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remaining balance most homeowners still owe is being rescinded as part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.”
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