It’s been a roller-coaster ride wild enough to churn even the sturdiest of stomachs: Unemployment is up, property values down, bankruptcies rising, sales dipping and then lurching upward again.

For many community associations, 2009 has been a dizzying and discouraging experience, as they struggled with late condo fees and a reluctance by owners to fund even needed repairs.

But will 2010 be any smoother a ride for associations in New England?

Not likely. Members of the New England Condominium Editorial Advisory board – representing a cross-section of disciplines within the condominium industry – are bracing for another bumpy year. From common fee collections to evaluating needed repairs, nearly every aspect of community association life is being impacted by the nation’s economic woes, and that situation isn’t likely to change in the monthsahead, the majority of these prognosticators say.

“The economy is not just going to jump back to where it was,” attorney Seth Emmer, a principal in Marcus, Errico, Emmer & Brooks, PC, in Braintree, Massachusetts, predicted. “I think it could be two years before thingsare really solidified; a slow gradual improvement over a couple of years.”

“I think next year will be just as bad, if not worse,” agreed Stephen DiNocco, AMS, of Affinity Realty & Property Management in Boston. “I don’t see much of a break in the economy, but things might plateau for a while. I think property values are going to go down again.”

With this somber scenario in mind, what have associations been facing in recent months, and what are the professionals urging them to do to gird for the future?

“People’s expectations have changed, and they’ve become concerned with things that might not have concerned them in the past,” DiNocco said. “People have become more critical of other owners, and the management company. The volume and type of phone calls has changed. People have become less happy with what they own. It has less value… and they don’t want to believe it’s a force beyond their control.”

Belt-tightening

While looking to control costs – especially in a time when many owners are struggling to pay their bills – associations need to be wary of making matters worse rather than better. Someattempts to trim costs may work, but others can set associations up for problems. “We have associations that are now preaching belt-tightening to the unit owners,” DiNocco said. “I had one association that actually saw a huge drop off in the use of heating oil – it was incredible.”

At the same time, boards will likely be more careful than ever in hiring and firing contractors in their quest to save money, suggested Lou Gargiulo, president of Great North Property Management in Portsmouth, New Hampshire. “I think associations are going to be faced more and more with contractors who are failing financially… You need to think long and hard when you retain people – or when you get rid of people as well. It’s not always smart to get rid of established contractors because you think you are going to save a few bucks with someone new,” he cautioned. “There are a lot of less-established vendors who are on the brink of going out of business and are willing to charge anything to survive.” While a lower price may look good to a cash-conscious board, plowing contractors, painters or other contractors that close up shop in the middle of winter or half-way through the painting job are no bargain.

“It’s important for associations to look very closely at their contractors to ensure that the people they’re selecting – from landscaping to painting, paving, and property management – have the financial resources to be able to sustain themselves. The job of boards, and a big role of the management company, is to ensure that if they bring contractors tothe associations, that the contractors are (financially) healthy, as best as one can determine,” he said.

Not surprisingly, in the midst of a recession, association boards – like individual homeowners – are trying to squeeze the dollars whenever they can.

Bob Burns, PE, RS, of Burns Associates-Engineers in Portsmouth, New Hampshire, noted that “we’re seeing some new emphasis on getting the most bang for the buck” by associations that are asking for engineering studies. In some cases, he noted, boards are bypassing the full reserve study and requesting only engineering studies of individual components, such as decks, because they know they have a problemwith that single component.

“We’ve seen a new emphasis from clients asking. ‘Is this the most economical way of doing this?’ Asking two questions instead of one, three instead of two – going deeper.” Burns said some associations are also helpingto trim reserve study costs with a “do-it-yourself” approach, working hand-in-hand with the engineering firm to gather some basic information so that the engineers have to spend less time on data-gathering.

“The client helps out by doing some of the work, and we reduce our cost, so the result is a lower fee for the reserve study,” Burns said. “It benefits the client in another way; they get involved in finding out what their property is all about. They’re on top of their situation, where they were kind of remote from it before.”

Burns predicted that associations will continue to scrutinize expenditures and look for ways to keep costs down well into the new year. “The cost of maintaining (a building element) is the new component that’s entering into the equation,” he noted. “Clients didn’t always look ahead at what it wasgoing to cost to maintain the roof or road, but now they are.”

Fellow engineer Ralph Noblin, PE, of Noblin & Associates, LC, in Bridgewater, Massachusetts, agreed that associations are pinching pennies and are likely to continue doing so in the year ahead –not always to the long-term benefit of the property.

“I wish I could be more optimistic,” he said of 2010. Condominium owners have become hesitant to spend money on property maintenance – particularly the commonareas of the property. “When we do presentations, we see that there’s this denial going on,” he said.

Neglect Taking a Toll

Many of the condominium units are beautiful inside, but have been neglected on the outside. To be polite, Noblin often refers to the properties as looking “tired” – but euphemisms can’t change the reality. “The problem is the realization of what it takes to maintain – and to replace when necessary – major parts of the real estate… You see the value in having a car that looks good, runs good, and you know there’s a cost associated withthat. This is your home; can you not translate that to your home?”

Unfortunately, he said, many condominium owners don’t make that leap, leading to parking lots that are patched instead of paved, or siding that is repaired or painted piecemeal. “The only thing that looks worse than universally bad pavement,” Noblin said, “is bad pavement next to a chunkof new pavement.”

These issues will only get worse in the year – or years – ahead, as condominium developments that were built 20 or 25 years ago reach critical points in the lifecycle of their roofs, decks, driveways and siding, Noblin said. “In 2010… projects that were whispering, ‘Replace me’ 15 years ago, and were saying, ‘Replace me’ 10 years ago, are now going to be screaming ‘Replace me!’,” he said.

Will associations have the money to do that work? Part of the problem facing condominiums is a tightening of financing, noted David A. Levy, CPA, of Brookline, Massachusetts. “The banks are still willing to talk, but they are more critical about the financials, about the management of the associations,” Levy said. “So they’relooking at the financials more closely, trying to get more money up front from the association members.

“I think banks are a little gun-shy about letting out most of the money, versus some of the money,” he said.

At the same time, he noted, there is a certain amount of “push back” from unit owners who don’t want common fees to increase in a tough economic period. “It makes the budgetary process more difficult…. It’s harder to come up with a budget that is workable,” Levy said. But at the same time, despite the economy, “I haven’t seen any association roll fees back,” he said. “They’re having a hard time increasing fees, but they’re not rolling them back, which is good.”

Association finances, are, of course, being affected by the real estate marketand government regulatory issues.

As an example, Emmer noted that the secondary mortgage market is impacting property managers, and, in turn, raising costs for associations “in terms of the condominium questionnaires that lenders are asking to be completed as part of the sale process.”

Lenders in real estate transactions are looking harder at reserve requirements and insurance issues, “and asking all sorts of legal questions that require someone to answer them. It’s not always something a property manager can respond to,” said Emmer, an attorney. That, he said, can lead to questions about “who should pay it (administrative time), and who is going to answer (the questions)…. One lender is askingor every document, budget, board meeting minute – I’ve never seen any lender ask for that before. It puts sellers, or unit owners, to great expense.”

While communities across the nation have been burdened by problems associated with condominium unit foreclosures, Emmer noted that “super lien” laws – like that passed in Massachusetts during the last real estate downturn some two decades ago – have lessened the impact for some New England associations by putting the associations ahead of lenders in collecting money from foreclosed units.

At the same time, lower sale prices on bank-owned units have “driven values down in the condominium because units are being sold at fire sale prices, and nobody likes that,” he said. More associations are also looking at instituting limits on rentals, in light of the real estate squeeze, he said. And attorneys are busy – and likely will be for some time –with delinquent common fee collections.

And just as associations are trying to deal with those problems caused by the overall real estate market decline, they’re also looking at potentially rising costs. “The biggest question for 2010 is what will happen to insurance rates. We have already seen one of the major insurance companies increasing rates,” predicted Bernie Gitlin, president of Global Insurance Network in Needham, Massachusetts.

While Gitlin admits that he’s been expecting rates to go up for some time – and they have, surprisingly, stayed soft for the past several years – increases now seem inevitable. “I’m not saying it’s going to happen tomorrow, but it has to happen at some point. There are a lot of signs pointing that way” he said. One factor that may drive rates upward is the merging of companies in the industry. “Ten years ago I had 15 companies that I could play off each other (to get lower rates). Now, these companies are all consolidating,” resulting in less competition.

Pointing to a number of influences that indicate rising premium rates are coming – including a drop in investment income for insurance companies and a drop in capital coming into the market –Gitlin is encouraging association boards to budget for increases next year. At the same time, he noted that some boards are electing to hold costs down by moving to inferior policies. “It’s not a great approach,” he cautioned.

Technology Controlling Costs

One way that management companies – and, by extension, community associations – can rein in costs is through smarter use of available resources, including new technology. From auto-maticcommon fee transfers from a homeowner’s checking account to digitally-stored documents that save space in addition to staff search time, systems that have sprung from technological advances offer benefits to managers and trustees alike.

Adopting these technologies can “free up talented people to provide better service,” said David J. Levy, PCAM, of Sterling Services, Inc, in Holliston, Massachusetts. As managers endeavor to maintain a high level of service, while controlling costs, the useof technology will grow, he predicted.

Adopting wider use of technology – such as association websites – can also improve communication within communities. In addition to making meeting agendas, community documents and newsletters more readily available, associations can now use a “phone-blast” system to quickly and easily alert residents to important events. “It can be used to invite people to the annual meeting; to remind themthat as winter approaches, to turn off water spigots; to move cars for snowplowing,” Levy said. “It’s another way of communicating.”

While finances are on the minds of community association leaders, other issues are also likely to gain attention next year.

In addition to the growing interest in limiting the number of rented units, a number of associations are looking at limiting smoking – including within individual units. “There seems to be a lot of controversy surrounding that, whether associations should go smoke-free or not go smoke-free,” Emmer said. “And if they don’t, what responsibility – if any – do they have to address smoke and odor migration from one unit to the other?” Emmer predicted that the smoking issue “is going to be a source of some litigation” in the year ahead.

New legislation is always on the horizon, too. Attorney Henry A. Goodman of The Law Offices of Goodman, Shapiro & Lombardi, in Dedham, Massachusetts, noted that new federal legislation dealing with watersheds and water runoff from impermeable surfaces such as parking lots and even roofs will be affecting condominiums. And as is often the case, he said, “Massachusetts always tries to do the feds one better. So now we have a Massachusetts law being put into effect by the DEP (Department of Environmental Protection)” which will be more stringent than the federal law. “There are a lot of proposed laws, some of which were proposed by people who don’t understand condominiums and some of which seem overly burdensomeon condominiums.”

Despite all the concerns of those working day-to-day with community associations, there are still glimmers of hope for the year ahead.

Jasmine Martirossian, PhD, a lecturer in the Law, Policy and Society Program at Northeastern University, and an author and speaker on community association issues, said she is optimistic about the coming year. “I think the economy is going to be on the upswing,” she said, despite prevailing pessimism among many. “Popular perception is usually lagging by about nine months… I am an optimist that the economy will emerge.”

In the meantime, she said, she sees many communities moving into a new era created by emerging demographics. “Baby boomers are aging, and condos are going to figure out ways to facilitate aging in place,” she predicted. The movement has already begun in regionsof the country that are home to larger senior populations.

“I see more neighborly watch programs over people who live alone, or maybe do not have any next of kin nearby or in general; it's a trend I’ve been seeing more and more,” she said.

Ultimately, she cautioned, “We can’t peer into the future, but we can predictbased on existing trends.”

Pat Gale is the associate editor at New England Condominium magazine.