most reserves would not cover anywhere near what is needed in this day and age. This will be interesting to see where it all goes.

[Another Condo Owner]

It's funny how differently board members and homeowners see the same issues. Board members are obligated to look out for the association as a whole and for the future of the association. Homeowners generally look at how they are affected "now" (financially or otherwise) and not how future homeowners will be affected so Boards are often dealing with this conflict while making decisions. Homeowners have the absolute right to get involved with their association and to offer suggestions on how to make things cheaper/better. Unfortunately, most homeowners do not get themselves involved, nor do they offer constructive comments and suggestions for improvement. The ones that do get involved don't always feel that they are heard because their suggestions aren't followed and they get frustrated, but not all suggestions are seen as good ones for the association as a whole. Will it save money down the line but cost us a lot now? Can we justify that expense now? It's impossible to make a "hard" decision that makes everyone happy. It's a double-edged sword. Boards are not trusted; homeowners are unhappy. Hindsight is, well, hindsight, and now we have to figure out how to move forward and manage the current challenges HOAs are facing. We try to bring well-researched suggestions to Board meetings and some are accepted and some are declined but at least we try.

[Securitize condos]

"It's funny how differently board members and homeowners see the same issues. Board members are obligated to look out for the association as a whole and for the future of the association. Homeowners generally look at how they are affected "now" (financially or otherwise) and not how future homeowners will be affected so Boards are often dealing with this conflict while making decisions."

That's because condos are mistakenly regarded as attached single family dwellings when in fact they are more like shares of airspace in a closely held, publicly traded company. This also explains why there's little interest among unitowners in the governance of the condo association and ensuring the association is sufficiently capitalized. If condos were regulated like the securities they are with stringent oversight and financial disclosure requirements, the current dysfunctional dynamic would come to an end.

[Homeowner]

Go Ms. Posner!

[Condo owner]

Edgewater Homeowner wrote:

<quoted text>
Doesn't sound like a "former" owner but a current board member.

You make it sound like sour grapes. It's clearly not. I think we need to look more deeply at the issue of board misuse of power and fee structures.

[Former Edgewater Resident]

Trust we moved and laugh that crazy things that went on at Edgewater with the Posners. They meddle in peoples private lives. Two of our neighbors had restraining orders against them. Their children do not even have communication with them. Unfortunately the association dues cannot be used for Ms. Posner's mental illness.

[Daryl Mullins]

My personal solution to this issue of under funding of Capital/Long-term Assets resulting in large Special Assessments is to REQUIRE potential owners be provided a single number by the Association prior to purchase.



That number is “Percent Funded” from the Reserve Study contained in a current Reserve Study. All Reserve Studies would be re-formatted by state mandate to put that percent funded number in a minimum 25 point font on the front page of the Reserve Study.



To prevent home financing abuse, the Federal Government required several decades ago “Truth in Lending”– the result was a single number – the APR (Annual Percentage Rate). This APR allowed comparison for home financings. That let the competitive market act – and consumers could make informed choices. They could do the same thing with “Percent Funded” in buying a Condo.



Percent Funded Guidance for the number of years of Condo Association existence – less minimum percent funding early in an Association’s existence and more later as the Long-term Assets aged is appropriate.

The State could publish such guidance in 5-year increments. The state could require a buyer’s initials of that guidance as part of financial disclosure when buying a condo or other association-regulated development.

SOME regulation of Condo Associations in needed; i have lived in one built in 1989 for 4 years. Our monthly dues have increase 2.5X in 3 years due to earlier Board members ignoring the future (politely) or stealing from future owners (a more direct statement).

Gene Mullin's solution is more regulation than may be needed.

Daryl Mullins (no relation)
Pleasanton, CA

[Jack]

We considered Mr. Pargett for our association. Pargett does not have secretary or even someone to even answer phones. The best managers have staff. Like in any other service, you get what you pay for. I have worked with property managers for years, there are the good, the bad, and the ugly. If board members really want to save money, pay more to get the best. In the long run, the board members and homeowners will be shaking hands and not be enemies of each other.

[Traci]

Our HOA in Gilroy, CA hired Pargett Management approx. 1.5 years ago to manage our newly-built neighborhood. My experience thus far is that Pargett avoids communication with homeowners; it often takes repeated letters, emails or phone calls to get communication on the most routine matters. More and more homeowners are becoming wary of both Pargett and our own Board because of the lack of coherent, timely communication. Some of us are still trying to understand why our own Board would hire a management co. that is 80 miles from our community. I lived in a condo. prior to my current home and I agree with Jack, the best managers have staff and you do get what you pay for. I worry that if I cannot communicate with the managment co. on minor issues, what am I to expect when a real problem arises.

[Jim]

While 80 miles is a huge distance, the much greater issue is the firm that represents your complex. If people are not interested in running for your board, then expect years of wasteful spending, mismanagement, and and a property manager than is probably a very cozy relationship with its vendors.

[Sandra]

Jack is right on! There is so much infighting at Edgewater Isle. Edgewater Isle associations even sued each other! It's on the web site www.edgewaterisle.com

I think part of the problem is the management companies each association hires is territorial, resulting in a turf war. Pargett runs his operation from a cell phone and a PO box.

Traci is indeed in a tough situation: Gilroy is way too far from Belmont. Business must be tough for him to accept a job 80 miles away. He's too small an operation to be responsible for large HOAs.

[Rick]

The Magagement in question is a poorly run outfit. If any HOA organization did their dilligence, the would probably not use them.

[LarryP]

Too many condo homeowners are whiners, especially people like the woman who originated the article. I don’t think people like her should be allowed to speak. I just pay my dues and shut up.

[Rick]

Now that Pargett has once again shot his credibility playing Russian roulette with $16,000 of other folks money, where does is future hold? Are the people at Edgewater going to use their brains or have Pargett bleed them dry?