In dayswhen amusement parks were focused on leisure rather than heart-stopping rides, features like halls of mirrors, fun houses and animated fortune tellers were standard fare. Drop a coin in the slot, and the mechanical prognosticator would send forth your fortune on a tiny slip of paper.

Amusing, occasionally worrisome, the fortunes provided momentary entertainment, ending up in a wastebasket and quickly forgotten.

But today, community association professionals – minus the turbans or veils of yesteryear’s automatons – peer into 2011 with serious goals in mind. Associations, like all businesses, need to plan for the future; to consider what might be needed in the weeks, months and even years ahead; and to take steps to ensure that those needs can be met.

Of course, prognostication isn’t exactly a science, and in hindsight, often turns out to be less than perfect. But the process itself, of looking at the recent past and anticipating what is expected in the near future, can be a helpful planning tool.

So, where have communities, and the industry as a whole, been during the past year, and what may lie ahead in 2011? Once again this year, New England Condominium has asked members of its Editorial Advisory Board – all leaders in their respective fields – to give our readers their views.

And without a doubt, the economy is the driving force behind their analyses of 2010 and forecasts for 2011, joinedby the impact of legal and legislative issues. Not surprisingly, the state of association finances and the condition of condominium buildings are hot topics when industry professionals consider recent history and forecast into the future.

Condo fee delinquencies have tracked the nation’s economic woes, notes David J. Levy, PCAM, owner of Sterling Services in Holliston, Massachusetts. While the problem hit lower-end properties first, in the past year or so it has spread into the mid-priced properties, he observes. “We’re getting more past due fees in the townhouses… it’s been hitting the upper and middle class more in the last year.” For some condominiums, he says, “discretionary spending had to be eliminated, and only essential services are being approved.” As 2011 approaches, he says, “I see some signs of self-healing,” but that healing will take time.

Crisis for Condominiums

Fallout from the sliding economy and rising unemployment has created “a crisis for condominiums,” in terms of collections, agrees attorney Stephen M. Marcus, a partner in Marcus, Errico, Emmer and Brooks, PC, of Braintree, Massachusetts. The past year saw a surge in the non-payment of condo fees, and a resulting surge in actions by boards to protect their associations. “It’s been pretty severe, depending on the community,” Marcus said. “Associations are seeing that they have to be good about dealing with collections quickly… Associations with decent counsel advisingthem have been pretty aggressive.”

Those aggressive collections are important, the experts say, because associations not only have to pay their operating bills, but now – more than ever – must have solid reserve accounts. The recent Federal Housing Administration (FHA) mandates for reserve fund contributions affect the ability of owners to sell their units. With the real estate market already sluggish, associations can’t afford to stand in theway of condo sales.

At a time when associations are struggling to tuck money away for future capital needs, the FHA has required thatannual budgets contain a minimum 10 percent reserve fund contribution.

“Condos have been under-funded forever,” laments Ralph Noblin, PE, an engineer with offices in Bridgewater, Massachusetts. “And now, associations say there’s no money there (to put into reserves). “ The FHA requirement “has really complicated the issue” for associationsin this tight economy, he says.

The problem, Noblin notes, is that when government entities tell condos to put 10 percent into their reserves, “people think that (10%) should beenough. But because the reserves have been under-funded since Day One, they really need more than that.” Over time, any home – including a condominium – will need new roofing, decks, and driveways – “and siding is the big hammer,” Noblin adds. A good ballpark figure, he says, would be to tuck away “$1,000 per home per year –but most properties are nowhere near that number.”

Without sufficient reserves, associations tend to put off repairs, kicking the problems down the road. “We’re in tough economic times,” Noblin acknowledges. “But when a home is for sale, buyers will make a decision in eight seconds, based on their first impression.” Deferred maintenance hurts property values and hurts ownerstrying to sell their units, he says.

But Noblin has hope for 2011. “I think people will start to feel better about the economy, at least in Massa-chusetts,” he said. “In Florida, Las Vegas, Phoenix, it will take longer. But I think I’ll still be a voice in the wilderness about what it really costs to live in a condo.

“As we come out of the doldrums, we need to educate people more. I think you can’t have enough knowledge. It’s time to get rid of the old perceptions, and start fresh.”

Desire for Education

Robert Burns, PE, principal of Burns Associates-Engineers in Portsmouth, New Hampshire, is seeing a surge in desire for that education. As the economy has foundered in the past year or two, he said, “clients have beenwatching the reserve bottom line more closely. And they want a deeper justification of capital expenses.”

While the impetus for that desire – the sluggish economy – is a negative, the result is a good thing, he says. “People are requiring a more detailed explanation for our recommendations. They want to know more about how we arrived at those recommendations,” he says. “In the past year, I’ve seen a closer collaboration with clients, more sharing by boards about their past maintenance. They really want to helpus to help them, to make sure that the numbers we’re using are really in line with their past experience.”

At the same time, he says, the difficult economic situation has led associations to try to “stretch things out; they’re asking their components to last longer. People are demanding that capital assets last longer; that’s the new normal.” That can be done, to a degree, by improving maintenance – spending a little now to save a lot later. For some communities, that realization is coming too late: “They’re in a bind now; they’ve alreadyreached the end of the road.”

Fortunately, those communities seem to be in the minority – especially among those who have been paying attention over the past several years, says Stephen DiNocco, principal of Affinity Realty & Property Manage-ment, LLC, in Boston. “In the past, when the economy was tight, people didn’t want to increase condo fees, saw it as being hard on people… But moreand more, the rule has become that people are divorcing themselves from the reality of ‘hard times’ and looking at the way things are,” DiNocco says. “They’re saying that, ‘Whether we’re in hard times or not, we need the money to accomplish our goals.’ They’re pushing for increases in fees.”

But setting new levels for fees doesn’t help if they’re not collected. And while many Massachusetts communities have been aggressive with collections, as Marcus notes, those in states without laws like the “super lien” – such as Maine – are having more difficulty. “A lot of people just stop paying,” DiNocco says. “If the unit is upside down, there’s real no way to collect your money… people go three, four years, and you have a lien, but you don’t have the money. That will pose a problem for associations, because they won’t be able to operate if they even have 10 percent of the propertiesnot paying; it puts a burden on everyone else to make up the difference.”

While acknowledging that he would “like to be more optimistic” about the coming year, DiNocco anticipates that problems with delinquencies and with unit owners staying in foreclosed homes will continue to plague associations for some time. “I don’t see whatis going to change any of the circumstances we’re presently in,” he says.

Collection Issues May get Worse

“The collection issue,” agrees Lou Gargiulo, president of Great North Property Management in Portsmouth, NH, “is not going to go away.” And as more condominium units move into foreclosure, he predicts, “there are greater problems with fees not being paid. I don’t see it getting any better in2011; I think it’s going to get worse.”

Beyond reserve fund issues, a host of legal and legislative actions are going to affect community associations in2011.

“Changes in the IRS (tax) code that require sending everyone a 1099 (independent contractor) form are going to put more pressure on small companies” that service community associations, Gargiulo predicts. “I think we’re going to see more small companies failing.” Those IRS requirements are also going to create more work and put more pressure on associations. “It’s going to take more resources for associations and management companies to comply with this. If that requirement isn’t rescindednext year,” he predicts, “it’s going to be a huge problem.”

Additional stresses management companies will face in the year ahead include increased costs in areas like health insurance and workers’ compensation. “There’s going to be a lot of pressure on smaller companies,” he says.

Environmental laws and regulations will also have an increased impact on associations, notes Burns. “I think we’ll be seeing more and more ‘green’ projects. I expect to see more on-site storm water disposal projects, being pushed by municipalities and the EPA (Environmental Protection Agency). The point is that sites should treat theiroverland pollutants, not contribute to the municipal outfall” at treatment plants. “I see a gathering interest in rainwater harvesting for landscaping purposes, capturing the runoff from roofs and parking lots for use in irrigation systems,” he says.

Bernie Gitlin, president of Global Insurance Network in Needham, Massachusetts, notes that a Fannie Mae stance on association insurance that relates to improvements to individual units and legislative breaks in flood insurance over the past year or so has had – and will continue to have – an effect on condo associations. The floodinsurance program was extended, but only until next September, potentially leading to more uncertainty down the road.

Pressures on community associations are arising not just from governmental action but from judicial decisions as well. Attorney Marcus believes there will be an increase in discrimination claims based on disabilities or age. “I think more people are becoming moreaware of what laws are out there, for example, to protect disabled people and children.”

“Slip and Fall” Claims to Increase

Marcus also foresees an uptick in “slip and fall” claims, following the Massachusetts Supreme Judicial Court ruling in Papadopoulos v. Target Corporation. That decision, in effect, eliminates a property owner’s defense of the “natural accumulation” of snow and ice in “slip and fall” cases, puttinga greater burden on the owner to protect individuals from injury.

Gitlin, of Global Insurance, adds that the “slip and fall” decision may boost insurance costs. “The landowner is now required to exercise “reasonable care” in clearing the property. And who knows what ‘reasonable care’ is? I think we’re going to see many more cases that will have to be defended by insurance companies – so we’ll see clearly, a liability increase in rates because of this.”

Gitlin also says that as condo insurance rates have held fairly steady, or have even dipped, in recent years, a number of “new players” have entered the field. The level of competition, he predicts, will be “unsustainable” over time. “The bottom line is, I see rates nudging up… at budget time, associations should be budgeting for small increases in premiums,” he suggests.

With all the turmoil of the past year, and the uncertainty projected for the year ahead, industry professionals are offering one word of advice: “Communicate.” No matter what the issue, it’s important to keep the lines of communication open.

Social Media’s Role is Rising

As the calendar pages turn, that effort will continue to take new forms, predicts Jasmine Martirossian of Boston, a lecturer and writer on issues related to communication and group decision-making. “I think we’re going to see more social media involved in condo communications,” she states. “I see more active sharing of information, using email, forums and boards.”

But at the same time, she cautions, these new forms of communication also lead to more “negative chatter – people complain more actively using social media,” which can lead to increased confrontation. “We’re becoming the Twitter nation,” she says, offering a word of advice. “There’s a Russian saying, ‘morning is wiser than evening,’” she notes. In community association communication – as in other settings –it’s good to sleep on a comment before sending it out into cyberspace.

“When we jump the gun,” she says, “we tend to exacerbate tensions and outcomes.” The new “respond now” pressure applies to management companies as well as boards and unit owners, she notes. “For management companies, it’s important to draw distinct lines in the sand” regarding responses to requests or comments.

On the positive side, she continues, “as more and more people go online, they tend to be more active in their associations,” a change that may bode well for communities in the year ahead.

The economy over the past few years has been unsettling for many, and “people are afraid.” But, she feels that things have improved in the past year. “The problem is that there have been seismic shifts that have been hard for people to process. “But I think it will continue to get better,” she predicts.

The rising reliance on technology is unavoidable, says Sterling Service’s Levy. For management companies, he said, “it’s getting to the point where if you don’t have it, you’re precluded” when looking for new management contracts. Association boards are looking for managers that can provide quality websites, automated email messages, homeowner account balances around the clock, online work orders and more. Looking to the very near future, he says, these technologies “are becoming mandatoryinstead of a luxury.”

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