A Look Forward Pros Predict What May Move the Needle in Condos/Co-ops/HOAs in 2017

A Look Forward

Another year is behind us, and what a year it was! While 2017 and beyond promise to be eventful in myriad ways, it probably makes sense to focus solely on what’s ahead in the world of condominiums, cooperatives and homeowners associations for the moment. In an effort to ascertain what we can look forward to, we reached out to various real estate professionals in the New England region and asked them what they felt to be the definitive moments of the last year, how those moments will reverberate in the year ahead, and what else associations should be looking out for as they manage the day-to-day operations of their communities.

A Trip to the Market

Most industry professionals remember the famous recession of 2008. Sadly, the housing market is not entirely out of the weeds yet, but recovery has been happening slowly and surely, and people are again looking to buy homes. 2017 surely looks to be a major transition year, and it’s quite likely that the housing market will not be unaffected by those ripples of change.

“Demand for real estate continues to be very high,” says Eric D. Berman, director of communications with the Massachusetts Association of REALTORS®. “Unfortunately, inventory is at or near record lows. Our most recent data set available for analysis is from October, and indicates that inventory of condos has been down 11 out of the last 12 months, and 71 out of the last 72 months, assuming I have counted correctly. Prices continue to go up because of this true supply-and-demand market. In July, the median price for a condo in Massachusetts hit an all-time high of $358,950. Sales are going down, not because of lack of demand, but simply because there are so few homes to purchase.”

Berman also posits that an uptick in interest rates will only cause demand to increase. “If those rates go up more than a point, that’s when we’ll see affordability go down, as that’s when interest starts to impact what a buyer can afford. This could help push prices down, and it certainly favors cash buyers. We look at data in the aggregate; therefore, I cannot speak about specific residential projects. In general, brokers are encouraging their buyer clients to make sure that they’re pre-approved for a mortgage. But lending continues to be tighter than we’d like; there are good buyers with good credit and good jobs who are having trouble receiving financing.”

All this points to an eventual need for increased availability of condos to meet the demands of the market. “And that supply has to come from other places than sellers just putting their homes for sale,” notes Berman. “We need new production. We need people to either move in with family or move away from Massachusetts, specifically, and we need investors to make decisions to sell units that they’re currently renting to homeowners. It is admittedly very difficult to build in Massachusetts.”

Managing Expectations

As with realtors and brokers, property managers must be on the cutting edge of all things condo, co-op and HOA, as best to represent their clients in an ever-evolving landscape. Changes in law, policy or technology are often brought to the board by a responsible and aware manager, such that the board can make an informed decision on behalf of its association.

“I’ve been reviewing the latest technology, and am working to get my site managers and maintenance staff on board with digital trends,” says John Kadim, a property manager with Crowninshield Management Corp. in Peabody, Massachusetts. “I try to establish, through various sites, digital to-do lists via which maintenance and site managers can access and update items in real time. As I am not personally always on site, this helps me stay informed as to what’s going on and what’s moving forward.”

“Another item on which I have been working is getting my sites on board with establishing a community website,” Kadim continues. “SenEarthCo is a great example, as it works with accounting platforms like Jenark. I have also found that HOA Sites is a community favorite, as it is very user friendly and aesthetically appealing to owners. Each has its own benefits and drawbacks, but they all work well in regard to achieving their main objective: to increase communication to owners as pertains to association business. The number one complaint across any portfolio of sites is that nobody ever feels that they are being well-enough informed. Having a website with the ability to post notices and policies, as well as to send notifications via email is a great way to address owners’ concerns in a transparent way.”

Legalize It

What is or is not permissible for a board to do is always somewhat in flux under the letter of the law, and 2017 will see several tweaks in regard to how associations can conduct business on both local and national levels.

According to Charles A. Perkins, Jr., a senior partner with the law firm Perkins & Anctil, in Westford, Masachusetts, several potential changes loom over condos and HOAs on the federal/macro level. “There’s a lot of dialog surrounding short-term rentals, the Fair Housing Act, tax deductions for associations, amateur radio and disaster assistance, limited property liens... you’re going to see people dealing with all of these,” he says.

“Airbnb is another hot-button issue,” he adds. “I think you’ll see that most associations want to ensure that it doesn’t take place within their building. It’s hard enough to know who’s going to be at the property and who isn’t when it comes to tenants year-to-year. If inhabitants are going to shift on a daily or weekly basis, it will be impossible to understand who is going to be in and out of a unit, and you’re going to see serious security issues associated with that.”

Green energy initiatives are also in the zeitgeist. “People have really been pushing solar energy,” says Perkins. “There’s a statute in Massachusetts that states that you cannot legislate, from a condo perspective, things that will unreasonably prevent solar from being installed. But the question then becomes, how will the solar panels be installed, what that will do to common area roofs, who’s going to get what in terms of tax incentives, where the power will go... there will be a lot of issues associated with that from an environmental perspective.”

Drones are also a point of contention that may soon come to a head. “If you’re in a large association and you want to see what’s happening on your roof, it’s much easier to fly a drone overhead than it is to hire someone with a ladder to go up and canvass,” Perkins says. “But with drones come liability and privacy issues.”

And Gary M. Daddario, a partner in the Tyngsboro, Massachusetts, office of Winer & Bennett, LLP, notices a curious trend that seems to fly in face of the basic tenets of condominium living. “I’ve seen an uptick in disagreements over, not just the rules, but the board’s authority to make the rules,” he says. “It seems as if there are unit owners who — notwithstanding that they purchased a condo and this is where they live, now — really want it to be more of a free-standing single-family home situation, and they don’t want to deal with the rules. And the easy response for those of us in the industry is that these people do not have to buy a condo, for crying out loud. This was the wrong move for them to make if they don’t want to have a set of rules that they must follow. And I don’t know for sure whether people are just not doing their due diligence prior to making a purchase, or if they’re not being briefed at closing, or if people who once owned a home and are now purchasing a condo thanks to the last mega-wave of foreclosures are just indignant because they used to be able to do their own thing, but now feel constrained.”

“Where these people are gaining traction is, they’re going to attorneys who are willing to take on clients in order to get some billing, and they’re filing lawsuits,” Daddario continues. “These lawsuits are making their way to the association’s insurance carrier, then the insurance carrier comes in and defends the claim on its own dime, so its mission is to get something done. Now all of a sudden you have an insurance company saying ‘well, this person has some issues with a few of the rules; maybe we can do something about this.’”

“This is alarming, because it implies that someone can file a lawsuit and thus more or less get more power than they would have by getting elected to the board of a community,” Daddario explains. “They’re now hypothetically negotiating rules for the sole purpose of ending a lawsuit. And if that works, I have a feeling you’ll see lawsuits by every condo owner in the state. From a counting pennies standpoint, I understand why a board might oblige a disgruntled owner, but it’s a dangerous strategy in the big picture. If you’re going to have people buy into a community where there are recorded documents containing restrictions, only to then claim that they don’t like restrictions, receive push-back, react via lawsuit, and enforce changes through the courts, that’s setting up a problematic future.”

So yes, a new year comes in with the tides of change. And while none of these may seem to be revolutionary on their face, a board is best served by being aware of the incremental alterations that are happening in its orbit, lest it find itself caught asleep at the wheel when confronted with a decision that can best serve an association.             

Mike Odenthal is a staff writer for New England Condominium.

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