Acclamation vote OK but developer in charge

Q. Recently, our developer turned over control to the unit owners. Owners were asked to submit their name if they wanted to be on the board. Since the developer retained one unit, he was eligible for a place on the board. At the meeting to elect the first owner board, only two residents and the developer ran. We were told there was no reason for a formal election and the board would consist of the developer and the two other residents.

After the election meeting, the owners were advised that the officers would consist of the developer as president and treasurer and one owner would be the vice president and secretary. We also found out that the management company for the association was a relative of the developer. I see nothing but conflicts of interest. What do you think?

A. If the number of announced candidates for the board equals the number of positions and all candidates will serve the same term, the nominees may be elected by acclamation. This form of selecting the directors must be done by a motion adopted by the unit owners at an open meeting. The election of officers must be done at an open meeting. Since the unit owners represented a majority of the board, I do not understand why these new directors would elect the developer as president. The purpose of the turnover process is to enable the owners to control the association.

Under Section 18(a)(16) of the Condominium Act, the board cannot enter into a contract with a company owned by a board member or whose family members have 25 percent or more interest without notifying the ownership. The owners must be given an opportunity to request a vote on the contract. If the owners were not advised of the relationship between the developer/board member and the management company, the management agreement is not valid.



Q. After the transfer to unit owner control, our new board adopted a rule to impose a $500 fee for moving into the building and a $500 fee to move out of the building. The fee is non-refundable if the unit is not sold but is fully refundable if the unit sells to a new owner. In effect, this rule makes it more expensive for renters.

This charge seems to create two classes of ownership and discriminates against those who rent.

Is there any way to avoid this fee?

A. Moving fees are not illegal if they are reasonable and apply equally to resident owners and investors. If your information is correct, the rule clearly discriminates against investor owners if the fee is not refundable after a change in occupancy arising from a lease. You have a valid basis to contest the fee.



Q. My wife and I purchased a condo. The building's 35 units were sold except for one the developer was using as a sales office.

In September 2006, we were advised in writing regarding the need for owners to sign a lengthy document to replace the initial declaration. The new declaration encompasses more units than originally planned. We objected to the proposed change because it represents a significant departure from the organizational structure in our original declaration. This past year, we received a letter from the management company stating the terms of the new declaration were in effect.

Can this new declaration be valid if it was not approved by 100 percent of the ownership?

A. Under the Condominium Act, a developer may reserve the right to add more units to the condominium project and change the percentages of ownership for each unit. Owners do not approve this "add-on" amendment to the declaration because the developer has the legal right to add the units.

The only other type of amendment that does not require owner approval is a change to the document made solely to conform with current law. If the declaration does not conform to Illinois law in some respect under Section 27 of the Condominium Act, the board may amend the declaration as necessary.



Q. I own a condo in Chicago. Seventeen of the building's units have balconies.

At the last meeting, the board announced that owners with balconies were responsible for repainting them.

Though I felt balconies were common elements, I got three estimates to paint my balcony and then asked management to arrange for the payment of my contractor. Management has refused to become involved in this project.

What is your advice?

A. The board may determine whether balconies must be repainted. Balconies are limited common elements. If the declaration makes owners responsible for limited common element repairs, the board should retain one contractor, determine the scope of work and bill each unit owner for his share of the project.

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Mark Pearlstein is a Chicago lawyer who specializes in condominium law and is chairman of the legislative committee of the Illinois chapter of the Community Associations Institute. Write to him c/o Condominiums, Real Estate, 4th Floor, Chicago Tribune, 435 N. Michigan Ave., Chicago IL 60611. You may e-mail questions to realestate@tribune.com. Sorry, he can't make personal replies. Answers will be supplied only through the newspaper.

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Radio towers get the nod

A Hispanic broadcaster's plan to erect several radio towers on partially wooded land near an American Bald Eagle habitat alongside the Little Calumet River is being welcomed by West Pullman residents because the project also will create a noise buffer between residential and industrial properties.

As part of Univision Radio Illinois Inc.'s plan to replace towers at 105th Street and Woodlawn Avenue with others at 359 W. 127th St., the broadcaster has agreed to landscape the site, particularly along 127th Street.

Univision is under contract to buy that land from Mittal Steel by the end of the year and will erect six 195-foot, self-supporting lattice radio towers, three satellite dishes and a building to store equipment.

The landscaping will create a noise buffer between the residential area north of the site and industrial properties to its east and west, a Chicago Department of Planning and Development project manager told Plan Commissioners last month.

The Plan Commission approved new zoning for Univision's site and the radio tower installation as a commercial planned development.

Univision will also donate funds to the city for the restoration of 10 to 15 acres just south of its site along the Little Calumet.

The U.S. Fish and Wildlife Service says a pair of federally protected American Bald Eagles nest there.

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Bankers see slump dragging on into 2009

BOSTON - U.S. housing prices will continue to decline at least through the end of next year and may not begin creeping upward again until 2010, executives from the nation's biggest mortgage financiers said last week.

Officials with government-sponsored mortgage companies Fannie Mae and Freddie Mac and CEOs from two major mortgage banks told the Mortgage Bankers Association's annual convention that the continuing spike in foreclosures and a glut of unsold homes will prevent any quick price rebound.

"It's going to be a long time before we see it bottom out and recover," said David Lowman, chief executive of JPMorgan Chase & Co.'s Global Mortgage unit. "There's too much inventory already in the marketplace."


Lowman and the three other participants in a round-table session before most of the convention's 4,000 participants differed slightly on the size of price declines still upcoming, but they agreed no price recovery is likely until at least 2009.

"I think this year we will see a 2 percent decline in national home prices, and we're projecting about a 4 percent decline next year," said Thomas Lund, an executive vice president at Fannie Mae.

Prices will likely flatten out in 2009, Lund said, before gradually rising.

Lowman said it might be 2010 before the price decline ends.

In certain coastal markets where speculative investing drove up prices rapidly early this decade, the price correction "could be quite severe," said Paul Bibb, CEO of National City Mortgage.

In Midwestern housing markets heavily hit by job losses, "the softness in those markets is going continue to depress home prices," Bibb said.

Patricia Cook, chief business officer of Freddie Mac, the nation's No. 2 buyer and guarantor of home loans behind Fannie Mae, said investors in mortgage-backed securities likely will remain wary of committing more money to the cash-hungry market until they see a slowing in foreclosures.

But that's unlikely in the short-term, since many at-risk homeowners will see their adjustable mortgages reset to higher interest rates in coming months and years.

The Federal Deposit Insurance Corp. estimates 2.5 million mortgages made to borrowers with weak credit will reset at sharply higher rates by the end of 2008.

"Until we see that, I think it's going to be hard for investors to come back in a meaningful way," Cook said. "We're probably in for a reasonable period of time that we'll see continued slowing" in the housing investment market.

Cook and Fannie Mae's Lund expressed support for legislation that aims to infuse more cash into the market and give lenders more leeway to help at-risk homeowners refinance. Some lawmakers, mostly Democrats, have been pressing regulators to allow Freddie and Fannie to increase their holdings of mortgage debt.

However, the federal regulator of Fannie and Freddie has declined to increase their investment caps, and the White House has said it opposes raising them until supervision of the two is tightened.

Higher investment caps could restore investor confidence that's now lacking, Lund said.

Lowman and Bibb agreed but suggested such expanded authority should be temporary.

"We are in crisis, so we support temporary measures," Lowman said.

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Adult communities becoming a debt-end

While the mortgage markets readjust after the late summer credit crunch, a growing number of older people are taking on more mortgage debt.

Take Celeste and James Kuta. The couple recently put a deposit on a new home at Carillon at Cambridge Lakes in northwest suburban Pingree Grove. They plan to sell their home in Streamwood next spring and move to their new house.

Though they own their free and clear, they're taking out a mortgage to buy the new house. That way, they figure they can use some of the proceeds from the sale of their old home. "We have the benefit of a large amount of equity," said Celeste.

The Kutas aren't sure how much of the new house they'll finance. That depends on how much cash they decide they want to walk away with and what they want to use it for.

The Kutas aren't unusual.

Families near or in retirement are getting more in debt, according to the Employee Benefit Research Institute. A big factor is housing debt.

Households headed by those 55 or older with housing debt increased to 36 percent from 24 percent between 1992 and 2004. The study attributed the rising debt burden to homeowners who take some equity out of their homes because they need cash. Or they buy a new house and need to finance part of it. More older people are taking out reverse mortgages, too.

The next generation of retirees will be even more likely than the current one to tap their home equity and go into debt, according to the Center for Retirement Research at Boston College, because Baby Boomers are not prepared for retirement.

At local active-adult projects by Cambridge Homes, about 40 percent of home buyers have a mortgage. That compares to about 20 percent five years ago, said Dave Smith, vice president of marketing at the Libertyville-based company.

As a group, older buyers tend not be too forthcoming about their finances, he said. Besides, he said, a growing number of buyers in active-adult communities are still working, so they're a little more confident about making house payments every month.

Home State Bank in Crystal Lake is making more mortgages to older people. Greg Grojean, group senior vice president at the bank, said people who aren't moving and want to get cash out of their homes are opting for long-term fixed-rate mortgages instead of home-equity loans. These borrowers tend to have no mortgage, Grojean said.

Home State Bank is also getting more requests for reverse mortgages. The bank doesn't offer the product now, but plans to do so in the next few months.

Despite the turmoil in the mortgage markets, money is available. The Kutas have a fixed-rate mortgage lined up through the lending arm of Cambridge Homes. "It was very cut and dried," said Celeste, who would never consider an adjustable-rate mortgage because she thinks it's too risky.

By law, lenders cannot discriminate against older people, said John Mechem, a spokesman at the Mortgage Bankers Association, Washington, D.C. The only product that does consider age is the reverse mortgage. (Borrowers must be 62.)

However, lenders do judge the borrower's profile, which may change with age. Many older borrowers will benefit, in the lender's eye, by having a long credit history. Of course, lenders also look at the borrower's monthly income, which may have taken a hit.

"If some people don't qualify on traditional income guidelines, we dig a little deeper," said Grojean about his bank.

While underwriting standards have changed because of the subprime mortgage mess, "People with good credit can get a good-quality mortgage," said Grojean. He added that those with a low credit score or income should be prepared to make a bigger down payment.

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Jane Adler is a Chicago-area freelance writer. Write to her at Senior Housing, c/o Chicago Tribune Real Estate, 435 N. Michigan Ave., Chicago, IL 60611. Or e-mail realestate@ tribune.com. Answers will be supplied only through the paper.

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Temporary nests

Don't tell business traveler Mike Napoli there's no place like home.

He has found a way wants to re-create that feeling as closely as possible even on long trips.

When Napoli and his colleagues spent several days in Chicago last year for a trade show, they chose corporate housing over a hotel.

"It's certainly more relaxing than a hotel and allows me to get up in the morning and make a cup of coffee and get some breakfast," he said.

When they stayed in a hotel on another visit, "we bought a bunch of pizza and kept it in the refrigerator when we worked at night and wanted a snack. Corporate housing is easier," said Napoli, who works for a company that sells floor coverings.

According to the Corporate Housing Report 2007, published by the Highland Group, a management consultant, there were an estimated 3,618 units dedicated to corporate housing in the Chicago area in 2006, a 14 percent increase from a year earlier. The report defines corporate housing as furnished apartments that include utilities, linens, utensils and other necessities, typically rented 30 days at a time.

The 2007 inventory of these units is projected to increase by 6 percent, while the occupancy rate in Chicago in 2006 was 88 percent. On average, states the report, corporate housing occupancy is considerably higher than that of hotels. The average length of stay in corporate housing in Chicago in 2006 was 68 days at an average rate of $99 a day.

In contrast, the average daily rate for a hotel room in the Chicago area was $122 at year-end 2006, but rates were "significantly different" when looking at just downtown hotels, which were as high as $180 for year-end 2006, according Duane Vinson, vice present at Smith Travel Research.

"In general, customers have become more sophisticated about their travel options and preferences. This has been particularly true in the last 10 years," said Peggy Berg, president of the Highland Group. She added that the product has improved accordingly.

Thomas Golden, who spent several months in Chicago on an assignment for the U.S. Postal Service, had such a "turnkey operation" in mind when he chose corporate housing downtown. "I have a full kitchen, utensils, everything."

Golden, who had a one-bedroom unit, said he'd have felt more constricted in a hotel room. "Because I was going to be living here for six months, I wanted to be able to stretch out, walk around, have some room," said Golden, of Pennsylvania.

Young Hill, general manager of Marriott ExecuStay, said while the basics are key, amenities have become more meaningful. "Does it have a fitness center, swimming pool and business center? I think before, people didn't care as much about building amenities because they weren't using all of them; it was really about location."

However, she said as people are staying in corporate housing longer, they want these things. "They want to be able to mirror their life at home to what they're doing when they're out traveling for business." That includes proximity to shopping and a grocery store.

Besides easy access to a laundry room, a swimming pool and fitness weren't that important to Golden. But they were to his colleagues, who stayed at another downtown location that had them. "I didn't care, only because I'm overseeing the project and just don't have time [to use them]."

Barbara van Rekom, who will be staying in a corporate apartment downtown until the end of the year, also doesn't ask for much.

"It's more cost effective. I have free Internet ... and I have my own kitchen and don't have to eat out every night. I can actually make a peanut butter sandwich if I want to," she said.

Most important, said van Rekom, a Nashville-based project manager for Hewlett-Packard Co., "I don't have to drag my stuff back and forth. Every week, I fly in on Mondays and home on Fridays, so it's my home away from home, and I don't have to change rooms every week."

Hotels have the edge in certain areas, such as daily maid service, said Elaine Quiroz, president of Corporate Housing Strategies, a Virginia-based training and development firm in the corporate housing. "But because guests [in corporate housing] stay so much longer than those at a hotel, they don't always want someone coming into their private space daily. Although some ask for weekly maid service, others prefer to opt out of maid service completely, and just settle in."

It's not that Napoli, an Idaho native who stayed in a brownstone in Lincoln Park, doesn't see any downside to the arrangement. "You don't have maid service every day; you don't have a restaurant where if you're involved in something, you can just call down and get room service.

"But for us, the drawbacks are insignificant compared to the convenience and cost savings," noted Napoli, who said two colleagues stayed in a one-bedroom unit on one floor, while he and an associate occupied a two-bedroom unit on another floor.

"We wanted to save on expenses. We found the cost of us in three hotel rooms would have been about $800 a night. We were able to do that for much less, maybe about half."

Quiroz also noted the high level of furnishings, bedding and amenities now offered in corporate housing. "It's becoming more aligned with the better hotels. The nice touches such as high-thread count sheets, for example. You expect to find these in hotels, but guests using corporate housing for the first time are often surprised at the superior quality of the interiors, furnishings and amenities."

She says that business travelers today are more sophisticated in their accommodation choices, and that includes corporate housing.

"Corporate housing is still relatively new to many travelers, having evolved in the last 40 years. Yet once travelers stay in these spacious apartments, they quickly develop a preference for them over hotels, for their longer-term stays. There is nothing that compares to having your own 'home' while on the road. And as corporate apartment services and amenities continue to move higher, this will become an even stronger choice for travelers."

Steve Cuskey, who visited Chicago last year for a trade show, is sold. "I pretty much rent places wherever I go because, to me, a hotel room has become jail with drapes and a television after about two days. [With corporate housing] everything's there, like a full-blown kitchen, an office with Internet access, a board room," said Cuskey, who also stayed in the Lincoln Park area.

Like Napoli, Cuskey emphasized the importance of establishing a "home" on the road. "What was important to me was having something that looks like my house and not a hotel room. I mean, how common has the word 'suite' become? I'm an old guy. Now a suite is just this word that means you have two rooms and a microwave sitting on top of a refrigerator. So I always try to zero in on something a little better."

Jim Haring, owner of China Doll Guest House in Chicago, agreed. "Business travelers are sick of sterile hotel rooms or even suites. They are discovering the option of self-catered apartments where they get a complete home and each apartment is unique. A Wi-Fi connection is a must, but many also offer completely equipped offices in the apartment."

"I want to have everything I need when I want it in the morning," added Cuskey. "I suppose I'm an old curmudgeon; I like to have coffee put ready right there and I don't want to wait for room service. And I sure don't want to have to tip the guy on top of that. And heaven help you if you open up mini-bar and take anything out," he said with a laugh.

"It has to feel like home."

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