Condo, Strata and HOA News

Monthly Archives: November 2011

Kudos for Cities That Get It: Ottawa and Condo Footprints

It’s always nice to drop kudos here and there (in between most of my posts which focus on the negative). In this case, Ottawa, Ontario, Canada has updated a tree-protection bylaw that was only two years old.

The by-law itself, in purpose and thought, rocks. Trees would need municipal approval before cutting: 10 centimeters or greater diameter on hectare and larger size land parcels; and 50 centimeter or greater diameter for any property. This should ensure those old and gorgeous trees remain rooted, and allow for younger trees the opportunity to grow into fantastic groves.

Condominiums are unlike either individual houses (protecting those gorgeous granddaddy trees – 50 cm. and greater diameter) or undeveloped green space (1 hectare or larger plots). Condos are kind of both – a group of individual residents on a large shared property.

Given that, Ottawa has updated the by-law to place condominiums under the 50 cm. and greater diameter part of the by-law, and made them not subject to the 1 hectare or larger plots section. It’s a nice, simple, and easily rolled out change to a rule that overlooked the large footprint of condominiums.

Kudos Ottawa for a small, but important law change that recognizes the nature of condominiums and removes inappropriate regulation.

98 Unit Condominium None Larger Than 350 sq. Feet

I have always walked through IKEA and marvelled at their model mini living spaces. Your whole life can be had in a compact space! It’s a marvel of both modern life and IKEA!

So I have always toyed with the idea of a whole complex built around micro condominiums – that is the developer has purpose built the units to work for a small space, not just sectioned off square footage into smaller and smaller units.

In doing some research I stumbled over the Cubix Yerba Buena in San Francisco (3.5 min video / pictures). With no unit large that 350 sq feet, the 98 units fill a very interesting role. Small living spaces called lofts (really meaning on combined living space with a separated toilet area) are the heart of this building. To help with the claustrophobic feeling one could get, there’s a giant roof top garden.

Talking with neighbours in my own condominium, we often talk about the opportunities to move – but realize that many owners spend little non-sleep time in our homes. With the exception of being unconscious, most of the rest of the time in the condominium is getting ready to leave or getting ready to sleep – with the rest of our lives being at work, hanging publicly with friends, or just “being out”. If one really spends so little conscious time in your condo, why would one need a lot of space?

Current rates go for 250k for 282 sq feet, and several units available to low income for about 99k.

Bad News – Toronto Has Become a Developer

I wrote an article about how the Collingswood NJ municipality decided to become a condominium developer and ended up holding the bag because the condominium market crashed. I restate that municipalities should never be residential condominium developers.

The role of a municipality is to direct the desired developments through zoning and legislation, and to leave the risk associated with the project with the developer (see recent crash in US housing to confirm risk exists).

Municipalities should never be in the business of risk. They should be in the business of service and infrastructure, not gambling – as in “gambling if the condo market will still be good in six years”.

Six years is the projected timeframe it will take to complete the – now largest residential planned condominium – development.  The project, which will be 20% city owned and 80% Tridel owned, is a 75 story development at York and Harbour, near the railway tracks.

Mayor Rob Ford said the new joint venture represents a creative way of solving the city’s financial problems. Cities don’t need creative – they need solid and sustainable. Rob’s brother, Doug Ford – who also is elected to council – sits as vice-chair of the Build Toronto, the city arm that is spearheading this initiative. He says the opportunity represents a cash windfall:

When there is that much profit sitting on the table, we wouldn’t be very prudent business managers if we turned our head on this opportunity

To add, the Build Toronto’s chief executive Lorne Braithwaite is quoted as saying:

The market is hot as a pistol and we are about to generate funds for the city and create a fantastic new development

So now we have “a creative response” that “represents a sure thing” that relies on a condominium market that in six years remains “hot as a pistol”

I haven’t heard such a combination of positive will and high risk since friends told me to buy RIM at $140/share just three years ago. Thankfully that sure thing in a hot as a pistol telecom market panned out. In only three years it’s lost 88% of its value. One can only hope it keeps performing as well for the next three years!

I didn’t buy any RIM, and I don’t buy into a municipality becoming a developer.

Losing HOA Sign Case Costs Owners $7000 in Covering HOA Legal Costs

I have often talked about my support of a no-sign rule for condominiums and HOAs, along with the risk owners take if they fight this rule. For Johnnie and Clara Russell of Fort Worth, the judge in their case – which they lost – awarded the defendants, the HOA, legal costs. In this case, the award amounts to $7000 which the Russell family must now pay.

My continuing caution to owners that want to fight no-sign laws: it’s an uphill battle, it’s expensive, and you’re likely going to lose.

Foreclosure Mill Company Closes Down – Employees Already Received Training for Life without Homes

The Steven J. Baum law firm held some timely staff training exercises* at the end of October. During this training, employees were encouraged to understand the role of homeless people. The office was transformed into a row of foreclosed homes, and staff applied fake dirt to their faces, pretended to drink cheap beer from paper bags, and hold signs that claim fiscal innocents for their destitute state. Every department of the law firm used the staff training exercises* to understand the plight of the troubled homeowners they made their living suing (pictures here).

Good thing too – because this foreclosure mill (ok, I almost wrote puppy mill, don’t know why this law firm seems so morally similar) is shutting down, all 99 full and part time employees are being booted to the street.

To quote Steven J. Baum himself:

Disrupting the livelihoods of so many dedicated and hardworking people is extremely painful, but the loss of so much business left us no choice

What was the cause of the loss of business: $2 million settlement of charges the firm mishandled mortgages filings, DOJ investigation, multiple class-action lawsuits, filing error-filled “robo-signed” documents, and having a practice described as:

Steven J. Baum PC appears to be operating in a parallel mortgage universe, unrelated to the real universe,” the judge wrote in that May decision. “Next stop, the Twilight Zone,” he said, quoting from Serling’s TV series about science fiction and the supernatural.

These actions resulted in the banks (including the big two – Fanny Mae and Freddie Mac) refusing to use his foreclosure services. Oh well. Guess with no income to pay costs, now he’s foreclosing on his own company.

* By “staff training exercises” I mean on-premise Halloween celebrations and dress up, and by “understand the role” and “understand the plight” I mean ridicule, make fun of, and mock.

Recession Proof-ish Condos: Buy In Financial Districts

I’ve mentioned many times that the condominium market in financial centres will always retain more value in a recession and bounce back quicker. New stats out of NY continue to show this trend.

Top end condominiums (the top 10% by price in any quarter) are down a very modest 16% from their height in Q1 of 2008 (4.17m vs. 4.99m) – where outside the financial district we are easily seeing values that have plummeted 60%, and in rare cases 90% (You can get HOA property for as low as $52 per sq. foot in Las Vegas).

This quarter and the last quarter have the highest number of 10m+ units sold in Manhattan. 12 completed sales of units 20m+ occurred in the three months ending September 30th (here’s one).

Finally, One57 developer still believes he’ll sell out his development – the tallest residential building in Manhattan when it goes up – at prices ranging from $3,500 – $8,000 a sq. foot (up to $91,425 a sq. m.).

It’s nice to know the 1% are still buying, and buying, and buying.

Hammock Lake HOA Denies Boy Scout Troupe From Soliciting Food Donations

I’ve been reading and viewing the news of a Florida Home Owner Association – the Hammock Lake HOA – that banned the local Boy Scouts troupe from soliciting food donations inside the HOA.

It’s an interesting problem – The Boy Scouts (founded by Lord Baden-Powel – I know that not from Wikipedia, but because I was one) and Girl Guides, founded in 1910 (from the Scouting movement begun in 1907), represent over 100 years of education youth in physical and skill development. They are, by any definition, a highly successful worldwide organization who benefit youth in multiple countries, and relatively non-contentious.

Second, the solicitation was for a food drive – a non-commercial collection of food designed to feed local unfortunate citizens. The food drive is clearly a community building and benefiting.

But the action of going door to door is an act of solicitation. The HOA rules clearly state “no solicitation.” As such, the HOA rejected the troupe request to poll the community for donations.

I’m on record that I believe condominium corporations and HOAs are overburdened by rules and by-laws that prevent the development of a community of owners. When I use the term community, I mean a group of people, who by chance of living within the same condominium or HOA, become friends and neighbours instead of strangers.

So I am torn by this – the judgement of the HOA to ban the food drive (a fantastic activity) definitely destroys any sense of community. The rules though are clear, and it is an act of solicitation and should not be allowed.

HOA and condominium rules are often very broad and very broadly enforced. The non-solicitation is a good one to examine. No solicitation, no signs, no political expression – all these exist to make a group of people, all with their own world view function and live together in harmony*. It’s important to limit political, religious and philosophical different expressions because these have huge chances to blow up into bigger fights. We’ve all likely heard the line:

They pull a knife, you pull a gun. He sends one of yours to the hospital; you send one of his to the morgue.

It’s worse when it comes to politics and religion with neighbours – ever seen neighbours attempt to out-sign (in size and numbers) each other during elections? It’s nasty – and worse when some or all of the board participate as well. It creates a community that is very dysfunctional. It becomes downright unwelcoming to people of different views.

Instead of allowing any signs, the HOA allows no signs at all. It’s simpler to enforce, it’s harder to litigate against, and it prevents the board from being seen as purposefully supporting or picking on specific owners.

If the HOA allows the Boy Scouts, the what about requests from a local synagogue, a chapter of the Red Crescent, Bank of America Community Volunteers, or the local Atheists Organization (the Boy Scouts and Girl Guides require a Duty To God, and a greater participation with God the further along the organization).

“No Solicitation” is neither vague nor ambiguous. “No solicitation” isn’t an aesthetic like “keep your yard neat” which is arguable if trimming the hedge to 3’ in height is neater than 3.5’ high shrubbery. “No Solicitation” is simple – no (as in disallowed) solicitation (asking residents for something or some action).

In this case, it would take a lawyer to say a two word statement is vague or ambiguous.

*These rules are very different than no-parking on the street, no-chickens rules, controls on the delivery of furniture, limitations on access to facilities, lawn and home standards. Those are all “operational” rules which should all be simply trashed.

Patchogue Village Board Completely Wrong in Believing Rental Units Reduce Property Values

On Monday, the Patchogue Village Board unanimously under ignorance, denied an owner the right to rent their unit. The trustee that tabled the motion – Gerard Crean believed it would help protect property values.

First off, the whole “gotta protect property values” is a bunk argument. The role of the board is not to “protect property values”. I’ve not seen a single bill of legislation that has indicated the role of a HOA or condominium corporation is “protecting property values”. They often indicate a mandate to maintain the physical infrastructure and to ensure services. Arguing property values is just a weak excuse a board uses to falsely justify their often ill and often mean decisions. You ever hear “we did this for property values” know that there is likely some sad decision that the board has made.

But let us also evaluate this argument that allowing rental property reduces property values. The neat thing is, the argument is completely false.

An in-depth study by Tsur Somerville – Director University of British Columbia Centre for Urban Economics and Real Estate, Sauder School of Business, Chris Kay – Head of Acquisitions, Fairmont Pacific Development Ltd, and Seang Dong – PhD Student, Sauder School of Business found:

Rental Restrictions in general Decreases property values by 3.3% to 5.4%.

Wow. That is substantial.

Tangential to this, we can also look at the effect of affordable rental housing on neighbouring property values. “Affordable rental housing” often causes shivers in local owners, as they imagine hordes of smelly dirty people with chipped teeth and pan handling tins at the ready invading their neighbourhood. What really happens to property values as found by the Real Estate Board of Greater Vancouver relying on American publications:

There is increasing evidence that affordable rental units are not a threat to local property values and are instead a net plus.

Yup – those huddling masses of poor (our imagination of them, not reality) are a net plus. So if we’re talking about private owners renting their own asset, who aren’t seeking tenants who are the huddled poor, the positive value should be even better.

And an article by Smart Money indicates that no-rental policies are more likely to force foreclosure or empty units, as depriving an owner of rental income to pay their condominium fees places greater units into fiscal failure. With multiple units in foreclosure, values of the other units are significantly reduced. For single family houses – each one within a block will decrease the surrounding buildings by almost 1%. Especially in today’s market boards should do everything they can to stop foreclosures.

The Iowa Property Owners Alliance indicates:

An outright ban on rentals may not make sense, particularly in an economy where there are many properties on the market. An HOA should consider if it would rather have vacant properties or occupied properties with renters. Additionally, some buyers may be reluctant to purchase a home in a community that does not allow rentals, so an outright ban could also lower property values by creating less demand for properties in the community.

All arguments point to the justification (which is a stupid justification all on its own) that “rental reduces property values” is completely bunk, wrong, stupid, and dim witted.

Remember how I said above that if you hear someone use the property value excuse to justify a sad board decision, it applies is spades to Gerard Crean and the Patchogue Village Board. They denied Lori Patton the right to rent her unit to help cover the costs of treatment for her two-year-old daughter’s rare blood disorder. It is a disorder that requires costly transfusions and, at some time, a wonderfully expensive bone marrow transplant.

Way to go Gerard Crean and the Patchogue Village Board! You win the current award for “stupid decisions that show you have no humanity, using arguments that are completely contrary to facts”. You. Are. Awesome.

More links indicating rental effects of property values:

How Do Rental Properties Affect the Neighborhood?
There Goes the neighborhood: The Effect of Single-Family Mortgage Foreclosures on Poperty Values
Field Guide to Effects of Low-Income Housing On Property Values

Criminals Treat Condo as Giant Living Piggybank, Owners Attempting To Respond

The Estates at Westbury, Bluffton, South Carolina has a couple of issues. The first is crime, and the second appears to be a failure of the management company to respond.

The 300 unit complex is riddled with crime and negligent owners and tenants. And I get the feeling that criminals are treating the site as a giant piggy bank. Two (news, news) units have recently been home invaded by armed group of men – both times forcing the owners to lay face down while they rifle through the home for valuables.

Less heinous, one resident describes the building on goings as:

the Estate could be a beautiful and serene place to live, there are a number of facts that make this a less than desirable home. With a number of armed robberies, muggings, residents who are permitted to move in and hold drunken parties until the middle of the night, fist fights breaking out at said drunken parties, carloads of people coming in to the community who do not belong here, people driving at undesirable speeds through the community that are a threat to the children playing here, drug dealings going on that are known to both the Association Manager and to the maintenance team, and music so loud that it shakes entire buildings – the lifestyle and feeling of “home” at the Estate is in sharp decline

It is so bad that one elderly couple fear even their walk to collect mail.

Ouch. That means it’s time for the management to step up.

To their credit, it appears the management is improving lighting and putting in brontosaurus in size speed bumps to limit vehicle speed. Where they fall down is communicating with the owners, and supporting their actions.

Most importantly, when it comes to supporting a proven method to reduce crime in an area – creating a neighborhood watch – the management has been resistant to at each step. The residents put up over 500 flyers to communicate with the community, the management tore them all down. Owners and tenants try to engage the Association Manager; she has banned tenants from her office because they are not owners. Tenant Jennie Krogulski has gathered about 30 tenants and owners volunteers to start a watch; and the final message from the manager – the residents are not allowed to set up a Neighbourhood Watch.

I  would counter with the following: if serious injury occurs to any member of the community – which a reasonable person would deem a neighbourhood watch would have helped prevent – I would go after the resident manager. I would hold her responsible.

Neighbourhood Watch programs have existed for a long time and are supported by the police department. Volunteers receive training and support. Issues of liability have all been resolved over the 50 years the program has been in place. USAonWatch even has a copy of the Neighbourhood Watch Manual free for download.

A Neighbourhood Watch program for a complex with these issues is reasonable, accessible, and empowering for the residents. It is a great and awesome program to support, and should be seen as a progressive action to combat the real and tangible threat of harm and danger these residents have.

For up to date information, the active residents have a Facebook page for the complex that can be seen here.

Dog Poo Bad, Flipping the Bird Totally Cool

I’m a big fan of ensuring that residents can communicate with each other, even if what they want to communicate is that they hate the board. Condominium Boards tend to be very sensitive, baby-soft-skin sensitive. I’m not sure what it is, but the moment they get on the board they won’t stand for any negative comments. Part of what drives this SOS (Sudden Onset Sensitivity) comes from board members access both to money (condo fees) and a lawyer (most corporations have a lawyer on call for foreclosures, advice, and general council).

So when Steven Preu was found by a judge to be well within his First Amendment Rights to flip the bird to the board, security cameras and the condominium manager; it seems reasonable to me. Flipping the bird is an expression of aggravation and completely impolite, and while society works better when everyone is polite, I myself have flipped the bird at times (to drivers mostly, not yet in a condo related space myself).

The judge also confirmed his right to write “insulting messages” within the memo section of his checks to the corporation, and his upheld Mr. Preu’s right to post messages in the trash room, and on a neighbour’s door.

Seems pretty good so far, but Mr. Preu’s actions at free speech weren’t completely ok, and even I knew – when reading the case – when he went too far.

He additionally blocked open fire doors that are required to be closed, and closed and obstructed fire doors required to be open. That is just plain dangerous. Fire doors must always be treated with respect.

Finally, he twice decorated common areas of the condominium with bags of dog poo, labeling the condo president’s name on the bags. Placing the name of the president is a non-issue to me (but likely does a fine job piercing the president’s skin), it’s the act of littering that become enforceable.

I’m just glad that the bags of poo weren’t flaming bags of dog poo – a fatal mixture with fire doors that were interfered with.