Developer Accepts Full and Utter Responsibility for Catastrophic Failure

I have written many times that the final and full responsibility for critical failures of a condominium are the sole responsibility of the developer. End of story.

So I found it surprizing refreshing that Kevyn Frederick, developer for the failed Leduc, Alberta, condominium development Bellavera Green, has stated:

As CEO of Bellavera Green, I take full and utter responsibility. I felt that to speak to anything involving anybody else’s responsibility would be to minimize the impact that I’ve caused upon the people of Bellavera Green. So I had no other choice but to do the right thing and speak to only my failures.

The failure of the Bellavera Green has most likely forced significant and likely in some cases complete, fiscal ruin for the 150 people forced out of the development. That doesn’t include unpaid bills to subcontractors and other stakeholders.

People are still going to be madly angry at Mr. Frederick – and rightfully so. There is significant pain and hardship now, and lasting well into the future, from such an absolute failure of the development.

But there is an upside.

A developer that takes no responsibility acts as a roadblock to an investigation. We’ve seen bad developers destroy documents, launch counter suits, attack people’s reputations and lives, in all – do everything in their power to cloud the issue and slow down an investigative review. All at the cost of hurting even more innocent people.

Having accepted responsibility (which I am still stunned, and think is an amazing step forward), it may open up Mr. Frederick to cooperate with an investigation.

Specifically, with the developer on side, an investigation can get a direct understanding on how the “development dream” changed into a “development disaster.” A personal reconstruction makes it significantly easier for an investigation to isolate key failures or holes in current legislation and best practices that could be rectified.

With Mr. Frederick, given his willingness (the acceptance of guilt is a positive sign), we may have a very unique opportunity to improve the process of condominium development and protect future buyers a little better.

For I’m sure – and as he has indicated under questioning – he and his company are broke. So if there is no fiscal compensation, some time and assistance would be a start. Call it a form of truth and reconciliation.

Catastrophic Condo Failure Is Not Caveat Emptor – Buyer Beware

The Bellavera Green Condo, Leduc Alberta, has suffered a massive, catastrophic, failure requiring all 150 of the residents (85 units) to vacate the premises. The reasons: code-failing fire alarm system, missing or damaged firewalls, condemned exterior staircase, non-sustained heat and electric, a second phase abandoned – unsafe and unsecured, and inability for emergency vehicles to access the building.

It is unclear who has title to the units (it’s not clear if the developer handed over title to occupied units), who to go after for costs, and the developer – Kevyn Frederick – has conveniently disappeared. As with catastrophic failures of this type, residents who have mortgages will remain responsible for their payments even if they can never return to their units, or have other costs until such time they could reside again at the Bellavera Green.

In all, 150 people (and those that rely upon them) have suffered grievous fiscal harm due to the mismanagement and greed of yet another developer. And I lay the blame clearly and solely at the foot of the developer and none others. Developers have full and final control over the building and plans. It is their choice to follow legislation, or to cut corners and ignore building codes. The rest of the infrastructure – including building inspectors – is just there to try to catch errors. But these errors are not there because they haven’t been caught; they are there at the failure of the developer. Trying to pass responsibility off on inspectors is a lot like saying “you didn’t catch me, so I’m innocent.”

That’s why fools who imply that the Bellavera Green owners who put down money and purchased mortgages have a responsibility to the failure of the condominium because of “Caveat Emptor” – or “if you were stupid enough to buy into this building then too bad for you” are pathetic and dim-witted.

The whole issue of Caveat Emptor, for a situation like this, was thrown out with Supreme Court of Canada judgement of Winnipeg Condominium Corporation No. 36 v. Bird Construction Co [1995] 1 S.V.R. 85, January 26 1995 (further discussion here):

First, it is reasonably foreseeable to contractors that, if they design or construct a building negligently and if that building contains latent defects as a result of that negligence, [purchasers] of the building may suffer personal injury or damage to other property when those defects manifest themselves.

In this case, the act of negligence: that it fails to meet code, and there is a real and true concern over devastating fire; so that personal injury or damage: the effects of such fire, that –

The reasonable likelihood that a defect in a building will cause injury to its inhabitants is also sufficient to ground a contractor’s duty in tort to subsequent purchasers of the building for the cost of repairing the defect if that defect is discovered prior to any injury and if it poses a real and substantial danger to the inhabitants of the building.

And the ruling seems to support my thought that the sole responsibility for catastrophic failures like this lay solely in the hands of the developer:

Apart from the logical force of holding contractors liable for the cost of repair of dangerous defects, a strong underlying policy justification also exists for imposing liability in these cases.  Maintaining a bar against recoverability for the cost of repair of dangerous defects provides no incentive for plaintiffs to mitigate potential losses and tends to encourage economically inefficient behaviour.  Allowing recovery against contractors in tort for the cost of repair of dangerous defects thus serves an important preventative function by encouraging socially responsible behaviour.

In the end, the owners are in for a long term amount of lost monies and (more importantly) time that will be required in moving forward with their lives. It’s a sad thing, and the province needs to put better protection in place to help stave off this type of abuse by developers in the future.

CondoPapers Gains New Client: Celtic Management Services Inc.

CondoPapers is ecstatic to announce the addition of a new client to their services – Celtic Management Services Inc. of Sherwood Park Alberta.

Celtic Management Services Inc.  incorporated in January of 2006. Over the last 6 years Keri Ramirez, founder, and Suzanne Eacott, Broker, have transformed this company into a leader in the condominium management and rental pool industry.

Celtic Management Services Inc. manages over 50 condominium properties throughout Edmonton and the surrounding area. The properties include of a mix of medium and large scale condominium corporations (including high-rise, low-rise, and townhouse complexes) and rental pools. With such a large portfolio and years of service, Celtic has a proven record in meeting the ever evolving needs of their clients – both long term and new.

On behalf of CondoPapers, I welcome Celtic Management Services Inc. to our family of management companies that benefit from our online document distribution and tracking services.

Stephen Cassady Elected To The Canadian Condominium Institute’s National Executive Board

On Friday, Stephen Cassady was elected to the Canadian Condominium Institute’s (CCI) National Executive Board. The board, consisting of 7 elected members and a Secretary Treasure, oversee the day-to-day operations of this organization, operating though 16 chapters in 8 provinces.

The CCI is a national, independent, non-profit organization dealing exclusively with condominium issues. Formed in 1982, CCI represents all participants in the condominium community. Interested groups are encouraged to work together toward one common goal – creating a successful and viable condominium community.

Stephen Cassady previously served on the National Council for CCI since 2008, and is currently serving for the 3rd year as President of the CCI South Alberta Chapter.

Bankruptcy Doesn’t Dismiss Outstanding HOA Fees

Housing represents the largest equity holding for most people in the world. Housing represents the majority of people’s working lives, and often is their security for retirement.

With that in mind, that’s why I fully support all legislation that prioritizes and guarantees that condominium corporations and HOAs have first standing to any monies recovered in foreclosure, bankruptcy or other sale. See, it’s important for government to protect people’s housing because it represents such a vast amount of equity. Government takes steps to protect people’s equity when it’s in a bank, and it does that when your money is “banked” in your house as well.

An owner failing to pay their fees harms not only their own property, but jeopardizes the housing of other, responsible, owners. Simply put, there’s no right for an owner to take a free ride on his neighbours shoulders by failing to pay their contribution, and having it shouldered by others.

Many states and provinces have very proactive laws that ensure HOAs and Condominiums have first standing in foreclosure. In Alberta, Canada, the condominium corporation – on the sale of a property – gets paid any outstanding fees before mortgages and even government taxes. Law makers realized that by ensuring that condominiums receive any money it is owed, it protects the other owners and has the highest return on economic stability.

In a similar vein, an owner in Odenton, Maryland, has found that bankruptcy doesn’t remover the requirement to pay their HOA fees. Indeed, and I congratulate the law makers, they have made those fees “nondischargeable” (a judge cannot dismiss the fees). By doing so, they have ensured the fiscal health of all the other owners. Even though Joan Sullivan no longer lives in the HOA, she is paying installments on the debt she owes.

And that’s a good thing.

Improving the Resale Price of Your Condominium Association’s Units

Earlier this year I consulted with a condominium association that felt their units were selling at well below market value. We did a review of the grounds, the prices, and the resent selling prices and confirmed their feelings with actual numbers. Their units were selling for well less than value.

The problem comes from two main problems – realtors price units in comparison with the local area, and realtors are really lazy. Ok, maybe not intentionally lazy, but their compensation is based on selling as many units with as little time spent selling each unit. As such, realtors are motivated on encouraging the seller to accept the lowest price possible to list. Owners that balk at the suggested price have a huge uphill battle to convince the realtor to spend time on actively selling a unit at a higher price – they still will list it, but if it takes too much effort to sell then they focus on their portfolio of “easier sales.”

The property is truly unique for the area – a community that is still 15 minutes from the downtown core (non-rush hour) and includes two fully sized ponds (and ponds understates the water immensely), they have large residences for the area, and have an excessively proactive grounds and building maintenance program.

We sat down and talked about a few things with their Resale Committee. It included a variety of initiatives including an aggressive marketing campaign to owners encouraging them to seek their condo board before a realtor, the board building a sales profile for the units – effectively doing the realtor’s job for them, and coaching to owners on how to talk to their realtor and convince them that a higher price for these condos will be as easy to sell as a lower priced unit somewhere else.

One really important factor is to build a large photo and video repository of the water works – with the numerous bunnies, squirrels, and baby ducks that sit amongst the reeds (seriously, it’s a water habitat oasis in Calgary) – and build a portfolio of all the seasons.

The suggestion that the board or other residents be accessible for potential purchasers to meet was also highly encouraged. While in person is best, I noticed a residence in New Jersey has interviews with four of their owners posted positive experiences to YouTube. This is a phenomenal way to show the pride owners have and convey to new purchasers. It will also help make the case to a realtor that these properties will sell at higher costs.

In total, through the consultation, we developed several activities that should add over 8.5 million dollars to the value of all the units in the corporation (adding over 100k/unit) over the next 2 to 3 years. This will bring the units in line with their true value.

$340,000 Garage – Seriously, That’s Just For a Garage

Just a few days ago I blogged about a company in the US building storage space condominiums. These units are not zoned for human habitation and are intended as owned storage on Units range up to 1250 sq.ft. and cost about $82,000. I though it was a fabulous idea – a good use of condominium controlled development, it meets a need, and reasonably priced.

They have been outdone.

A luxury car garage – 34 units total – called The Dens – has been recently been completed near Calgary, Alberta, Canada. The kicker – a 1600 sq.ft. garage was purchased for $340,000.

In other news, reported by the Globe and Mail today, income inequality is rising quickly in Canada.

Seniors Could Migrate To Small Towns and Bring Them To Life

I am excited about bringing the community aspects of seniors condominium living to small towns. Create a net migration of seniors fleeing the large urban communities to nest in smaller municipalities, and with that, lower the cost of their housing and make a comfortable retirement accessible.

With housing and health care costs rising significantly for seniors as the demand swells – literally as the baby boom bump hits this care phase and more people compete for limited living assisted care or seniors only living – we need new solutions.

One would be to build such housing in rural towns. As stated below, we can realize a lower cost of residency for the seniors in smaller communities.

But better, if done right, the communities will be the ultimate benefactors – the focus being health care.

It’s a chicken/egg problem. Seniors don’t inhabit small towns due to a lack of easily accessible medical treatment. Small towns have problems growing because they lack a variety of services including, importantly, medical care.

We can break this chicken/egg problem by building assisted care communities. These communities hire trained and certified nursing and medical staffing. Done right, and working with the regional health care boards, these professionals could have split time jobs – part-time for the assisted care facility, and part-time for the health care region. Indeed, balanced correctly, this could be a way to subsidize the cost of nursing and trained medical receptionists for the always overworked, underappreciated, and often difficult to find rural general practitioner. We could work on using a seniors complex to incentivise doctors to practice in rural communities by sharing costs with the housing facility.

Perhaps the hosing facility has a medical clinic as part of the building, with an outside/separate entrance for the public use.

And if a small community can attract some accessible medical treatment, which is one of the most significant hurdles to overcome in growing the town, everybody wins.

Maryland Condominiums Have Right To Force Homeowners to Carry Insurance

I am humbled that there is a US state that has given the power to condominium boards to make carrying a homeowner insurance policy mandatory. For a country that often talks about the absolute right of the individual to make their own decisions (any anything, forbid, otherwise is some strange form of socialism, communism, or other ism), a collective has been given the power to require an owner to purchase specific insurance.

With condominiums, may people think that the insurance policy purchased by the condominium covers their units, when in fact this is normally not the case (there are exceptions).  Normally the insurance policy held by the condominium only covers damages and repairs to the common elements – the building envelope and grounds. It does not cover inside the owner’s unit.

For example, if you owned a unit in a condo that burnt down, and the condo is repaired, the corporation policy would rebuild the structure, but not the interior of your unit – the “betterments and improvements.” What’s a betterment or improvement – anything inside your unit. That would include the toilet (yup – the piping would come in, but the actual porcelain toilet is a betterment). It likely wouldn’t include your cabinets, your flooring, your paint, your sinks, and all sorts of stuff. You would have a shell, to fill as you would.

Additional insurance, bought properly, would cover those betterments and improvements (seriously, we don’t see the toilet as an improvement – we think it’s part of the unit, but it is). And because of the danger of fire or water or other loss, I always encourage people to buy the additional insurance.

It’s nice then, having been in the industry long enough to see several major losses, that Maryland will allow the boards to make this additional insurance required to be purchased by their owners. I’m not sure how they will enforce it (it seems a little toothless – what are you going to do, evict the owner?) – but it is good intention.

Some may wonder how few people actually pass on buying insurance – I have a great example. In Calgary, March of 2010, a massive condominium fire in the Millrise left hundreds homeless. Less than half, half, of the owners had additional insurance. That meant more than 100 people would have been left with just a shell of a unit when they were rebuilt, and would have had to pay the additional living expenses of shelter during the months and months to rebuild. Fortunately, the board had made a decision to carry the additional insurance for everyone – which allowed all the units to be rebuilt completely, and the homeless have their expenses covered during the rebuild.

Maryland’s insurance requirement is slightly different than what I described, as it’s a requirement to carry insurance against a deductible (of the common property insurance) for damages originating from their unit. But in general it is the same idea – forcing insurance and reducing the risk of catastrophic loss.

Holmes on Homes on Holmes Approved Home

OK. I’ll admit I’ve always been a fan of Mike Holmes since seeing the first episode of Holmes on Homes. The mixture of anger, resolve, and a powerful moral drive that the world should have been better and people more honest is addictive to me. Add that to an industry which has generated the aura of a helpless homeowner at the knee of the contractor (and that’s not generated out of complete myth), and we have the making of a modern day knight.

And honestly, if the industry wasn’t as rife with incompetency, poor business practices and a history of poor performance – especially at the homeowner level, then the premise of his show would have never generated anything past a pilot episode. Instead, the show survived and Mike has since opened up a business umbrella for several products and services that run on the “honesty and trust” that he developed in the television show. Inspections, products, multiple TV shows, approved products, workwear, and most recent sustainable homes and communities – Holmes Approved Homes.

I’m a big fan of two things (1) Strong industry self-regulation and (2) A big hammer of regulation when self-regulation fails.

This would be a great attempt to build on the self-regulation side, with the creation of a set of standards that are followed and implemented in new building. The program indicates it adds 5-10% to the cost of the building to have a residence that is crafted under the Holmes Approved Homes system. And that sounds cheap if it delivers on its promises.

Having sat at the Alberta review of the Condominium Property Act for the last two years, all I heard from the developers was – any change to legislation would drive prices up so high, that housing would no longer be affordable. They painted scenarios where the costs would skyrocket with massive increases in even basic entry-level housing. At no time did I feel that the price increase that they expressed could be done on 5-10% increase.

So if we can see that real, sustainable, and importantly, trustworthy new development can be had for less than a 10% increase in costs, then I am all for that. I would champion this program.

As always, we do have a 10 year “testing phase” that the commitments made can be delivered, and I also believe that the delivery isn’t in the architecture and materials so much as it is in the physical construction and the quality of the trades. If the trades issue can be solved (based on the massive failings in new condominium developments from poor implementation) then we really have an inexpensive winner of a private building program.

Holmes’ Homes get celebrity inspection