Looking Ahead What’s in Store for Condominiums in 2015?

Looking Ahead

It’s been said that the more things change, the more they stay the same. As the calendar turns to 2015, that message fits neatly into the condominium picture. There’s no doubt that new technologies, new laws and new philosophies on many aspects of community life are evolving — but at the same time, many of the challenges haven’t changed since the first door opened at the first condominium property here.

As 2015 approached, New England Condominiumturned to its Editorial Advisory Board members for their predictions on what the new year might hold for condominium communities throughout the region.

Defer or Repair?

Humanity’s move from caves into buildings launched an inevitable project: maintaining those structures. The move from single-family homes to condominium units may have shifted the physical burden of that maintenance from the homeowners’ shoulders to the boards’ — but the need for repairs and replacement of worn-out and damage components hasn’t disappeared.

Unfortunately, for too long at too many communities, that work has been deferred, again and again.

“Major repairs continue to haunt associations that have deferred maintaining buildings as the buildings have gotten older,” attorney Stephen Marcus of Marcus, Errico, Emmer & Brooks says. “Some have reached crisis proportions in terms of needing to make the repairs and oftentimes with pretty heavy dollar amounts attached to them. It creates some dissention (among homeowners), because the dollar amount can be staggering, the amount that each unit owner has to come up with.”

“There are a lot of buildings I can walk around and literally stick my finger through many sections of the outside wall,” Ralph Noblin from Noblin & Associates, Consulting Engineers, in Bridgewater, Massachusetts, agrees. “They’ve just been let go. It more than looks bad, it’s like driving a car with no brakes.”

What does that mean for the coming weeks, months and even years? “I think you’re going to have a lot of interior damage with these buildings in that condition, with wind-driven rains. Deck collapses seem to happen at least one a year, and some have been highly publicized. It’s not just ‘people load’, but one winter when we had heavy snow, in New Hampshire a lot of snow slid off roofs onto decks and caused deck collapses.

“This stuff has got to be taken care of, not just for aesthetic reasons, because the siding looks bad or the roof looks bad. I hope that it starts to get better, that people have woken up and realized it’s just been luck there haven’t been more tragedies,” he says.

Fortunately, the experts predict that although problems are likely to crop up this winter and in the spring storms that are just around the corner, some associations will also start to tackle that challenge.

“I see a slow but steady acknowledgement that this is real estate. This stuff has got to be taken care of, not just for aesthetic reasons,” but also because of the value of the assets, Noblin predicts.

Lou Gargiulo, president of Great North Property Management in Portsmouth, New Hampshire, concurs. “Associations are going to have to think about funding it either through assessments or through bank loans. The assets need to be maintained,” he says. “As time passes, costs are only going to increase,” so it’s more likely that condo boards are going to start tackling those projects soon — even if it means biting a financial bullet that many homeowners won’t like.

But it’s not just decades-old condos that are faced with expensive repair projects. “We’ve seen number of condos come on line recently, so we know more developer-related claims will be coming along” in the months ahead, says attorney Henry Goodman of Goodman, Shapiro & Lombardi in Dedham, Massachusetts “Nothing of any size can be built with perfection,” he notes, “but people are entitled to get what they paid for.

“With the recession, people were holding back on completing developments,” but as sales pick up, more developments are hitting the market, are being turned over to association boards, and will, he predicts, lead to more construction defect claims. “Developers tend to not want to go back to fix the problems once they’re gone,” Goodman says, but associations will be pursuing them to repair the defects.

Follow the Money

Finances, of course, are a major topic of interest at every community — and will continue to take center stage in 2015, not just at board meetings, but in property management offices as well, the experts predict. And the two are closely tied: Rising costs for management companies by nature tend to lead to rising fees for associations.

“I think that with the degree of uncertainty that exists as a result of the health care reform act and the incremental costs associated with it, there is going to be increased costs toward condo associations from the management fee perspective,” Gargiulo says. “Also, if they (association board members) have site employees, from that perspective as well. So that is one area of concern” for the coming year.

“There are also ever-escalating workers’ compensation cost increases that all parties are also suffering from,” he adds. “That, too, is something that has to be considered as they begin budgeting for the future.”

One area in which associations might be able to hold costs this year is insurance. In a break from recent trends, “I am predicting a stable insurance market,” says Bernie Gitlin, executive vice president of Risk Strategies Company in Randolph, Massachusetts. “You may see a point or two here or there,” but stability seems to be in store. “I’m not seeing any real reductions,” he cautions, “although, if it’s a big premium and they’ve had good experience, there may be some small reductions. It really depends on the long-term experience.”

Mother Nature tends to play a role in the insurance arena, especially for properties along the coast. Things have been relatively quiet for a couple of years on the storm front, but as New Englanders know, that can change in a heartbeat. “If you’ve got risk in the catastrophic areas — flood, earthquake, windstorm — that’s when things become a little challenging.”

Saving Time & Money

Stephen DiNocco, principal of Affinity Realty & Property Management in Boston, sees technology — whether on the financial side, or with issues like security systems — playing a larger and larger role in management. It will also save associations money on the maintenance side, DiNocco adds. With many security or building systems, he notes, “If there’s a problem, you’ll be able to check it out from office, rather than sending the maintenance guy out. You get more productivity. We’re doing some of that now, but I think managers will be routinely monitoring properties from the office,” DiNocco says. “A lot of issues can be resolved from a distance.”

As the new year unfolds, “The goal is to be high-tech and high-touch,” predicts David J. Levy of Sterling Services in Holliston, Massachusetts, “using more and more technology to free up employees.”

Levy cites bookkeeping as one area in which technology is helping management companies to be more efficient, allowing them to keep their own costs in line, and hopefully keep the lid on client fees. “It’s hard to believe, but with accounts receivable, there are still companies opening mail and doing bank deposits like we did in the 1980s,” he says. It’s less expensive and more efficient to have that handled through an electronic interchange by the bank. “We maybe have to spend 10 minutes a day on the electronic interchange, versus somebody working four to six hours.”

The technology can also provide an increased level of information for managers and board members. An electronic accounts payable service, he says, makes key financial information “available for trustees to review 24/7, and it’s secure. I can research back three years ago, to see how many inches of snow there were in February 2012,” and get the information instantly in the middle of a board meeting if a question arises.

This use of technology “may not save the association directly, but it frees up management staff from routine services to be more value-added. Instead of the property manger being in a clerical role, the operational side of the business is running like clockwork. And the property manager is now being more of your partner, and helping to run your property better.”

What Else Lies Ahead?

Additional forecasts from the New England Condominium panel of experts run the gamut. Here are some of the top predictions offered for 2015:

Legal Issues. “I still see a lot of discrimination claims coming,” says Marcus, “from those requesting pets to accommodate a disability. Service animal and discrimination against children claims continue to be pretty widespread.” Some are based on claims that associations set different rules for children (such as prohibitions against congregating in the street) than for adults, he notes. Relative to animals, he says, “Somebody denies somebody a dog, they claim have disability and they get evidence from a medical provider or professional that they need the pet,” and a conflict arises. “They do need to provide some medical information but that information is easy to get …. You can even apply on the internet. It’s difficult for board to grasp why someone needs a cat for emotional support… so boards are more reluctant to approve those types of requests.”

Goodman also sees “continued attacks by lenders over statutory liens.” Along with other members of the Community Associations Institute’s amicus curiae team, Goodman was involved last year in several priority lien cases across the nation, and is awaiting decisions in some of those jurisdictions. “Lenders do not want to step up to the plate and have any responsibility (for the condo fees). They just want to sit and let the association dangle.”

Beyond the courtroom, legislation regarding ham radio antennas is being debated, and may affect condominiums in the near future, Marcus says. Similar to the issues raised by folks wanting satellite dishes for TV reception, the ham radio antennas may, or may not, end up falling subject to FCC rules about whether associations can limit their placement. The legislation to allow antennas has 47 co-sponsors, Marcus notes, “so it may very well gain traction.”

More technology.Associations will continue to get greener, Levy predicts. “I see a big push, with more and more interest in green … all around the common areas,” he says. The associations he manages have already gotten involved in purchasing “green” energy — and banking savings over the cost of energy from NStar or National Grid, he says. “All of our common area electricity except for one property” has gone down that road, he says, and more environmentally-friendly changes are likely to start kicking in at associations in the near future.

“And I think more companies will be using condo-centric software,” he predicts. “More companies are buying software specifically designed from scratch for condos.”

Management business. Management today, says DiNocco, “is a competitive situation… Everyone is trying to hold costs.” From the management side, he notes, “margins are small because it’s a labor-intensive business.” Even as companies try to contain costs, most of the savings ends up in stable fees for associations, not increased profits for the management firms.

Levy predicts a surge in consolidations within the management industry. “I’m seeing management companies buying smaller companies,” and property management businesses that were launched two decades ago being sold to other firms as owners decide to retire.

At the same time, he predicts “a shortage of managers” as the future unfolds. “Companies are manager-constrained …. There’s more demand than there is capacity at management companies,” he says.

The Market. “I hope the new year will see more consumer confidence,” DiNocco says. With the stagnant economy, he says, many owners “have been looking at things through a negative lens,” because property values haven’t been rising (with Boston as a major exception). “I think we’ll see next year that people will be starting to look at big picture” and regain some confidence, he predicts. “There will be a lot of opportunity for people to get into the market this year.”                             

Pat Gale is Associate Editor of New England Condominium.

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