San Rafael condo owners hit with $145,000 special assessment
Marin Independent Journal
By Richard Halstead
16 January 2018

Members of the 36-unit Pinnacle Condominium Association in San Rafael have approved a special assessment that will result in each condo owner having to pay $145,000 to fund a $5.22 million exterior repair project.

“That is a major special assessment for a building this size,” said Marjorie Murray, president of the Center for California Homeowner Association Law in Oakland, a clearinghouse for consumer education and referral services for the estimated 9 million California homeowners who now live in a common interest development.

Not all members of the Pinnacle homeowners association support such a large assessment. When the assessment was put to a vote on Dec. 18, only 18 members voted yes. Nine members voted no and three ballots were not counted because they lacked a signature and/or unit address on the outer envelope.

“For us, it’s a pretty raw deal,” said Erik Lovlein, who together with his wife purchased a Pinnacle condo in November 2016. “We knew the siding was a bit old and needed some updating, but we had no clue.

“There was zero debate on the topic,” Lovlein said. “If we don’t do this, the entire world is going to come to an end, let’s vote — that is how it was presented.”

In August, the association board gained approval for a $170,000 special assessment to fund a $6.45 million renovation; in that election 18 members voted yes while 15 voted no. The board decided to reduce the assessment, however, because some members protested that they couldn’t afford to pay it.

2nd special assessment
In 2015, the condo association assessed each of its members $25,000, which was to be paid back in $5,000 yearly installments. The $15,000 remaining balance most homeowners still owe is being rescinded as part of the new special assessment.

Pinnacle condo owners pay an additional monthly condo fee of $600; that will be reduced to $500 per month for the next four years due to the special assessment. All of these costs come on top of any mortgage payments members may have.

Group loan
The 36 condos were built in 1980 and are situated in eight buildings on Professional Center Parkway in northeast San Rafael. A large portion of the assessment cost, an estimated $2.2 million, will go toward replacing the buildings’ cedar siding, which has proved hard to maintain. The second biggest item will be replacing 26 front roof decks and 11 rear roof decks at an estimated cost of $752,000. The project also budgets about $916,000 in soft costs for project management, legal costs, permits and architectural and engineering work.

One of the condos, a three-bedroom, two-and-a-half bath unit at 142 Professional Center Parkway, sold for $515,000 in 2015 according to Redfin, a residential real estate company that provides web-based real estate database and brokerage services. Redfin estimates that unit is worth $669,057 in today’s market.

The association has offered homeowners who are strapped for cash the opportunity to participate in a 20-year, group loan. The interest rate on the loan will be 4.75%, which means participating homeowners would pay $947 a month, in addition to their $500 condo fee.

Lovlein said that even though both he and his wife work in the high-tech industry, they plan on using the loan.

“I really have no choice,” he said. “We put 20 percent down. We’re only a year into our payment. It’s not like we have a bunch of equity to do a big refinance.”

Forced out
Alexandra Cremades said she and her husband, Luis Rivas, also purchased their Pinnacle condo in November 2016. The couple both work in the wine industry.

“We were one of those who bought at a high price and now on top of that we have the assessment,” said Cremades, the mother of two young children.

Cremades said they had to sell property they owned in New York to help cover the assessment.

“We’re having to do all sorts of things to figure it out,” Cremades said. “It’s going to be tight.”

Christopher Yock, a San Francisco firefighter and single parent, said he bought his Pinnacle condo 12 years ago and is still paying a sizable mortgage.

“I kinda feel like I’m being forced out of my place,” Yock said. “I stopped participating in the meetings because it was becoming too emotional. The people on the board have been unreceptive to single-family people here who are living in the complex.”

CCHA’s Murray said trying to keep condos affordable is one of her association’s prime objectives.

“This is why we know quite a bit about special assessments and these mega-construction projects,” Murray said.

She said if a condo owner fails to pay their special assessment, they’re at risk of losing their home and being evicted.

“Homeowner associations have this really heavy hammer,” Murray said. “They can foreclose on your house, and they can do it rapidly before you know what has happened. You only have to owe $1,800 or more in assessment, and they can put a lien on your house and start foreclosure proceedings.”

Murray said theoretically the need for an assessment of this size should never arise.

Reserve Studies
“Homeowner associations are required by law to do reserve studies every three years to determine how much they should be saving for capital items like roofs and building infrastructure,” Murray said. “The idea is that boards should plan ahead and save in reserves so that special assessments aren’t necessary.”

The Pinnacle Condo Association plans to use $300,000 of its $800,000 reserve fund to pay for the repair project.

Murray said, “Why not use all of it? That is what it is for.”

Murray said in some instances condo property managers team up with construction companies to convince homeowner associations to make unnecessary repairs or increase their profits by inflating costs.

Critics of the Pinnacle special assessment have raised questions about the selection of CIDology Inc., based in Pleasanton, to serve as the project/construction manager.

CIDology — the CID stands for common interest development — handles every aspect of a special assessment, including helping associations to get their members to approve an assessment and arranging financing for association members who need it.

According to information sent to Pinnacle condo owners prior to the assessment votes, CIDology has “provided services to inspect our buildings, organize and facilitate this process including contractor bidding, budgeting, oversight of contractors and liaison with the city and banking.”

Pinnacles condo owners report being told that CIDology will be paid a minimum of $600,000 for its work overseeing the special assessment project.

Legal action
Brian Smith, who founded CIDology in 2013, was formerly CEO of the I.W. Bison Co. In 2013, Shorebird Homeowners Association in Redwood City, sued I.W. Bison and Smith for more than $4 million in damages related to a major roof repair project that the homeowners association hired I.W. Bison and Smith to manage in 2008.

Smith did not respond to requests for comment.

Jeffrey Cereghino, a San Francisco lawyer who represented Shorebird HOA, said the case settled out of court and the terms of the settlement are confidential.

Also in 2008, the Emery Bay Village Homeowners Association initiated an arbitration against I.W. Bison for remedial exterior work it managed there. According to a letter that the HOA’s attorney, Ann Rankin, sent to HOA members, “Following conclusion of the remedial work, the association experienced new water intrusion problems and other issues that had not manifested before the work was performed.”

Rankin stated in her letter that it would cost an estimated $3 million for the required corrective work. Neither party would comment on the resolution of the matter.

Repairs needed
Steve Jordan, chief risk officer for RealManage, the Pinnacles’ property manager, which is based in Carrollton, Texas, said RealManage has worked with CIDology on two other projects. Jordan said he was unaware that Smith’s work on previous projects had resulted in litigation and arbitration.

Jordan would not say how much CIDology is being paid for its work overseeing the Pinnacle special assessment project.

Hamid Shamsapour, president of the Pinnacle Condo Association’s board, left his job as the city of Larkpur’s director of public works in January 2013 and spent two years working as a project manager for the Sonoma Marin Area Rail Transit project before starting his own consulting business. Shamsapour was unwilling to discuss the assessment in any detail but provided a few brief remarks.

“It’s a 40-year-old building; it needs a lot of repair,” Shamsapour said. “We looked at all different alternatives. We presented all the options to the homeowners. We had multiple hearings. We discussed it. We put it to a vote.”

“We have leaks and other issues that cannot wait,” Shamsapour said.

Florida Booth, an association board member until recently, said, “I think being on the board you see a whole different side of this. It needs to be done.”

Attorney Cereghino said one of the attractions of a company like CIDology for homeowner association boards is its expertise in convincing association members to approve special assessments. He said such companies also offer one-stop shopping.

“You essentially have the evaluation being done by a construction manager, who makes the recommendation for the scope of what needs to done, goes out and gets the bids, and often gets paid a percentage from the work they’re recommending,” Cereghino said.

“If you put all of that together, you have somewhat of a circular structure that doesn’t have any cross-checks,” he said.

Regarding the Pinnacles’ special assessment, Cereghino said, “That is a giant number for a small association. We would recommend they get a second opinion from a forensic architect whose only skin in the game is to give an independent analysis.”

top  contents  chapter  previous  next