Your participation either by attending in person or
sending in your proxy in advance is critical.
Why? This is a special
meeting like the Annual Meeting and requires 51% participation or the meeting
cannot be held.
Your financial responsibility for repairing and
maintaining the building is not optional.
Owners in a condominium are
not only responsible for upkeep of their own units but also for all the
elements in common ownership with other Association members. This means if the
garage floor needs repairing (as it does now), the Association funds (which
come from you mostly by condominium fees) will pay for those repairs.
We have limited ways of
getting money into our Association funds: condominium fees, sale of property in
common, and special assessments.
Our condominium fees are at
an all-time high price and that in combination with our large loan (which we
got to pay off our windows and balcony door project) and our small reserve fund
are driving down our property values. We currently have about 20 apartments on
the market and lenders, given our poor financial profile, are not willing to
give buyers loans. Most buyers do not purchase with cash. So if they can’t get
a reasonably priced loan, they won’t buy at the Elizabeth.
As to the Association
apartment that we recently renovated, we have been advised not to sell it because
we will not get a good sale price at this time, given all the other Elizabeth
apartments on the market.
Currently the bylaws say if
we want to levy a special assessment, 75% of the Association must agree. Since
we have trouble every year getting 51% participation for our Annual meeting and
more than 30% of our owners do not live in the Elizabeth, it is impossible to
achieve a 75% agreement for something as significant as a special assessment.
Why aren’t apartments selling at the Elizabeth?
There are three main reasons
apartments are not selling: the high condo fees with no end in sight for
additional increases, the modest amount of money in our reserve fund, and the
questionable funding for the long list of major capital improvements. Lenders
look at these three things before they will consider giving a buyer a mortgage.
I can’t afford a special assessment.
Since this bylaw change does
not address what the cost of a special assessment might be, it remains to be
seen whether an individual owner can afford a special assessment. No definitive
plan has been offered to any owner. All owners would be invited to participate
in articulating special assessment options should the bylaw amendment changing
the Association approval from 75% to 60% is ratified.
One way a special assessment
might be used is to pay off our large loan. Paying off the ECA loan early has
monetary benefits. It is estimated that if we had a special assessment to pay
off our loan, we would free up over $650,000 to use for much-needed capital
improvements, such as hallway refurbishment.
Why can’t we pay off the loan with small increases in
our condo fees?
In theory, we could pay off
the loan over a ten-year period as long as we are not hit with unexpected large
capital expenditures. The cost of paying off the loan is significant as
detailed above and our property values will continue to fall. With old
buildings, we should expect the unexpected relative to urgent needs to repair
something. No amount of strategic planning can make up for a limited capital
reserves fund and the burden of carrying a large loan. That is why 6 out of the
7 board members are supporting the special assessment bylaw change.
Did we really need to take out that loan?
This is water under the
bridge but Association members are asking this question.
Yes, we needed to replace the
leaking window and doors which were driving up our energy costs and ruining the
quality of life for some unit owners, given all the dirt and grime coming in
through the worn-out gaskets. Repair of
balconies and the façade provided not only timely safety measures but also
improved the real estate appearance of our building. As an owner since 1978, I know people began
lobbying for window replacement in 1997, when I moved back into my unit after 5
years of living elsewhere. It was then that I saw and experienced how run down
the Elizabeth had become.
Since our Board knew it was
not possible to levy a special assessment and get 75% agreement, taking out a
loan was our only option.
What are the consequences if I don’t vote my proxy?
Your inaction would be a NO
vote, indicating that you do not want to take responsibility for what happens
to our plummeting real estate values and the upkeep of our building. Other
condominiums in Montgomery County, Maryland, have gone in to financial failure
and building disrepair to bad effect.
Condominiums in
crisis: Financial troubles put many communities at risk
Why should I approve the bylaw pertaining to how
directors serve?
The main reason is to provide
continuity so that board members have enough time to finish major projects.
More information below in previous blog post.
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