Updated Surplus Numbers

Updated Surplus Numbers
Updated Surplus Numbers: Actual surplus 2018 per audit was $85,163.
Boards 2011-2018 implemented policies and procedures with specific goals:
stabilize owner fees, achieve maintenance objectives and achieve annual budget surpluses.
Any surplus was retained by the association.
The board elected in fall 2018 decided to increase owner fees, even in view of a large potential surplus

Average fees prior to 2019

Average fees prior to 2019
Average fees per owner prior to 2019:
RED indicates the consequences had boards continued the fee policies prior to 2010,
BLUE indicates actual fees. These moderated when better policies and financial controls were put in place by boards

Better budgeting could have resulted in lower fees

Better budgeting could have resulted in lower fees
Better budgeting could have resulted in lower fees:
RED line = actual fees enacted by boards,
BLUE line = alternate, fees, ultimately lower with same association income lower had
boards used better financial controls and focused on long term fee stability

Saturday, March 22, 2014

Fireplace Fiasco Saga

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Currently, all of the fireplaces in this association have been condemned by the City of Wheaton. How this came to be is a tale of incompetence at several levels.

500 Fireplaces, and Counting

Back in the late 1970s the City of Wheaton got on board the expansion in this part of DuPage County. A tremendous expansion in south Wheaton took place and corn fields were replaced with homes, condominiums and apartments. Our association of 336 units was built as was another nearby.

In the process, something went wrong. The builder made mistakes and the city code enforcement division fell down on the job. In our HOA this showed up as no steel reinforcing installed in garage floors. But a more deadly and insidious problem was lurking within our units.

In 2010 a fire occurred in a nearby association. About a year later there was a second. It appeared the fires began with the fireplaces. This got the attention of the board at BLMH and in September 2011 an urgent safety bulletin was posted for residents. Not everyone on the board was happy about this turn of events and a few owners felt we had overstepped our bounds. After all, it was "my" fireplace stated one owner and I'll darn well do as I please.

Management and I agreed that safety was foremost and trumped any inconvenience. I recall several passionate and heated discussion I had on this subject. One was with the then president of the board. Owners would be unhappy. Of course, this would be an inconvenience. Of course, it might interfere with sales or property values. I argued the downside would be far, far worse. Compare the inconvenience of a destructive fire. Compare the "inconvenience" of possible injury or death. Compare the rise in insurance premiums not only to owners but also to the association. Any such insurance premium increase would be reflected in the owner fees. Yes, there was a larger picture here and not using one's fireplace seemed a very small price to pay and a temporary one. This would eventually be sorted out. None the less, one owner publicly lambasted the manager and questioned his judgement for bringing our fireplaces to the attention of the city.

What had gone wrong?
Apparently, 180 or so fireplaces were installed in a nearby HOA in such a manner as to render them unsafe and a hazard. At the time of construction this was not detected by the inspectors of the City of Wheaton. The problem, however, was far more extensive and included other buildings in the city. It now appears that 500 fireplaces were improperly installed. It is possible there are others.

A Safety Hazard and Other Issues
This is the latest of a series of mishaps at BLMH. Shortly after construction it was determined that there was no steel reinforcing in the garage floors. This too was an expensive problem, but was not a safety issue. How many garages are we talking about? This HOA has 84 4-car garages. The problem was an expensive one to correct. And some owners wonder "where does the money go?" Over the years some of it has been spent dealing with construction defects. In fact, more has and will be spent on these problems than on all of the road, driveway and roof replacements.

The fireplaces are a larger problem than the garage floors had been. In our HOA 330+ fireplaces were not properly installed, were not properly inspected, and then were sealed into the wall. A ticking time bomb, as it turns out.

So What is being done about this?
Fireplaces have been a discussion item at each and every association meeting at BLMH for two years. One issue was to provide a continuous reminder to residents "Do not use your fireplaces." Another was to track the progress and issues at the nearby HOA so as to be prepared for our day. A third was to come to terms with owners who expected something to be done by the board  "now." Some owners have been very impatient. It's been the position of the board that "It is your fireplace, you can replace it at any time." Of course, that will be expensive and no one wants to be a pioneer.

Throughout, management maintained a dialogue with the Building and Code Enforcement Department of Wheaton.

At times, the board calmed owners and advised patience. I actively promoted the position "Save for this, you will need funds to deal with it when the time comes." The fireplaces are owner property and were an option at the time of construction. Not all units have one. Owners have been reminded that the fireplace is their property. As such, owners need to do their own due diligence. Not all owners agree. There has been a continuous pressure on the part of some owners to push this as well as any and all other issues real or perceived, onto the board. So the board is expected to deal with the unhappiness of some owners with COD, the board is expected to figure out the fireplaces, etc. etc. etc. A former president once stated "They expect concierge service."

There is a double standard at BLMH. Some owners love to complain and then figuratively beat on the table and say such things as "I'm an owner, I expect such and such from the association." It's my opinion that the fireplaces present the opportunity for the 336 "owners" in this association to walk the talk.

2012 and to the Present
By 2012 management and the board asked for volunteer owners who would allow an inspection of their fireplaces. Few owners were willing, but the association was able to conduct an inspection of a few and that information was provided to the city Building and Code Enforcement Department. Of course, inspecting four fireplaces, or about 1% of the fireplaces on the property might not be conclusive. However, it seems likely that each fireplace at BLMH was installed improperly and not inspected properly by the City of Wheaton at the time of installation.

In the past year there have been informal, uncoordinated discussions with the Building and Code Enforcement Department. Owners who had these discussions and came to the HOA meetings reported a confusing list of requirements. Management also seemed to be getting inconsistent information. However, in December 2013 it was decided that we had sufficient information to move forward.

I suggested that a letter be written to the Building and Code Enforcement Department requesting specific guidance. The goal was to achieve some clarification. The board and management agreed and so I wrote that letter. Five scenarios had been identified:
  1. An owner felt their fireplace did not have a problem. What to do?
  2. An owner desires to remove their fireplace. What codes, permits and other requirements were to be satisfied?
  3. An owner desires to replace their fireplace with a natural gas vented unit. What codes, permits and other requirements were to be satisfied?
  4. An owner desires to replace their fireplace with a ventless gas fireplace. What codes, permits and other requirements were to be satisfied?
  5. An owner desires to replace their fireplace with an electric unit. What codes, permits and other requirements were to be satisfied?
The City Responds
The letter was mailed to the Building and Code Enforcement Department in December with copies to the Mayor, City Council, City Management and the Engineering Department. I attended a coffee with the council meeting and presented my personal perspective in a candid conversation.

The letter of response is somewhat vague. The city doesn't want to provide a design guide to the owners. Of course, the reason 500 owners in Wheaton are being made to jump through these hoops and expend several million dollars is because of a failure on the part of the city. I suppose one might argue to the contrary; yes if they had been properly installed there would be no problem. It has been said the these factory built fireplaces are "at the end of their useful life."  However, no one has issued a city wide directive stating that any and all fireplaces installed prior to 1980 are unsafe and must not be used. This is a very consistent failure to properly inspect a large number of original installations on the part of the city.

Each owner at BLMH have been given a copy of the response of the city to my letter. Suffice it to say that the city's response has generated some confusion. There is an opinion this may be intentional on the part of the Building and Code Enforcement Department.

Confusion has been pronounced by the near simultaneous announcement by the very same Building and Code Enforcement Department that they want to shift from the 2003 code to 2012 code. So which code should owners spend their money attempting to design to, and will the 2012 code increase owner costs even more?

Will this be Expensive to Correct?
The city has stated the defects must be corrected. Complete removal or replacement seems to be the only options. However, the Building and Code Enforcement Department has indicated they are willing to discuss other options. That appears to be a false hope. I say that because of what has occurred during the correction of this defect elsewhere in Wheaton.

Further more, the city insists all current codes be adhered to. That may require adding insulation and electrical outlet(s) for example.

I will be monitoring this process for consistency and even-handedness on the part of the Building and Code Enforcement Department

This will financially stress some owners. Will anyone foreclose as a consequence? I don't know, but I am considering a "foreclosure meter" to be added to this blog.

I was planning on a newer, better furnace and HVAC system and got a quote. That will not happen at this time because I have decided to allocate those financial resources to the fireplace problem. The furnace and HVAC system I have is working fine and is about 12 years old. However, I prefer to take care of these things on a "preventative maintenance schedule." In that way I avoid or minimize breakdowns. The possible energy savings and benefits of a newer furnace and HVAC will have to wait. On the other hand, the Department of Energy new, improved standard for air conditioners goes into effect January 1, 2015. That might yield some additional energy improvement and so waiting might have some benefit. On the other hand, the edict passed down by the DOE for gas furnaces, which was overturned by the courts, simply raised costs to owners with little or no benefit. I posted about this on March 9. 2013.  In other words, waiting to replace my air condition in 2015 may provide nothing more but much higher installation costs.

What will I do about My fireplace?
I am of the opinion that removal of the offending components, including firebox, flue and chimney is necessary to satisfy the city. However, if this can be done without removal of the brick or stone faux mantle, it should be less costly. I would then like to install an electric fireplace on the surface or on new framing installed in the existing faux stone fireplace enclosure. The floor and ceilings will be properly sealed, the gas line will be capped and an additional electric outlet will be installed in the opening of the former gas line shutoff.

I have been told the city won't accept this. As far as I am concerned, if all codes are adhered to then the city has no choice but to accept this. By "all codes" I mean the codes the city is enforcing elsewhere.

The Limits of Involvement of the HOA Board and Management
Now, some owners feel this is someone else's problem. The builder dropped the ball and so did the City. They also feel that the association should take these people to task and solve this.

There are some realities here. First, the HOA has 336 owners, most of whom own a fireplace and are perfectly capable of dealing with the problems caused by their appliances, furnace, air conditioner and hot water heater. This is a part of home ownership. This HOA is not an apartment complex, it doesn't have a superintendent nor is it a retirement community. It has six board members who oversee the operation of the HOA and one manager. In fact, the board is understaffed and has been for years. Why should six volunteers take on the problems of the personal property of the 330 other owners?

The answer is simply this. They should not. However, the board is also in the unique position to provide coordination and maintain the peace. Nor is there any time or money budgeted to pursue this legally. Owners are welcome to spend their personal funds in any way they want, and they do so when they are so moved.

As I said, there is and continues to be a double standard at BLMH. When the association attempts to enforce the rules, some owners will say "It's my unit and my property. I'll do what I please." A case in point is the satellite antennas on the property. These are owned by the respective owners or their tenants. The association has rules about where and how personal property can be put in the common elements. The exterior of the buildings and the roofs and grounds are "common elements." There are guidelines about where to install and if on the roof, there are stipulations to assure the roofs and trusses are protected. Yet, more than one owner has threatened legal action when the board attempted to enforce the rules. Another owner attempted to install park equipment in the common elements, there have been address markers placed on lighting standards at the street, people routinely feed the birds and other animals and then complain when mice enter the building, etc. etc. When the board has attempted to enforce the rules about these, the argument of the owners becomes "It is my property; you have no right to tell me what to do with my property." So it should be with the fireplaces. It is the City of Wheaton that has condemned your fireplace. The association issued a directive, an "urgent safety notice" when it became known that similar fireplaces were suspect in nearby fires. This was to protect the residents from themselves and their neighbors and to protect the structure of the building.  Some owners again took the position "It's my fireplace. You cannot tell me what to do." Now that the City of Wheaton has condemned your fireplace, I suggest that if you have an issue about this, then discuss it with the City of Wheaton. It is your personal property. As some owners have stated time and time again "I will do what I want with my personal property; I'm an owner." So do it! However, the association should take steps to assure that the roofs are properly repaired or sealed when you have your chimney removed or replaced. It should also take steps to assure that insulation is in place so water lines and other pipes in trussed spaces or other common areas are protected from freezing when you have the modifications made to your fireplace.

The Impact on Resale Values
Home values have taken a hit in south Wheaton. For our association, the problems include not only the fireplace issue. Our fees are higher than basic HOAs because this is a PUD or Private Urban Development. We pay for maintenance items that other residents in Wheaton are provided as part of their taxes. In other words, our owners pay twice; once to the City of Wheaton and again to the association. Furthermore, the well publicized flood issues in south Wheaton remain unresolved. The city is supposed to "operate and maintain" a storm water control system which includes Lake 3 to the north and Lake 4 to the south. However, in the four decades this system has existed under city control it hasn't done very well. The most recent flooding has again raised the specter of serious problems. These problems too, like the fireplaces, have been there all along, but have been aggravated by recent events, including the construction at the college. Finally, the "Community" College of DuPage has gone on a tax and spending spree, borrowing about $340 million in the name of the taxpayers and is busy paving its campus, installing extensive storm sewers on the western half of the campus which further aggravates an already serious situation. The college for its part seems content to build white elephants such as the hotel and 4-star restaurant, and a monument to Robert Breuder, the current president.

This was once a nice neighborhood to live in. However, anyone with some common sense would have some valid concerns about the situation in south Wheaton, and the costs it will take for the Briarcliffe Lakes Manor Homes Association to deal with these. And who is expected to figure this out? Why, the board of BLMH, of course!  As several of the owners explained during the 2012 COD hearings "This is primarily a retirement community." Really?

3 comments:

  1. Wow, you really slammed them all. Tell it like it is brother!

    ReplyDelete
  2. I apologize that some unit owners have given you a hard time about the fireplace issue. It must be a colossal headache to have to deal with this fiasco, along with all the other little pleasantries that have blessed BLMH over the past few years. It's very depressing to see the home values in other parts of Wheaton recover year over year while BLMH continues to stagnate and/or drop.

    While I understand how stressed you must be getting with all of this, I feel like this 'blame the owners' post is a bit harsh. The owners, which provide the lifeblood and literal resources for the HOA and this community to exist, are the ones getting screwed here. I'm very upset that I'm going to have to spend several thousands of dollars to remove a fireplace that I've never used and that was (apparently) improperly installed years before I was even born. Who wouldn't be?

    I have an honest question - what happens if an owner cannot "take action" to correct their fireplace (I'm assuming the cheapest option would be to have it removed). So let's just say that this is going to cost 4 to 5 thousand dollars. Is there going to be a 'deadline' as to when the corrective action must be taken? What is the consequence for not doing so? If I don't have 5 grand laying around in a bank account, what is expected of me to do? Maybe these would be questions for the city of Wheaton and not you, but you might know as you seem to be a pretty smart guy.

    ReplyDelete
  3. One of the problems in an association as large as BLMH is the size and diversity. Yes, I was harsh, but not nearly as harsh as a few of the owners who treat the board in this HOA as servants. . In fact, this post was about as far as I can go and retain some civility. What has occured at BLMH is a "raw deal" and the residents of Wheaton should be outraged. this problem is a lot larger than our little HOA.

    Board members are not on the board to deal with the problems concerning the personal property of other owners, with the exception of dealing with rules violations (for example, an automobile parked in a "No Parking" zone. On the other hand, each and every owner at BLMH is an equal owner; we all pay fees, have the same problems and the same issues. So why is it some owners expect the "board" to go to the mat with COD? It is really unfair of any owner in any HOA to expect board members to resolve issues of this type. Board members have specific duties and responsibilities.

    On the subject of "how to pay for" this fireplace problem, it is useful to remember that the board is comprised of owners who have fireplaces.

    If you want to have a frank conversation about this and how to deal with it, come to the next association meeting. All owners are invited. I assure you, I will be candid.

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