Page 12 - New England Condominium January 2020

12 NEW ENGLAND CONDOMINIUM
-JANUARY 2020
NEWENGLANDCONDO.COM
Nick Ruccolo, a vice president with
Crowninshield, a real estate management fi rm
in Massachusetts, also sees fi nancial misman-
agement as the underlying cause of distress for
condominium communities. “Th e problem
we most typically run across,” he says, “espe-
cially with new accounts, is deferred main-
tenance. Many items that should have been
done have been deferred, or passed along.
Th ey didn’t start as emergency items, but over
time they became emergency items. Typically,
then, a large assessment will have to be put in
place to take care of it. We had a situation like
this where all the roofs—and the common
roads—of a community were so neglected,
they had to be done at the same time.”
Even without an emergency rearing its
head, buildings age, and mechanical systems
and equipment become obsolete. It’s a fact of
life for property owners and managers and
can be predicted to a certain degree if com-
munity administrators understand the con-
cept of depreciation and earmark funds ac-
cordingly. It is the responsibility of a co-op or
condo board and its management to properly
prepare for the necessary maintenance and
ultimate replacement of building systems. A
board that consistently defers regular main-
tenance or opts for a cheap fi x rather than a
more long-term solution will ultimately land
the property in distress. Like a bridge that
hasn’t been properly maintained, the overall
physical plant could come close to collapse,
literally and fi guratively.
Mortgages
Less common these days, but a very seri-
ous problem during the Great Recession a
few years ago, was co-op buildings defaulting
on payments for their permanent underlying
mortgages. As a reminder: co-op corpora-
tions own their properties as fee simple es-
tates, and as such can—and do—place large
mortgages known as underlying permanent
mortgages on their buildings. Th e debt service
on these mortgages is paid monthly and pro-
rated among the shareholders. In certain cas-
es—if there are large numbers of subtenants
or vacant units, for example, and the primary
shareholders aren’t paying their monthly
maintenance charges on time (or at all)—the
board may not be able to meet its obligations
under the mortgage. Aft er 90 days, the lender
will place the mortgage in default and begin
the process of foreclosure. If the property is
foreclosed, the co-op will be wiped out—and
all shareholders will lose their equity.
Halper explains that the key to avoiding
such a problem is to limit the number of sub-
tenants in the property, which can help keep
shareholders committed to their investment.
He says it’s also advisable to contact your lend-
er in the event a serious fi nancial or cash-fl ow
problem presents itself to head off a default
and foreclosure action. Th e last thing the bank
wants is the property.
Interpersonal Confl ict
While perhaps less obvious at fi rst than fi -
nancial or physical breakdowns, a breakdown
in interpersonal cohesiveness, oft en char-
acterized by confl ict between individuals or
groups within the community, can be just as
detrimental to the health of a co-op or condo.
Th e inability for a board to make decisions
due to confl ict or constant infi ghting among unwillingness—to handle its business forces
diff erent factions within their community can their management company to cut ties and
grind the eff ective operations and manage-
ment to a halt.
“Interpersonal problems between residents crisis from a former client community. “We
and the board, between board members, and had a situation where a board employed a
between groups of residents happens all the non-union super at a very low wage,” he says.
time,” says Ruccolo. “You have to play the “Eventually they fi red him, but it wasn’t done
role of conciliator, to get the opposing sides to properly, and he fi led a wage claim against
reach compromise. It’s not unlike the politics them. [Th e board] refused to listen to any
of today. You have to fi nd common ground, of our advice, and we left shortly thereaf-
and that’s really hard to do.”
Halper mentions situations wherein an in-
dividual person can get control of the board them.” Halper says that while management
and will try to run the building or association fi rms carry errors and omission insurance,
like their own personal fi efdom. Th at kind of there’s still liability, and most fi rms will part
inappropriate, self-serving control can lead company with a truly dysfunctional board
to a complete breakdown in communication, before they become liable for the board’s mis-
which in turn can make a manager’s job near-
ly impossible.
Avoiding Trouble—and
When to Walk Away
A fi nancial pitfall can be dodged if caught
early enough, before the dollar amounts in-
volved creep too high for the individual share-
holders or owners to handle. “Completing a
regularly scheduled reserve study, and main-
taining both the reserves required therein and
completing the work required as scheduled,
will avoid the possibility of the property be-
coming distressed,” says Ruccolo.
Halper agrees, and adds that “the key is to
keep up with both fi nancial and maintenance
needs. Raise maintenance annually to keep
up with increases in operating expenses and
other costs. Cheapness is at the heart of the
problem.”
And sometimes, a board’s inability—or
leave the community to its own devices. To
illustrate his point, Halper relates a real-life
ter because the situation became untenable.
We didn’t want to face possible liability with
management.
Both Ruccolo and Halper also point out
that the management business can be stressful
enough as it is—managing even one chroni-
cally distressed property can add to that stress
and can take time away from other proper-
ties in one’s portfolio. “You don’t fi nd fi rms
that only handle distressed properties,” says
Ruccolo. Partly for the reasons already men-
tioned, but furthermore, Halper continues,
it’s a matter of reputation. Nobody wants to
be known as the company whose portfolio of
properties is riddled with problems, lurching
from one crisis to the next. “It’s a small busi-
ness, and everyone knows each other,” he says.
“You have to be careful of your reputation.”
n
A J Sidransky is a staff writer/reporter for
New England Condominium, and a published
novelist.
CONT...
THE CHALLENGES...
continued from page 1
sipping a pina colada. People can contact
you all the time from wherever they are.”
Scott Wolf, a managing partner with
Brigs, LLC, a New England-based real es-
tate management firm, concurs. “I’d like
to get rid of email,” he says. “Everyone’s
expectation is an instant answer—but
there’s something to be said for actually
picking up a phone and speaking with
people. With direct contact it may be eas-
ier to resolve an issue a little faster and
more easily.”
“The internet has changed the focus of
how we communicate with people,” says
Wollman. “Fewer people use the phone
or talk face-to-face. Where I used to get
10 calls, I now get 30 emails. The thing
is that in our business, there are many
times when a problem is better handled
in a more personal way than email pro-
vides for.”
On the Other Hand…
While advances in communication
technologies have changed the way man-
agers work and allot their time, they do see
benefits in it as well. “With the advent of
the internet and online communications, but one they will continue to use even if home, see this article from 2019: https://
one can accomplish things more quickly, it means more hours in front of the com-
even though more people are contacting puter screen or on their smartphones. new-approaches -
you,” says Wollman.
“It’s also less stressful.
You don’t have people
angry at you all the
time,” he adds, with a
chuckle. “It’s also easier
to deliver bad news!”
While email does of-
fer some remove from
direct
confrontation,
it can also make some
feel entitled to be much
harsher than they might be face-to-face—
and it can often flatten out nuance and the other functions a manager has to per-
tone, which makes misunderstandings form, and can be too intrusive. Rare is the managers with much more flexibility.
and accidental offense not uncommon.
Wolf says, “Ultimately, electronic com-
munication provides you with more time dreds of clients or customers to have their in his view, incorrectly—take the place
to do other things, which means that private smartphone number—even if they of direct conversation and visual inspec-
you do get more done, but you also work have a separate one just for work.
more, because of the actual time involved
in answering email. There’s always more nials—show a strong preference for text
email.”
In the end, electronic communica-
tion may be a mixed bag for managers, apartment-seekers are looking for in a
And speaking of that in light of this trend, his company has
smartphones...the purchased technology that masks private
next logical step in phone numbers and enables managers to
electronic commu-
nications may not and land lines.
sit so well with man-
agement. Many pros rect management are great, and have re-
feel that text mes-
saging, while per-
haps more immedi-
ate and in-real-time owners of rules or building violations, fa-
than even email, is cilitate online bill approval and payment,
simply too much of a distraction from and give remote access to desktop com-
property manager (or any professional, Wolf says that the one trade-off he sees is
for that matter) who’d want literally hun-
Younger owners—particularly millen-
over pretty much any other type of com-
munication. (For more on what younger one of the last frontiers of socially ac-
cooperator.com/article/younger-buyers-
Ed.
) Wolf mentions
respond by text from desktop computers
According to Wolf, “Other apps for di-
ally improved our ability to complete our
tasks more efficiently and quickly.” He
includes such things as apps that notify
puters via smartphone, which provides
that these new apps do sometimes—and
tions, which in some cases are absolutely
necessary.
A Matter of Age
Discrimination on the basis of age is
THE EVOLUTION...
continued from page 1
continued on page 14
“Th ere’s something
to be said for actually
picking up a phone and
speaking with people.”
—Scott Wolf