By Don DeBat

 Several Chicago and Illinois condominium owners who are fed up with being ripped off by management companies who charge excessive fees to access legal documents are fighting back with class-action lawsuits, legal experts say.

On November 20^th, CondoCerts.com Inc., a national web database that sells statutorily mandated certification documents to owners selling condos in Illinois, was hit with a $5-million punitive class-action lawsuit from sellers who claim it’s illegal for the website to charge “more than the reasonable cost of copying those documents.”

Condo owner Robert Ahrendt, the plaintiff in the class-action lawsuit, said he paid $370 for the documents he needed from CondoCerts. However, Ahrendt and other sellers say based on how easy and fast the documents were downloaded, CondoCerts is charging far more than the cost of providing them.

CondoCerts is marketed by Mutual of Omaha as an online document management service. It electronically stores the real estate documents related to condominium transactions and provides copies upon request, tasks typically handled by a property manager.

The class-action suit accuses CondoCerts of violating Illinois’ Condominium Property Act, fraud, unjust enrichment and deceptive business practices.

The suit seeks refunds of monies paid to the company as well as punitive damages and court costs for owners who paid a fee to the company for documents related to the sale of a condo in Illinois over the past five years.

Arendt is represented by Elizabeth M. Al-Dajani and Karnig S. Kerkonian of Kerkonian Dajani LLC, James X. Bormes and Catherine P. Sons of the Law Office of James X. Bormes PC, and Kasif Khowaja of The Khowaja Law Firm LLC.

Another three Illinois condominium owners filed a similar class-action lawsuit over allegations that they were charged unlawful and excessive fees for the documents needed to close on the sales of their condos by a property management company.

Condo owners John Murphy, Cecil Mathew and Nirupa Mathew, on behalf of themselves and all Illinois condo property owners, filed suit on October 5^th in the Cook County Circuit Court against Foster/Premier Inc., Homewise Service Corp. and Next Level Association Solutions Inc. for alleged violations of the Illinois Consumer Fraud Act and Illinois Condominium Property Act.

According to the complaint, the plaintiffs allege that they contacted the companies for copies of their condo disclosure documents in order to sell their properties.

To obtain the documents, the plaintiffs were allegedly charged hundreds of dollars, an amount that was greatly in excess of the “reasonable fee” covering the direct-out-of-pocket costs of providing such information and copying permitted by law. 

The condo owners are seeking an award for damages, pre-and-post-judgment interest, attorneys’ fees, expenses, costs of suit, punitive damages, and further relief as the court deems appropriate. They are represented by Charles R. Watkins of Guin, Stokes & Evans LLC in Chicago and David Fish, Kim Hilton and John Kunze of The Fish Law Firm, PC in Naperville, Illinois.

Often, sellers, buyers, brokers, attorneys, appraisers and lenders are referred to an on-line website portal to access the documents they need, which are provided in an electronic format by a third-party servicer or management company for a hefty fee.

However, legal experts say the sales of the documents often are then recycled multiple times in a single transaction and each party requesting them pays the fees.

A resale disclosure package, which includes documents and mandatory disclosures listed in Section 22.1 of the Illinois Condominium Property Act, could range in cost from as little as $200 to a whopping $1,250 or more for each party requesting the documents. Additional “rush” fees may add hundreds of dollars to the cost of obtaining the documents—even if they are stored on-line.

 “How is it legal for a for-profit management company to resell documents that belong to unit owners in a not-for-profit condo association?” asked condo owner Sara E. Benson, managing broker of Benson Stanley Realty, and president of Association Evaluation, LLC, a Chicago-based real estate data-analytics firm. “The money is not going to the condo association. It’s paid to the management company or third-party provider—entities that do not own the documents.”

Benson believes that providing documents should be included in the management contract’s scope of services. Also, governing documents and resale information should be posted on a password-protected website for all owners, so they can be shared with prospective buyers at no cost, she said.

Because failing to provide documents to the seller as required by the Illinois Condominium Property Act (ICPA) can kill the sale of a condo, Ahrendt, one of the class-action law suit plaintiffs, argues that sellers are stuck paying the unfairly high fees or risk the sale of their real estate.

Ahrendt said he was charged a total of $370 for access to the documents, including two unexplained $20 service fees. Within minutes of receiving confirmation that the transaction went through, Ahrendt said, he received an email saying the documents were ready for download.

The suit claims that obtaining copies of the documents filed with the Recorder of Deeds office typically costs about $2.50 and calls CondoCert’s fees “unreasonable” in light of the fact that they are digital and were immediately accessible.

“Plaintiff, and other similarly situated individuals, had no choice or option but to pay the unreasonable fees and costs charged by defendant to obtain and access the ICPA documents in order to comply with the statute and the terms of the real estate sales contract,” Ahrendt’s complaint stated.

According to the suit, the document-servicing company’s conduct caused Ahrendt and other similarly situated individuals to suffer harm by depriving them of a choice—charging an unlawful and unreasonable fee for the documents, forcing them to pay the unlawful and unreasonable fees in order to comply with the Illinois Condominium Property Act—in order to convey the condominium unit.

Necessary documents also include a statement of any liens or other unpaid assessments against the unit, insurance information, rules and regulations, outstanding association loans, and other information common to the sale of a condo, some of which should be publicly available.

Ahrendt said that after he received a written purchase offer for his condo in May of 2017, he was instructed to use CondoCerts to obtain the documents, and was forced to pay the $370 in fees or risk losing the sale.

“To be clear: a selling unit owner’s failure to turn over the Illinois Condominium Property Act (ICPA) documents to the potential buyer will terminate a real estate sale and the selling unit owner could be precluded from selling his own real property,” the complaint said. “This can cause litigation, monetary and nonmonetary damages for seller.”

Among the four counts in the complaint, Ahrendt and the sellers said CondoCerts violated the ICPA, as the statute caps the “reasonable fee” associated with copying and providing the documents to the direct out-of-pocket cost incurred by the provider.

Ahrendt alleged CondoCerts has basically no cost on its end to provide the documents, as evidenced by the speed with which the documents are provided, the suit claims the $370 is not “reasonable.”

Other counts in the suit include allegations CondoCerts violated the Illinois Consumer Fraud and Deceptive Business Practices Act and that it unjustly enriched itself.

The complaint asks the court to certify a class including anyone who paid CondoCerts for the Illinois Condominium Property Act documents dating back to November 20, 2012. The complaint also seeks more than $5 million in damages, interest and court costs for the case.

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For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.

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“Novice buyers often fall in love with the decorative staging or the lakefront view of a for-sale unit,” said Sara E. Benson, a Chicago real estate broker and appraiser with more than 30 years of experience.

“However, you need more high-tech inside information than typically available on a Multiple Listing Service printout,” advised Benson, CEO of Association Evaluation LLC, a Chicago-based real estate data-analysis firm. (www.AssociationEvaluation.com)

Working as an exclusive buyer’s broker for decades, Benson always did the behind-the-scenes condo-investigation homework for clients. On every deal, Benson dug into the condo documents—budgets, board minutes, history on special assessments, status of reserve funds, and common-area conditions before she let a buyer blindly sign a sales contract.

Why? Because more than half of the 337,000 community associations in the U.S. are facing “serious financial problems,” reported the Community Associations Institute. And, 72 percent of association-governed communities were underfunded in 2013, according to Association Reserves, a California-based company that helps associations with budget and operational issues.

In 2012, Benson utilized her real estate appraisal background to develop a unique algorithm analyzing more than 140 data-points regarding the internal workings of community associations. Using the data, she commissioned a team of computer scientists and programmers to create a new, patent-pending scoring system—the “Private Association Rating”—or PARScore®, a revolutionary new high-tech, data-driven analytics process.

So, how does a condo shopper obtain the often hard to get financial information? The simplest way is just ask for it, and make the deal contingent on getting the information.

“You should insist that your Realtor or real estate attorney attach a special “Condominium Association Inspection Contingency Rider” to the contract to make completion of the deal contingent on receiving important documents and often hidden financial information.

The rider requests the following information: Declaration or Covenants, Conditions and Restrictions (CC&Rs), association rules and fine schedules, current and prior year’s operating budgets, most recent 12 months of board minutes and audits.

The rider also requests most recent reserve study and reserve study review, current reserve and operating account balances statement, lawsuit disclosure statement, owner-occupancy disclosure statement, life safety completion statement, and most recent 24 months of special assessment history disclosure.

The Contingency Rider also requires the seller to pay any expenses related to gathering the documents and providing them to the buyer.

The Contingency Rider also includes a new benefit—a Buyer’s Inspection Notice—which calls for visual examination of the property’s commonly owned elements, such as recreation facilities, swimming pool, fitness center, parking, elevators and common roof deck. The prospective buyer pays for the visual inspection as part of the PARScore® fee.

While surfing the web, a Chicago-area condo shopper found Association Evaluation through a Google search.

The buyer, who plans to move from north suburban Gurnee and hopes to buy a condo in southwest suburban Oak Lawn, downloaded the free “Buyer Kit,” the Condominium Association Contingency Rider, and the HOA Contingency Rider using the following links:

• Buyer Kit: https://associationevaluation.com/buyerkit/

• Condo Rider: https://associationevaluation.com/wp-content/uploads/2014/06/AE-Condo-Inspection-Rider.pdf

• HOA Rider: https://associationevaluation.com/wp-content/uploads/2014/06/AE-HOA-Inspection-Rider.pdf

The buyer also asked Association Evaluation to complete a PARScore® evaluation on the Oak Lawn condominium he plans to buy. He already has received the association’s declaration, bylaws and insurance certificate. “Financial information and other documents listed on the Association Evaluation website have been requested,” he said.

“Today, potential buyers of condos or homes in HOAs have access to digital tools that de-clutter murky data in favor of transparent information that actually empowers the consumer in advance of their purchase,” said Benson.

The Association Evaluation team already has captured more than 50,000 Chicago-area and Illinois condo associations and HOAs in their database, and has completed hundreds of PARScore® reports from Bethesda, MD to Palm Springs, CA.

Through the proprietary algorithm, PARScore® provides a standardized rating between 400 and 900. Every association is assigned a unique Permanent Identification Code (PIC). More than 140 data sets are analyzed and scored against the coded individual associations by using the patent-pending PARScore® point system.

Depending on the number of units in the condo building, the cost of a PARScore® typically ranges from $300 to $850.

Collected data includes direct investigations with association directors and property managers, as well as on-site inspections of the communities. Additional data sources include monitoring corporate filings such as lawsuits, judgments and bankruptcies.

Financial reporting includes verification of operating and reserve-account monies. Board minutes are examined for adherence to standard accepted business protocol procedures and to ensure against unexpected and costly special assessments that have been discussed by the association’s directors, but not yet levied at the time of sale.

A check for date of last reserve study and date of last financial audit also serves to greatly reduce risk. News, Internet and media sources are consistently monitored for each association.

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.

The post Condo Buyers Should Never Buy Blind Without Insider Info appeared first on Association Evaluation LLC..

Home buyers and owners seeking to refinance will find a lump of coal in their Christmas stockings thanks to President-elect Donald Trump.

Economists say mortgage rates in early December skyrocketed to a high for 2016 in anticipation of higher inflation under President-elect Trump’s administration and a long-forecasted Federal Reserve Board (Fed) interest hike this week that are expected to push the cost of borrowing higher.

Eyeing the prospect of a more vibrant economy in 2017 and more rapidly rising prices, lenders are hiking interest rates, experts say. Economists are predicting home-loan rates of 4.5 percent by the end of 2017.

Freddie Mac’s latest mortgage-rate survey posted an average of 4.13 percent for benchmark 30-year fixed rate home loans—the largest interest rate for that loan in 2016.

According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year loan jumped to 4.13 percent on December 8th from an average of 4.08 percent a week earlier. It was the sixth week in a row that rates moved higher. A year ago, 30-year loans averaged 3.95 percent.

The 4.13 percent rate hike boosts the typical the monthly payment on a $200,000 mortgage about $6 a month.

Fifteen-year fixed rate loans averaged 3.36 percent, up 3.34 percent a week earlier. A year ago at this time, the 15-year fixed-rate loans averaged 3.19 percent.

“The 10-year Treasury yield dipped this week following the release of the Job Openings and Labor Turnover Survey,” said Sean Becketti, chief economist, Freddie Mac. The average 30-year mortgage rate started the month 18 basis points higher than this time last year, he said.

Long-term home-loan rates are not set by the Fed. They are tied to the yield on 10-year U.S. Treasury bonds. Ten-year Treasury bond yields have risen sharply to 2.35 percent from 1.6 percent in the third quarter of 2016, pushing loan rates higher.

“As rates continue to climb and the year comes to a close, the December 13th-14th Fed meeting will be the talk of the town with the markets 94-percent certain of a quarter of 1 percent rate hike,” Becketti said.

Higher interest rates have caused refinancing activity to plummet 28 percent in November. However, home loan applications for home buyers are still marching along at a strong pace because many “fence sitters” are purchasing now to avoid higher rates later.

If you are planning to buy a home or condo before higher rates price you out of the market, there are a few facts you should know:

• History is on your side. On the positive side, home-loan rates still are historically low. The annual average rate from 1972 through 2011 was higher than current rates. In 1999, benchmark 30-year mortgage rates were 8.15 percent.

• Lower down payments available. New programs at Freddie Mac and Fannie Mae allow the secondary mortgage market gurus to purchase loans from lenders with lower 3-percent to 5-percent down payments, opening the homeownership door to more young, first-time buyers.

• More lenient credit scores. The average FICO score for home buyers obtaining mortgages backed by Freddie Mac currently is 750, a relatively high score. However, if a borrower is approved for a Federal Housing Administration-insured (FHA) loan, the score averages only 700.

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.

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This week, we delve into the dirty bedbug problem plaguing the entire nation.

Don’t Let the Bedbugs Bite!

According to a recent report issued by the US Department of Housing and Urban Development, bedbug infestations have become a serious problem in housing throughout the country. In recent years bedbug infestations have increased dramatically in all 50 states, reports the National Pest Management Association, which tracks the little critters. In 2000, bedbugs were a growing problem for only 25 percent of pest-control professionals. By 2010, a new survey found the pest experts were treating the bedbug epidemic 95 percent of the time.

Bedbugs thrive on human blood. They hide until they hunt for nourishment, which they typically do under cover of darkness. Amazingly, these pesky night biters can go for a year without food. You may not even know you have them until you wake up with small red welts on your skin – often three in a row. They will bite anywhere, but prefer soft spots on the body such as the inner arm, stomach, neck, breasts, or behind the knees.

Pest-management experts say bedbugs are on the rise because people are traveling more often to exotic locations and some are bringing them home. Bedbugs are especially attracted to environments inhabited by large numbers – their primary food source.

The environments they seek not only include condominiums and cooperatives- both luxury and modest – but apartments, hotels, hospitals, and assisted-living centers. They are equally fond of fitness center gym lockers and department store dressing rooms.

Scratching at the Problem

Take the case of the condo renter who woke up one morning with what looked like a few bug bites. She contacted a doctor friend and he said they looked like bedbug bites. The concerned renter spoke with her landlord, and an exterminator and he instructed her to look for signs of bedbugs (markings on sheets and shell casings), none of which were present. The exterminator said without such evidence, it’s difficult to tell if bedbugs are present and it might take at least a month to find such things.

“He gave me the number of a dog scene service,” the renter said, “Dogs can trained to locate live bedbugs when they are not visually present.” The renter asked the dog service to come out to check the apartment. “The owner of the dog service said the animal sensed bedbug activity in one corner of my box spring, but nowhere else in the unit. He could not, however, find any physical evidence, but he did believe- consistent with the bites I had received and the dog’s indicators – that there were bedbugs in the unit. He believed the infestation was very early and said it could be just one or two bugs.”

Not wanting to wait or let the problem worsen, the renter asked an exterminator to come and spray the entire apartment, and a second treatment was also scheduled. “I have also taken the additional precautions of washing and drying all of my linens and clothes in the entire apartment. The good news is that since they sprayed, I’ve had no new bites,” she said.

Bedbugs travel easily from unit to unit through electrical outlets, under baseboards, and across hallways. They hitchhike on luggage, clothing – and even pets. They do not distinguish socioeconomic classes.

The good news is that they won’t kill you and they don’t transmit disease. The bad news is that they do cause health problems, such as varying degrees of skin irritation due to itching, and can cause allergic reactions in some people, which may lead to secondary infections. They may also cause stress, anxiety, and insomnia.

As an owner of condominium or a cooperative, it is your duty to immediately inform your board of directors if you have the slightest suspicion that bedbugs are present. Just one week is a virtual eternity of breeding in the bedbug world. The board must quickly conduct its own investigation. Ultimately, it has the legal responsibility and duty to deal with the issue.

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This week, we continue our exploration with disturbing stories out of Michigan and New York.

Human Garbage Dump in Michigan

When inspectors checked a unit at the Wingate Condominium Association, just south of Ann Arbor, Michigan, they found rotting meat in plastic bags, decaying animals, animal feces, money strewn throughout the debris, around 30 bicycles, “unknown soft items” in various states of decay, and mold and raw chicken stuffed in the mailbox. Mice and rats were living in the heating vents and ducts of the low-rise property. Because their skin felt like it was being bitten by tiny insects, building officials wore disposable, protective outerwear and respirators while inspecting the home.

“It’s absolutely the worst scene you can imagine, in terms of just the nightmare of decaying food and rodents,” said township attorney Doug Winters. “It’s almost like a human garbage dump.” The condominium association and its property management company had to be ordered by a court to have the abandoned property completely cleaned and cleared.

New York Cleanup  

In one chic Upper East Side co-op, a reclusive owner had lived in the building for 20 years and had never permitted anyone into her apartment. It wasn’t a problem until a water leak began infiltrating the unit below.

“The entire apartment, floor to ceiling – and they were 10.5-foot-high ceilings – was filled with garbage bags,” recalls the board president. The debris was so thick that initially, the plumber could not find the source of the leak.

When the shareholder refused to work out arrangements with the board, they sued for eviction, arguing that the shareholder was in violation of her proprietary lease by failing to keep her unit in a habitable condition. She was given an ultimatum: either clean up or leave.

Suing for eviction was beneficial. The shareholder hired an attorney, whom the board insisted come out and personally inspect the apartment. That did the trick, said the president. The shareholder signed an agreement stipulating that she would remedy the problem within a certain time period, and if deadlines were missed, she would pay a fine. The agreement also gave the board the right to inspect her apartment on a periodic basis.

Is Hoarding Entertaining?

Apparently, Americans find hoarders fascinating. Recent series of reality television shows and documentaries have included TLC’s Hoarding: Buried Alive and A&E’s popular Hoarders. But when a hoarder lives next door or across the hall, it isn’t entertaining in the least. In fact, it’s a healthy and fire hazard.

Whether treasure or trash, compulsive hoarding is characterized by the excessive acquisition of stuff- mostly useless- and the inability to discard it. Hoarding has been associated with health risks, impaired functioning, and poor sanitation, and it negatively impacts personal and familial relationships.

Many hoarders have piles of debris to the ceiling with tiny pathways cutting through the clutter. Others have to climb over mountains of trash in order to move around. Hoarding becomes problematic when it crosses the line into health, safety, sanitation, and welfare issues.

Amid the piles of debris are often found rotting food, maggots, rats, roaches, vermin of every type, and animal feces. Hoarders can be difficult to spot, and an association may not know a problem exists until an emergency erupts.

“Hoarders tend to be antisocial and often won’t let anyone into their units,” said Tom Skweres, president of Wolin-Levin, a Chicago-based property management firm. Symptoms of hoarding may include foul odors, insects or vermin coming from a unit, and window blinds that are always closed.

Miami property manager Gloria Donnelli, owner of Elite Management Associates, said that she has had to call the fire marshal to explain the situation to owners. Her management company posts signs that there will be a fire department inspection on a certain day and time. Upon the department’s inspection, she then has the firemen explain the life safety issues involved with hoarding. They also explain the danger involved and how the situation puts other unit owners at risk.

“In Chicago we deal with this on a frequent basis,” said the late Mark Pearlstein, a condominium attorney. “The first step is to contact the family, but in most cases family members want nothing to do with the individual. The second step is to contact the neighborhood community police officer, who, if they respond, will notify the Board of Health and may refer the individual to a care facility on a temporary or permanent basis.”

Pearlstein stated: “More often, with a younger person, we advise the owner with a cease and desist notice that they have 48 hours to clean the  unit or we send in ServiceMaster to clean the premises and restore it to a sanitary condition. If the owner resists access, we seek an emergency injunction. Management or staff will often find insect infestation, thus justifying the emergency.”

In dealing with a hoarder, David Hill, an Atlanta, Georgia, community association manager, found that “in the end, the association had to obtain a court order. By the time we were able to enter the unit, the hoarder managed to accidentally burn the building down.”

Living inside a community-governed association requires neighborly involvement. Be sure to look for warning signs of hoarding and be vigilant about any insect or vermin infestations in your building.

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Last week, we talked about the ways that your HOA can unwittingly be stripped of their monies. This week, we talk about the signs that your HOA might be the victim of embezzlement. There are many clues to embezzlement, but the primary clue that theft or misappropriation of funds is occurring is

Although fraud activity may continue for years – even decades – the typical fraud lasts for approximately two years. By the time others become suspicious of fraudulent activity, it has most likely been going on for quite some time -and by then, the missing money is frequently unrecoverable.

Arlen Lasinsky, director of litigation and forensics for a Deerfield, Illinois, accounting firm, describes the “fraud triangle” of white-collar crime. According to Lasinsky, the fraud triangle’s three angles represent 1) opportunity, 2) motivation, and 3) rationalization.

Opportunity presents itself when a person sits in a position of trust and control- and has access to funds. The opportunistic mechanism is engaged due to lack of oversight and proper in-place financial controls. In short, opportunity arises when one person can compromise the transaction because he or she can a) consummate, b) record, c) reconcile the transaction.

Motivation may include job loss, drug or alcohol problems, divorce, gambling problems, death of a family member, illness, or any other change in life circumstances. These all can trigger fraud.

Rationalization frequently includes an inability for thieves to see themselves as criminals. Yes, they are stealing money, but their inner voice convincingly whispers, “I deserve this.” Other rationalizing voices include, “I’ve earned this, and no one will miss it anyway,” “I’m just borrowing a little bit,” and “I’ve made so much money for this place, they owe me.”

Most cases of theft and embezzlement start out small and snowball. Flashing warning signs include the following:

• Not taking vacations;
• Being the first and last to leave the office;
• Creating a fire drill to get reports or copies of bank statements;
• Unreconciled bank statements;
• Living an unusually lavish lifestyle

Just as some volunteer presidents know nothing about how to govern, many volunteer treasurers do not know how to conduct basic accounting – and virtually nothing about budgeting. Or, conversely, they know too much about accounting and how to create false invoices, Photoshopped bank statements, and false bottoms. It’s scary, but true.

One 19-unit condominium association provided a makeshift budget to unit owners. The budget- on just one single sheet of 81/2-by-11-inch paper – simply stated, “Electricity, $250 per month, same each month – same as last year,” and so on for each subsequent category.

At that point, a few residents who actually took the time to read the numbers, doubted the treasurer could perform simple math. They started asking questions, but their questions were aggressively rebuffed: “Why are you asking me questions about the budget? Don’t you trust me? Everything is on the record. How dare you not trust me?” Later, when further pressured by one unit owner, the treasurer responded with a string of expletives and indignantly walked out of the room.

This type of highly defensive behavior combined with refusal to produce documents should be a screaming red flag – with neon-flashing chase lights – to fellow board members and owners dept in the dark. By law, owners are entitled to see all bank transactions concerning their association. Sadly, too many owners only glance at their association’s minutes and budgets and never request copies of actual bank statements. As a result, gross negligence, misappropriation of funds ,and theft may go unnoticed for years – even decades.

In the above case, and unbeknown to the other owners or board members, the treasurer was pilfering thousands of dollars from the association funds.

In addition to secrecy and concealment, other clues include boards that “punish” owners who inquire about financial matters by levying bogus fines and legal fees, and aggressive board attorneys who defend board secrecy. Trumped-up “embezzlement assessments” for the whistleblowers has even resulted in illegal foreclosure on some owners’ homes.

Non-board-member owners should ask tough questions. They are entitled to request records and to lobby for a financial audit. Transparency should always be of utmost priority for board members, especially in areas related to finance. Any form of concealment begs suspicion.

According to certified public accountant Kimberly Waite of Frost Ruttenberg & Rothblatt PC: “It’s not enough to elect a treasurer- every board member is responsible for every action of the board.” Board members have a duty and an obligation to watch the finances and set up controls to reduce opportunities for fraud and negligence.

Ultimately, your HOA is your responsibility. Be vigilant about your HOA’s accounting practices.  Be informed and demand transparency. 

The post Clues That Your HOA Might Be The Victim Of Embezzlement appeared first on Association Evaluation LLC..

Once you wade through the alphabet-soup the federal government uses to describe the nation’s newly revised mortgage-application process, understanding what you are signing will be a breeze.

First, some background. The U.S. Congress enacted the Dodd-Frank Wall Street Reform Act to help control the banking industry’s predatory lending practices, which sparked the mortgage foreclosure crisis and the Great Recession of 2008.   

Experts say the nation’s banking crisis happened because there were too many gaps in regulation and no one was looking out for the system as a whole. The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB) to prevent mortgage abuse in the future.

The CFPB was given the task of revising and simplifying the rules regarding home loan disclosures as they apply to mortgage lending under the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA).

Starting on October 3, 2015, lenders must implement the new integrated disclosure rule—called TRID—on all mortgage applications set forth by the bureau. TRID stands for TILA-RESPA Integrated Disclosure.

While the new TRID rule is designed to simplify the home loan process, it also will take longer—up to 45 days on average—to close a loan. However, under TRID, home-loan borrowers now will receive two key simplified and consolidated mortgage documents, instead of four:

• The Loan Estimate. This new mortgage document, given to a borrower when his or her loan application is approved, replaces the old Good Faith Estimate and initial Truth-in-Lending statement.
• The Closing Disclosure. This new document replaces the old HUD-1 Settlement Statement and the final Truth-in-Lending statement.

Borrowers must receive the Closing Disclosure document in writing three days prior to the closing. Any last minute changes in rates or terms trigger another three-day delay. So the borrower has time to read and understand all the terms and costs.

Now, you won’t have to be a math major to clearly see and understand exactly what you’ll be paying. The Loan Estimate will show the total loan amount, interest rate and charge, monthly loan payment, and other loan closing costs—all individually broken out.

A glance at the Closing Disclosure will tell borrowers exactly how much money they’ll be paying at the closing table, including costs for the appraisal and title search. The form also clearly shows the amount of the monthly loan payment, money escrowed each month for property taxes, homeowner’s insurance, and mortgage insurance.

So, theoretically, under TRID there should be no last minute surprises. The numbers should match the costs the borrower was originally quoted, and lenders will not be tempted to add on any hidden extra fees during the closing.  

“TRID is about full disclosure to the consumer—and it’s long overdue in association-governed communities where excessive transaction fees, document charges, and upcoming special assessments are often hidden from buyers,” said Sara Benson, president of Association Evaluation, a Chicago-based condominium-rating service agency.

“If you are purchasing a condominium, your lender will need a lot of additional information about the association in order to assess your financial ability to repay the loan,” Benson warned.

“Know Before You Owe,” the government’s new TRID website explains the new disclosure forms to real estate professionals—Realtors and lenders. It also includes “Your Home Loan Tool Kit,” a 26-page, step-by-step, home-loan application guide for consumers.

For more information, visit: http://www.consumerfinance.gov/know-before-you-owe/real-estate-professionals/.

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For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.

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Article reposted with permission from Don DeBat

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By Deborah Goonan, Independent American Communities blog http://independentamericancommunities.com/

In a recent discussion forum on rules regarding display of flags in Common Interest Communities (aka Homeowners Associations), there was some vigorous back and forth about the fact that Association-controlled communities are controlled primarily by the CC&Rs (or Declaration of Condominium) contract, rather than Constitutional law.

The classic Association Governance industry argument is that the governing documents are contractual agreements to which property owners “agree,” and that the Constitution forbids interference with, or “impairment,” of HOA contracts.

One Community Association Manager’s comment on the thread reads as follows:

“To call this a patriotic issue is fatuous at best. The number of ‘patriotic’ issues can bury an HOA or Condo with beliefs of how to showcase them. The ‘freedom’ is to make the changes in an organized fashion. If your neighbors agree, then change the docs. If not, agree to conform or sell and move on. No one is forcing you to live where you, and only you chose to live…”

Let’s unravel several untrue premises and faulty assumptions.

First of all, a buyer, or someone otherwise acquiring title to an Association-controlled property, has absolutely no control over the contents of this “contract” to which one supposedly agrees without full disclosure. It’s not as though a home buyer is instructed to sit down with an attorney prior to closing, reading and initialing each cumbersome page of Declarations of  Covenants, Conditions, and Restrictions or Declaration of Condominium, with an opportunity to ask for clarification and to negotiate the terms of the agreement with the Developer or Owner-Controlled Association.

Even if full disclosure were provided in plain language, those Declarations are subject to change significantly after purchase or transfer of title. On the day you move in, the pool is open all weekend, you can park your Ford F-150 in the driveway, and your 55 pound dog is acceptable. Next month or next year, the Board could change the rules, sometimes without a direct vote of members, depending upon the latitude spelled out in the governing documents. Or there might be a membership vote at the next annual meeting. All of a sudden, the pool is closed on Sundays, you are expected to park your truck in the cramped garage, and you must get rid of your pet unless he loses 15 pounds.

…a buyer, or someone otherwise acquiring title to an Association-controlled property, has absolutely no control over the contents of this “contract” to which one supposedly agrees without full disclosure.

Furthermore, the entire process of amending the governing documents “contract” is most often undemocratic.

The only title holders that have meaningful power to amend its terms are the majority shareholders, usually represented by the Developer, affiliated investors, or perhaps a voting bloc represented by a handful of persons who either own multiple units or hold most of the proxies. These same individuals often have the power to unilaterally amend By-Laws without a vote of membership. The truth is, a physical majority of people (homeowners) might not hold a majority of corporate voting interests, resulting in Minority Rule.

Even if that’s not the case – in the rare instance that each member owns an equal proportion of property – the homeowner must be prepared to conform to Majority Rule, subject to change at any time in the future, regardless of the resulting inconvenience or hardship.

Who, in their right mind, would agree to these terms, if given the choice?

If a buyer were writing a contract to purchase a home in a homeowners or condominium association, what would it look like?

• If HOA governing documents were valid, consumer-friendly contractual agreements, then title holders would be required to agree to any change in the terms of the agreement.
• Likewise, property owners would demand the right to withhold payment of assessments for non-delivery of services or non-performance of HOA duties.
• The HOA would not be permitted to use title holder funds to settle disputes with unit-owners in court.
• The HOA would not have the unilateral power to fine, where the homeowner is presumed guilty with the burden of proving innocence.
• Nor would title holders agree to the HOA’s right to foreclose upon private property to collect its lien on relatively small debts – often inflated by hefty legal and collection costs.

On the issue of “choice:” If one wants to own a home in many US housing markets, one is forced to hold one’s nose and take the bitter HOA pill.

In reality, the only “choice” is to simply walk away from the closing table or refuse to buy into an association governance. But when 80% of new construction is burdened by Association control, then for millions of buyers in the fastest-growing real estate markets, choice is merely an illusion.

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, Coalition for Community Housing Policy in the Public Interest (Chppi.org)

As the 2016 Presidential election campaign heats up, so do political sign controversies in homeowners associations. Here’s a perfect example from Florida, a dispute over a Hillary Clinton sign in a resident’s window.

Help Me Howard, Channel 7 WSVN, on political signs in your HOA(1)

Howard Finkelstein is Public Defender for Broward County in Florida, but he moonlights as a legal analyst for the local Fox News affiliate. According to Finkelstein’s analysis, an HOA can deny a resident’s right to display a political sign as long as their documents are “written correctly,” and if the homeowner took this to court, she would “probably lose.” However, an HOA cannot allow some types of political signs (such as the one we see in the video about gun ownership rights) and not others  a sign supporting Hillary Clinton).

That would be Selective Enforcement: that’s the kind of inconsistency that gets HOA Boards in trouble, the kind of stuff that leads to billable hours to the Association attorney to defend the indefensible. Guess who pays for this expemse? Why, that would be the members of the Association, the homeowners.

Of course, Howard brings up the standard argument that because it is not the government, a private HOA can make up rules prohibiting signs. Or, as I like to say, the standard industry claim is that the Bill of Rights Need Not Apply, including your guarantee to Free Speech under the First Amendment.

But, is that absolutely true or is it subject to interpretation?

Recent Case Law opens the door for future challenges

In 2012, the NJ Supreme Court, in Mazdabrook vs. Khan(2) ruled that an Association’s restriction against placing a political sign inside a condo unit’s window was unconstitutional under state law. Of course, the facts in Mazdabrook bear a striking resemblance to the action taken by Valencia Morris at The Enclave at Cutler Bay. Ms. Morris was threatened with a fine if she did not remove the small political sign she had placed on the inside of her unit’s window.

More recently, in 2014, in Dublirer vs 2000 Linwood Avenue Owners (3), the NJ Supreme Court upheld that the Association violated the state’s Constitution when it denied the owner of a Fort Lee Co-op the right to distribute campaign leaflets as he contemplated running for a seat on the Board.

In both cases, the NJ Supreme Court ruled that even a private organization such as an Association-Governed Residential Association, cannot restrict “too much speech” and rejected legal arguments for the Associations that a homeowner “gives up” Constitutional rights by taking title to an HOA property.

Now, some FL attorneys will argue that the NJ Constitution offers greater protection of rights involving private organizations. So let’s compare the two state Constitutions on the issue of free speech.

New Jersey Constitution, article I (4)

6. Every person may freely speak, write and publish his sentiments on all subjects, being responsible for the abuse of that right. No law shall be passed to restrain or abridge the liberty of speech or of the press. In all prosecutions or indictments for libel, the truth may be given in evidence to the jury; and if it shall appear to the jury that the matter charged as libelous is true, and was published with good motives and for justifiable ends, the party shall be acquitted; and the jury shall have the right to determine the law and the fact.

Florida Constitution, Article I (5)

SECTION 4. Freedom of speech and press.—Every person may speak, write and publish sentiments on all subjects but shall be responsible for the abuse of that right. No law shall be passed to restrain or abridge the liberty of speech or of the press. In all criminal prosecutions and civil actions for defamation the truth may be given in evidence. If the matter charged as defamatory is true and was published with good motives, the party shall be acquitted or exonerated.

Now, I’m not an attorney, but these two provisions seem to say essentially the same thing.

Are the winds of change blowing?

Allow me to leave the reader with one final thought, courtesy of the First Amendment Center at the Newseum Institute (NI). In their recent survey (6), NI asked: Does the First Amendment go too far in the rights it guarantees? Below you can see the results. (click here and scroll to page 4 for a full-screen view)

Looking at perceptions of First Amendment rights for different age groups, it’s quite clear that younger generations are not going to put up with private corporate HOAs restricting speech! Time is on our side.

References:

1) Help Me Howard, Channel 7 WSVN, on political signs in your HOA

2) Link to Federalist Society Article on Mazdabrook vs. Khan

3) Link to NorthJersey.com article on Dublirer vs. Linwood Ave.

4) Link to NJ Constitution Article I

5) Link to FL Constitution Article I

6) Link to Newseum Institute survey on First Amendment

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