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Steel Porches, Building Maintenance and Condominium Assessments

Today, while riding the Red Line L into work, I was struck by how many steel porches are rusting on Condominium Buildings.  About ten years ago, a porch collapsed in Lincoln Park.  The porch was in adequate condition by porch standards of the day, but it was pushed past its limit with nearly 100 people crammed on a porch designed for about 5 people.  Unfortunately for the owners of the building, several people were killled…and guess what, they were wealthy and politically connected.  The result: the new Chicago Porch Ordinance and the witch hunt against landlords and condominium associations to upgrade their porches.

The good news: Chicago has some great porches that are much safer than ordinarily found.  The bad news: many of the condominium conversions of the housing boom now have strong but rusty steel porches.  I remember the ballyhoo of developers discussing how great these “premium”steel porches would be.  Practically no maintenance, incredibly strong and panacea for anyone wishing to avoid the costly replacement of wood porches.

Well, think again.  Steel rusts.  And it rusts really well.  In fact, rust typically starts forming immediately after a painted steel surface is exposed to moisture.  So guess what? – you need to do regular maintenance on these porches, such a sanding, painting and testing the integrity of rusting areas.

Example:

In 1999, Developer converted 12 unit apartment building to 6 condominiums.  Each unit has “miraculously” only paid $150 per month for their assessments which are to cover primarily condominium association insurance and miscellaneous expenses.  The association does not reserve money and has not ever had an increase in assessments.  Since 1999, all of the original owners have sold and moved out with only second or third generation owners present.  The “new” roof is now over 10 years old, there have been reports of small leaks onto the ceilings of the top floor units.  Also, the “deluxe” steel porches prominently featured in the original advertisement for the condominium development have worked out well for 3 units and poorly for the other 3 units.  Apparently the porches don’t all drain outward, leaving puddles after rainstorms.  After ten years, 3 units have consistently rusty areas that really need to be fixed.  The owners are angry but can’t get the association to fix these rusty spots as this is “unnecessary.”

Solution:

Automatically raise assessment 15% each year in the budget regardless of whether the membership thinks this is a good idea to get assessments more in line passively over the next few years.   Propose a modest one-time special assessment for porch maintenance involving sanding and painting and, if the areas are significantly corroded, have an engineer prepare a report indicating that now replacement of the deck is necessary.  Then increase reserves to at least 10% of budget for the current year – this will make the association FHA compliant.  With good maintenance a steel porch can last indefinitely, but unlike treated wood, constant small amounts of maintenance are necessary.

condominium association failure

condominium association failure

You’re in a crisis, the worst kind of Condominium Association Crisis.  No one’s paying assessments and you are the only one left on the board.  This “collapse” of a condominium association can and does happen with alarming frequency.

So what can you do?  Take control.  Hire a skilled real estate attorney who understands how to get your cash flowing moving and vacant units rents.  Here’s a quick action-to-do list:

1)  Don’t Panic
2)  Determine which units are vacant
3)  Determine which units haven’t paid assessments in over 3 months
4)  File eviction actions against the units that are vacant and units that have over 3 months arrearages.
5)  Get simple possession judgments for the vacant units and possession and money judgments for the arrearage units.
6)  Once you have  possession order, simply rent the units on 13 month leases until all of the back assessments are caught up.
7)  Have your attorney monitor all foreclosure actions find out if the units are in foreclosure, being sold, confirmed sold or bank owned
8)  When the units are sold to the first non-lender in possession buyer, up 6 months of past assessments will be paid out of that transaction
9)  When you combine the rent from the leases and 6 months back assessments from foreclosure sales of the units, the association will eventually be fully caught up.
10)  Take action now – even if only 15% of your units are vacant, the association is in danger and needs to be brought back under control
11)  Look towards the future – don’t just wait for condominium questionnaire from lenders to find out your association problems – fix them now to make your building attractive:

  • Get your building FHA Approved – this is a combination of an inspection and certain financial requirements for your association
  • Improve the financials of your budget by:  Make reserves at least 10% of annual budget; Keep assessment delinquencies under 5% of budget; Make repairs on a regular basis
  • If the building is in need of lots of long term maintenance, always raise budget by 15% per year as this budget increase does not have to be approved by membership – only the board.

 

illinois past due assessments

illinois past due assessments

Should I pay them, hide or not worry about this?

The answer: If you are moving out, the assessment bill dies as it regards you at the time the unit is either sold at foreclosure or simply sold.

Another way the assessment is recovered is when the unit is leased by the condominium association.  Here’s the kicker – when you file bankruptcy, you surrender your interest in the unit, but it isn’t actually transferred to someone else, instead, your lender would eventually foreclose on the unit or take it back via a deed in lieu of foreclosure.  Not to complicate this answer, but essentially, today because of the desire to clear title of multiple mortgages, it generally takes a foreclosure sale to transfer the property to a new owner.  However, if you move out after the bankruptcy, the condominium association still has to evict you to get clearance to lease out the unit to pay association fees.  The best thing you can do is to release your interest to the condominium association so that your unit is not empty, the association stays out of default and eventually you are released from the liability of ownership in the sheriff’s sale.

Bottom line:  An occupied unit is always best for everyone.  Therefore, if you are staying, pay your assessments until you are told by the lender to leave.  If you are leaving, help the association by releasing your interest so they can rent your unit.

I can’t sell my condominium because the Condominium Association is in bad shape. Several units are paying assessments & the Association is broke. What should I do?

The answer is: Do Something!

Under the circumstances, the best thing to do is become a member of the board to help keep things moving.  At the next board meeting, suggest that the board retain/hire a law firm that specializes in eviction.  Then as your condominium budget  allows, hire the firm to evict the longest non-payers of assessments.  The law allows the association to rent the unit for up to 13 months on a single lease to recover assessments.  If the past due assessments are recovered prior to the end of the 13 month lease, the surplus is paid to the owner of the condominium unit and is allowed to move back-in.  If the assessments are not paid up, then another 13 month lease can ensure.  Pretty soon, your building will be full of paying renters, your association budget will be repaired and hopefully you can sell your unit and not at a loss!

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