Community Communication Corner

By The Numbers - The Rise of the “Over 55” Communities

Every year, I am impressed with the number of “newbies” (first-timers) that enter the world of community living by purchasing their first condominium or property that is part of a homeowners association. More impressive still, is the increasing number of folks over the age of 55 who are joining communities that cater specifically to their needs and desires. Megatrends are at work here and we seeing them trickle down to our own backyards here in CT.

More than 75% of the wealth in this country is controlled by a group of adults we call “Over 55.” The group of consumers that are 65-plus have twice as much per capita income as the average baby boomer. Is it any wonder that there are more “Active Adult” communities springing up around Connecticut than ever before? If you were a real estate developer looking for a fast-growing market segment with the means to purchase your product, you would be well-advised to invest your resources in creating communities that will attract this group of buyers whose numbers are going to continue to increase for the foreseeable future and beyond.

As a country, we have experienced a huge increase in life expectancy since the turn of the 20th century. We have added 30 years to the average life span, taking it from 46 to 76 years. Every 6 seconds, someone in this country turns 50 and one step closer to joining the “active adult” community. 55 million people in the U.S. are already members of the “Over 55” demographic. That number will double by the year 2030. These figures come to us courtesy of the Center for Mature Consumer Studies. I encourage you to visit their website at http://robinson.gsu.edu/marketing/Centers/cmcs_index.htm to learn more.

The success of these communities and the seemingly endless supply of new “Over 55” residents indicate that we will see far more of them in the years ahead. While the concept of “active adult” communities is nothing new, the diversity of amenities offered widely varies. The one thing they have in common is to restrict their communities inhabited by those who share similar and age-appropriate lifestyles. These communities are likely to thrive in the upcoming years as the numbers suggest that, as a whole, this is a financially secure group with the ways and means to live where and how they see fit. That means that as a community, they should have no problem creating healthy reserve funds to keep their common assets in top shape. Sounds like a great place to live!

I am, on occasion, asked about special communication requirements for “Over 55” communities. While that usually evokes a giggle of some little old man using a magnifying glass to read the community newsletter, the reality is that today’s “active adult” is no different than any other community member. They have just reached a certain age milestone. “55” is the new “35” and so is “65” and beyond in many cases! Community newsletters, websites, etc. are just as important in an “Over 55” community as they are in any other community. In some cases, the communications are more important as the audience is educated and takes the time to read the news of the community and to take action when needed.

Our “Over 55” population isn’t showing any sign of slowing down here in CT. I have had the pleasure of meeting and working with many residents of “active adult” communities and they have shown me that they have interests as varied as golf and tennis to scuba diving and parasailing. Some may be retired but very few that I have met plan on slowing down any time soon. I am excited to see new and viable “Over 55” community associations being born in our state. I look forward to welcoming many of these associations to CAI in the very near future.

Article from our upcoming Common Interest Magazine. To subscribe visit: http://www.caict.org/ci_subscriber.htm

Bob Gourley is one of the founders of MyEZCondo, a communications firm that specializes in newsletter production and other communication solutions for condominium associations. He also serves as Board President of Captain's Walk in West Haven, CT. MyEZCondo is a member of CAI-CT. Bob serves on the Publication Committee, Chairs the Membership and Website Commitees and was recently elected as President-elect of the Board of Directors for CAI-CT.

Is Your Association in Compliance with Changes in Fannie Mae Underwriting Criteria?

Changes in Fannie Mae’s underwriting standards for mortgages may very well create a violent storm for community associations. Lenders are now required to more carefully scrutinize condominiums and their management companies, which will ultimately mean more mortgage application denials.

Condominiums are considered to be very high risk in the current housing market since there has been a significant increase in condo owners that default and go into foreclosure. In many cases this has been caused by escalating property insurance premiums and/or major repairs due to long-term deferred maintenance which forced associations to impose special assessments.
Over the course of the past six months, Fannie Mae has gradually implemented requirements such as:

• No more than 15 percent of its association fee payments more may be more than one month delinquent,
• At least 10 percent of the association's total budget must be in reserves for capital expenditures and deferred maintenance,
• Lowering the loan-to-value ratio to no more than 90 percent for a condo resident,
• Associations must be majority owner-occupied or second-home purchasers and at least 51 percent owner-occupied if the mortgage is for an investor,
• At least 5% of the condo’s value must be derived from the borrowers’ own funds,
• Appropriate legal documentation,
• The adequacy of the association’s annual budget, and
• The adequacy of property insurance.

Although most of the major changes have been in place since February, they are just now beginning to affect the condominium market.
“Associations will be under additional scrutiny in terms of their overall budgets, reserves and delinquencies by unit owners. Throughout the Community Association Industry, we are now seeing increased client awareness of these changes at board meetings and daily telephone calls,” said Jordan Arovas at Webster Bank.

According to a Fannie Mae official, ‘requirements for condo projects are intended to ensure that the project is managed appropriately, and has adequate reserves and appropriate governing documents that will result in stability and sustainability for the entire project and its homeowners. ‘

A few energy saving tips.

Here are some energy saving tips to help reduce your electric bill this summer that we found on the internet:

Turn your thermostat up. During warm weather, set your thermostat as high as possible, given health and comfort considerations and drink plenty of fluids. Turn thermostats to78 degrees when at home; 85 degrees when away. Use fans to circulate cool air.

Close your drapes or shades. Windows are one of the largest sources of heat gain in your home. Although not as effective as exterior shading, keeping your drapes and shades closed during the day helps keep unwanted heat out of your home.

Ventilate when it's cool outside. Most areas of Connecticut have cooler nights even after the hottest days. Cut your cooling costs by opening windows when it's cooler outside than inside. In the morning, close up the house to trap the coolness inside.

Use ceiling fans wisely. Ceiling fans create enough air movement in a room to make it feel cooler by four degrees or more. They use only about as much energy as a 100-watt light bulb. Since you will feel cooler, make sure that you turn up your thermostat to 80 degrees or higher to save on your energy costs.

Eliminate wasted energy. Turn off lights in unoccupied rooms. Unplug or recycle that spare refrigerator in the garage if you don’t truly need it—this seemingly convenient way to keep extra drinks cold adds 10-25% to your electric bill. Remove the refrigerator door for safety reasons and to prevent mold.

Use appliances efficiently. Do only full loads when using your dishwasher and clothes washer. Run your appliances during off peak hours or after the sun goes down. Be sure to clean your clothes dryer's lint trap after each use. Use the moisture-sensing automatic drying setting on your dryer if you have one. When replacing these appliances, buy Energy Star products. They save up to 30 percent over standard models.

Plug “leaking energy” in electronics. Many new TVs, VCRs, chargers, computer peripherals and other electronics use electricity even when they are switched “off.” Although these “standby losses” are only a few watts each, they add up to over 50 watts in a typical home that is consumed all the time.

If possible, unplug electronic devices and chargers that have a block-shaped transformer on the plug when they are not in use. For computer scanners, printers and other devices that are plugged into a power strip, simply switch off the power strip after shutting down you computer.

Are some venders cashing in on the fuel crisis?

Recently I received a notice of increase from one of my vendors stating that they were increasing their fuel charge from $2.00 per delivery to an adjustable charge based on the average price of a gallon of diesel. My first thought was ok, oil has gone up considerably. My next thought was are they only delivering to me within a 10 mile radius? At the previous $2.00 per delivery this is about ½ of what it costs for a gallon of diesel. Even if they only have 3 of us in the same 10 mile radius we paid for that gallon of fuel used for the delivery plus some profit.

I called the company to cancel my service, to protest their cashing in on the fuel crisis, and they immediately changed there policy to offset for this obvious inequity. I imagine I was not alone in complaining and at the same time they probably had many other customers that just accepted that new charge without question.

The moral of the story is question extra charges added to your bill as this is a way to up sell and still appear to be competitive. Adding special coverage, delivery and handling, fuel adjustments, and other charges are a way to add in extra profit after the sale.

MANAGEMENT EVALUATION

An interesting feature of homeowner associations is that they are either self-managed or managed by a community association management firm under the direction of elected volunteers of various backgrounds.

Experience has shown that there are some drawbacks to this concept:

• Many associations are run more as social organizations instead of business enterprises that are comprised of assets often valued into the millions of dollars.
• Continuity in running a community association is often difficult to maintain because board members usually serve for a few years at most and there are turnover issues with professional community association management.
• Board members and managers often lack training and education.

The Community Association Institute offers professional training for managers and board members. Listed below are some pointers taken from its’ M-! 00 course material. (A highly recommended course for new board members and managers.)

What are some of the signs of a weak or ineffective management situation at a community association?

• An increase instead of decrease in action items carried over from one board meeting to another.
• An increase in unit owner attendance at meetings and complaints about poor service.
• Untimely or no response to maintenance requests.
• Inability to fill board positions – or resignations due to “personal” reasons.
• Surprise assessments or unexpected financial shortfalls.

If community associations such as condominiums and planned unit developments are considered non-stock business enterprises that are often valued in the millions of dollars, then it is necessary to measure performance of how a property is being run and have plans for maintaining and enhancing values.

There are several methods for measuring management performance whether self-managed or managed by a professional management firm.
One is an owner survey and the other is a management audit.

A management audit, sometimes called an operational audit in the commercial world, is a useful tool for measuring performance. These are the factors that are included in a review of an operation:

• Review and updating of the association’s governing documents including rules and regulations.
• Appearance and physical condition of the property .
• Owner/resident satisfaction.
• Financial condition.

Once a management audit has been completed the board and unit owners should have a good idea of where there association stands and what action may be required to shore up weaknesses.

The results of the management or operational audit would be a major input to an annual management plan.

An annual management plan is a statement of goals and objectives and includes a yearly cycle of tasks.

As stated in the M-100 syllabus, a management plan addresses a community association’s administration, governance, and community aspects.

These are the typical areas that would be included in the annual management plan:

• Rules and regulations – enforcement policies and current applicability.
• Repairs and upkeep programs.
• Vendor services.
• Communication programs for the unit owners and residents.
• Finances – Adequacy of budgets, replacement fund analysis, monthly fee collections.
• Administrative activities – meetings, elections.
• Insurance and risk management.

Periodic performance reviews and an up to date management plan will help to provide objective measures and guidelines for board members and managers.

If commercial enterprises find it useful to prepare plans and review performance, then community associations should too. The benefits far outweigh the effort and expense.

Walt Williamsen has vast experience as a property manager. He has been active with CAI-CT for many years, serving as President from 2001-2003. Walt is a frequent speaker at CAI-CT seminars and he coordinates our popular Ask the Experts: Leadership Forum program. Walt is the owner of Condominium Consulting Services, LLC.

WHEN THE BLOOM IS OFF THE MANAGEMENT ROSE……

Over the past five or so years, I have had the unique opportunity to see several sides of the association management issue while working with both boards and management companies.

At most education seminars put on by the state’s CAI chapter the topic of problematic management issues usually comes up in the Q&A sessions and based on my experience, there are more than a few situations where the board/association is not happy with the management company and similarly, the management company is not a fan of the board/association as a client.

Notwithstanding all the advances in email, instant messaging and all the other modern communication devices, I still maintain that the association management business is mostly “high touch, low tech.” In many ways, it is a relationship business.

Problems often arise on account of these typical dynamics that are common to the community association management business:

• Board members come and go;
• Managers come and go;
• Unit owners and managers with myriad personalities interact daily;
• Physical structures and properties constantly deteriorate and require constant upkeep;
• Many associations want the most service for the lowest cost; and
• Some management companies would like to provide a minimum of service for the fee charged.

In any event, CAI has many resources on how to hire a management company and how to operate a management company, but these are topics for another time.

It does not do a community association any good to be continually changing managers and management companies – and here’s why:

• There is disruption in the continuity of operations, projects, and administration.
• Records and valuable site documents are often lost in the transfers.
• Some good vendors and contractors may consider it “disloyal” to continue on.
• Financial records may be compromised (perhaps not all accounts are transferred).
• A property may get a reputation as a difficult, high maintenance client administratively, causing other companies to avoid it or to charge higher fees (i.e., combat pay).

Assuming a basic level of competence and reasonable responsiveness on the part of the part of the management company, these are pointers to consider before deciding to move on to try another management company:

1. The obvious – discuss the disappointment in performance on the part of both parties. Often a change in site personnel or board contacts will work.
2. Have realistic expectations – in most cases, an association is paying a management fee that is not sufficient to have exclusive use of one manager and the entire office staff. It is typical for a site manager to be overseeing six or more properties at one time.
3. Managers and staff should be treated with respect and courtesy. These are regular people trying to deal with many different issues with many different people, especially after unfavorable weather events. Swearing at, bullying, or otherwise belittling someone over the phone over some unresolved issue is not appropriate.
4. Reevaluate the association’s management requirements. Perhaps a hybrid type management arrangement can be discussed.
5. Consider email as a tool for conveying succinct messages. Unit owners should be encouraged to limit emails to a brief description of a problem to be resolved. (Some emails received at management offices are small novelettes that are too lengthy and take up much staff time.)

Ultimately, if you do decide to part company, both parties should “leave on terms where they can go back in and pick up their hat.” In other words, don’t burn bridges. There are numerous instances where associations and management companies have parted company and then reunited years later with good results.

Walt Williamsen has vast experience as a property manager. He has been active with CAI-CT for many years, serving as President from 2001-2003. He is currently a member of the CAI-CT Board of Directors and serves as Secretary. Walt is a frequent speaker at CAI-CT seminars and he coordinates our popular Ask the Experts: A Basic Course for Board Members program. Walt is the owner of Condominium Consulting Services, LLC.