Tyler Berding

We can continue to deny the systemic flaws in the nations homeowner associations, we can ignore the problems, make excuses, blame the victims, minimize the issues hoping they will miraculously disappear but at some point, those rose colored glasses are going to have to come off.  At some point we will have to stop fooling ourselves into believing that the light at the end of the tunnel is the rising sun and acknowledge that the train wreck is imminent.  This shoddily built house of cards is going to come tumbling down.  

 Tyler Berding joins us On The Commons this week.  Tyler is an attorney in California who represents associations.  Unlike many of his colleagues, Tyler has been open about the problems with the HOA/condo model and admits that it is not working.  He has long been warning us about the problems of multi unit housing, particularly the condo conversions.  These buildings start off as rentals and are then sold as condos but as older products they have a shorter remaining life span than a newer building.  To compound the tragedy, they are usually sold to people who are least able to afford the special assessments for major repairs and replacements that aren’t far behind.   We’ll talk about the problems and try to figure out if there are any answers to the housing dilemma.  

 Tyler maintains a blog called Condo Issues  http://condoissues.blogspot.com .  One of the entries is a 2013 report on a survey conducted in California about reserves in HOAs and Condos.  Interestingly enough, his survey finds that reserves are about 50% funded.  However, CAI released the results of their own survey today announcing that America’s housing is healthy and association reserves are 70% funded.  OK folks, you can relax, CAI is on the job!  

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9 thoughts on “Tyler Berding”

  1. Although Berding complains about inadequate reserves, he presumes an infinite life for these projects (particularly condominiums). This is a false premise. These aren’t 50 year buildings – buyers aren’t knowledgeable about reality and sellers/developers aren’t going to advertise these as having a limited lifespan – but they DO! These are disposable properties. Like it or not the condominium should be terminated rather than causing financial ruin for the owners to benefit the vendors (i.e., condo attorney, management company, etc.)
    Second, the problem with reserves is …. embezzlement and waste. Why should homeowners be threatened over collection of these funds when the reality is they will for the most part not get used for what they are allegedly being taken for?
    Bottom line, these are 20-25 year properties and the condominium should be terminated rather than trying to cause financial ruin for whoever is holding the bag at the end of life of the project.

  2. “Some board members may be hyper-cautious. And there are owners who have their own agendas of why they want things.”

    From 24:00 to 25:50, you discussed the issue of home owners being denied access to documents and records. Mr. Berding dismissed your concerns, claiming that California has very strict statutes. Colorado also has an open records requirement in H.O.A. law, and I’ve been unable to get an accounting of illegal fees charged to my account for nearly five years now.

    Berding claims that the H.O.A. corporation being liable for attorney fees is an incentive for H.O.A. corporations to follow the law. This is incredibly disingenuous, becuase (1) the H.O.A. corporation is simply going to pass that costs back to the home owners, and (2) as Evan McKenzie said on your program back on June 26 2010

    It’s like something you would see in Nazi Germany or Soviet Russia. People think these things don’t go on. But we know they go on every day in condo and homeowners associations.

    These people who have no idea how to use power at all. They won’t even accept limits on their power. They don’t know what the law requires of them, these directors. They go by what some lawyer tells them to do, which the lawyer tells them to do only because he or she knows they can get away with it. Because the only recourse you have is some civil suit…

    There’s nowhere for owners to turn. If the lawyer tells them “Oh, just jack ‘em around. Who cares what the rules are? Who cares what the law says?” it doesn’t make any difference. The transaction costs of enforcing an owner’s rights are so great that they are hardly ever able to it.

    That last line “Who cares what the rules are? Who cares what the law says? It doesn’t make any difference. The transaction costs of enforcing an owner’s rights are so great that they are hardly ever able to do it” is why most H.O.A. statutes are worthless to the individual home owner. According to the Washington Examiner (August 07, 2014):

    If you have $400 to spare, count yourself lucky: Half of Americans would have trouble raising that amount in an emergency, according to a new report that suggests that many U.S. families face surprising financial difficulties…

    Only 48 percent said that they could easily handle an emergency expense of $400 without running a balance on their credit card. Almost a fifth said they simply could not come up with the funds, and a similar share said they would have to take on credit card debt. Others said they would either have to sell something (9 percent), ask a family member or friend for help (12 percent), or turn to a payday lender (4 percent) to come up with the money.

    The whole “home owners are protected by their right to sue their H.O.A. corporation” line of thinking is pure crap.

  3. [ 41:15 ] “Periods of high demand, like we had prior to the last recession, and we’re getting into now, they [developers] can sell anything they can build…” [ 41:25 ]

    About half-way between where I live and Ward Lucas lives is a new neighborhood called Candelas

    The Candelas master planned community, is within the most north-western quadrant of Arvada, in Jefferson County Colorado. The development borders the Rocky Flats National Wildlife Refuge all along its northern property line.

    A neighborhood right next to a National Wildlife Refuge sounds wonderful. Except that those of us who lived in Colorado during the Cold War years know that Rocky Flats is where they built plutonium triggers for nuclear warheads.

    The site was previously occupied by the Rocky Flats Plant, a nuclear weapons production facility. Contaminated by plutonium during plutonium fires and both uranium and plutonium ground leakage, there is no public access to the refuge at this time.

    . . .

    Plutonium “triggers,” also called nuclear pits, were manufactured at the site for 40 years. The triggers were themselves nuclear-fission bombs designed to implosively ignite fusion reactions in thermonuclear warheads. There were serious leaks from outside-stored drums of radioactive waste in the 1950s and 1960s that originated from spent lubricant used in plutonium milling .

    Plutonium can spontaneously combust at room temperatures in air, and major plutonium-based fires at Rocky Flats in 1957 and 1969 were the most costly industrial incidents of their time. These two fires took years for immediate-area clean-up, and many other fires occurred as well. These fires spread plutonium throughout the northwest corridor of the Greater Denver area, reaching into downtown by way of prevailing winds. As plutonium has a 24,000-year half-life, nearly all of this contamination still exists in some form, and has been spread by the substantial (up to 80 mile-per-hour) winds that can frequent the Front Range area at the base of the Rocky Mountains. Water and soil contamination was finally publicly reported in the 1970s, even though the leakage and fire-spread contamination had occurred many years earlier.

    As reported in the press, “The 1980s were no better for the U.S. Department of Energy facility, culminating in a Federal Bureau of Investigation raid in 1989 that shut it down for multiple violations of U.S. anti-pollution laws.”

  4. I hear what Tyler is saying. But I also know in the HOA environment, such as where I live, it would not matter if you tripled the dues and put double the amount required by a reserve study in the reserves the place would still fail. It is impossible for people with no business or construction experience, and no ability to know whether they are being sold a bill of goods by a property manager to govern a community. HOAs are businesses and they have to be run like a business. And just like many businesses they are failing. Some due to the economy and homeowners not paying the dues. Other due to the fact the money is being wasted.

    Here’s an example: My HOA bought two brand new pick-up trucks for service vehicles to the tune of $78K. This was to drive around a community with approximately 2 miles of blacktop. They bought snow blades for those two trucks, yet they hire a snow removal company each year. They keep one employee in the clubhouse in a small office with the utility bills around $800 per month. They have another building with plenty of office space where that one person could be located but she isn’t. That building is the maintenance building and it’s around $1,000 per month for utilities. Not to mention these buildings have had roofs, painting/stucco, new wood flooring, new bathrooms and kitchen, and a new deck. In the case of the clubhouse it is rarely rented so the rental does not cover the expenses much less the insurance and cleaning fees. They have added dog poop service centers that require emptying. And they added flower beds which require the expense of flowers and labor to water them along with the cost of water. They recently resurfaced two tennis courts. And spent massive amounts of money on two swimming pools. And they pay the employees health insurance, uniforms, cell phones, paid holidays and paid vacation. These are not skilled laborers. On top of that they pay for a CAI property manager. And the last CAI property manager talked them into borrowing one million dollars and giving him the first $100K of it.

    The other problem is hiring shoddy contractors to do the job and then having it redone multiple times. It’s job security for these people.

    A big part of money problems boil right down to lack of money management skills and very few HOAs have people in place that know anything about money management.

    Additionally, Tyler says it hard to get a group of people to agree on what needs to be done. He is correct which further proves the point of why HOAs have/do/will fail.

    I could not agree more than multi-family housing should be rentals only. If they are investors will build better quality, keep them better maintained, and the fighting and feuding and legal battles will stop.

    With every one of Shu’s shows I learn more about why HOAs are destined to fail. They have proven themselves not to work and our cities need to STOP requiring them to be built.

    Rent the roof over your head and enjoy life!

  5. Tyler Berding always shares great information with regard to condominiums. I completely agree that apartments should be rented and professionally managed and funded by knowledgeable investors. The only exception might be very high-end condominiums with millionaire owners that can afford to pay for long-term maintenance. (and pay for legal fees if the need arises)

    I agree with Nila. A lot of the same concepts can be extended to detached and attached single-family homes in planned developments, or HOAs. Yes, each owner may pay for the maintenance of their own home’s structure, but once again, we have a large group of individuals with “disparate interests” that are responsible for maintaining major infrastructure and/or amenities of the community: roads, parking lots, storm water drainage components, retention ponds, canals, retaining walls. Or how about boat docks, beach access, golf courses, fitness facilities, pools and spas, playground equipment, tennis courts, etc. ? What sometimes happens is that the HOA Board decides to remodel the clubhouse and resurface the pool, but put off seal coating the roads or cleaning leaves and debris out of clogged storm drainage catch basins. Or they might decide to paint or stain a deck off the clubhouse that really needs to be replaced. I call it “window dressing.” It’s a disaster waiting to happen, no to mention legal and insurance liabilities.

    Then, when you live in a large development that includes condos, townhouses, and single family homes from entry-level to McMansion price ranges, you have built-in conflicts. The owners of Estate Properties often happen to own a lot of the lower-end homes (usually condos and townhouses) as a source of rental income. Of course, the more properties one owns, the more votes one gets in the corporation. Those who control the vote control the HOA. Those with a lot of money to spare prefer not to have excess cash sitting in a low-interest reserve account, when they can make more money investing it elsewhere. Therefore, they vote NOT to fully fund the reserves. After all, they can easily pay the special assessment when the time comes. But what about the Rest of Us?

    Oh well, if owners of limited means cannot pay whopping special assessments, then the HOA will eventually foreclose on those properties, and create more opportunities for rental income for future buyers….

    1. I had a property manager tell me they were sprucing up our HOA so buyers would be impressed. Okay…so the fancy sign, landscaping, wood floors in the clubhouse, fence around the pool with the new fancy gates, is has basically been done to give the buyers the wrong impression. Because when they buy one of these junk units they will find the maintenance is not done according the the declarations. Therefore, all the expense of, as Deborah calls it “window dressing” is what I call putting lipstick on a pig. It done with no other intention than to mislead the potential buyers!

  6. I agree with nothing Mr. Berding says, and would caution listeners to read between the lines of what he speaks.

    All property deteriorates. The fact that HOA housing is not built to the standards it should be, is whose fault? Inferior building practices, permits on-the-fly, and attorneys who make a living from construction defect litigation, and brokering deals between HOAs and litigants, is whose fault?

    Ah yes, its the “reserves remain artificially low” dance again. Followed by the “owners deciding for themselves” opera. Nevermind that those “owners” OWN their own property and have every right to decide for themselves on what their money will be spent. Mr. Berding’s advertisement in Shu’s interview, and a theme played over again throught his free advertisement, is this: associations (not owners) need to partner up with a developer and rebuild it.” In other words override what the owners want. That is the biggest clue where the industry is now headed with these Dynasties of Dysfunction (courtesy of Ms. Vanitzian) that industry is what they themselves created and are now having grave difficulty in continuing control because the owners are waking up.

    Mr. Berding by most accounts is an ennormously $ucce$$ful “construction defect” litigator. California, on the other hand, within the past four years, has seen a record number of law firms dissolve for lack of business. Yes folks, most “lawyers” are out of jobs. Tyler Berding is not among them. Do a search throughout the California Court system using Mr. Berding’s name and see how many cases he has going at any given time and who the parties litigating are — speaks for itself.

    Around 19:00; Then, leading into it, he says the money lost pales in comparison to blah blah blah, then cleverly shifts his focus somewhere in the middle of the interview, afterall, “its not about him” and quotes [from HIS OWN STATS] that in 1993 there was a 27% increase in management — imagine that! The industry managed to achieve 27% of homeowner money going to management and not attorneys. Must have pained him when he read that.

    He complains, there’s “more going to admin.” LISTEN CLOSELY TO THIS PROPAGANDA: He is now complaining that a lot of money is going out (that he can’t control as a lawyer, that money is supposed to go to attorneys); he describes that more money is going toward operating expenses to bring in alot of other people that are now necessary to make repairs, contractors and others on an ad hoc basis, and that these contracts are “renegotiated every year, with people like managers, landscapers, accountants, and people like that,” so the contractor, the vendor, is going to raise his prices. Ya think? The only entity he intentionally omits as having a contract and renegotiating it and causing more money going out are association attorneys and HOA litigation. Gee, what a coincidence that he three times throughout the interview omits attorneys and attorney fees having anything to do with the draining of homeowner funds. Its always the other vendors.

    Lost was the opportunity to ask this genius, “So Mr. Berding, how many of those developer deals have you brokered? Are you a broker? Have you invested in building any of these buildings or developments? Is that what your pitch here today is?”

    What Mr. Berding did give us in that interview was this: It appears as if the HOA cash cow syndrome is running out of money and that he has devised a way to get it back: Tear down existing HOAs and rebuild them. That way he sells himself as a broker for that deal, partakes in the new construction, writes himself into the CCRs as the HOA’s attorney, manages the development, and the cash flow never stops. He gets four bites of the apple, we lose our homes. Next? He’ll be pushing eminent domain at the legislative hearings.

    1. > I agree with nothing Mr. Berding says,
      > and would caution listeners to read
      > between the lines of what he speaks.

      I woudn’t go so far to say that “I agree with nothing Mr. Berding says”.

      Yes, a lot of what he has said over the past years is pure self-serving garbage one would expect from the industry. Especially his denial of the responsibility that the H.O.A. boards and vendors and attorneys have had in creating the current mess.

      But, unlike a lot the industry’s apologists, a lot of what Ty;er Berding has said over the years is so god-damn brilliant and insightful, it should be required reading for our policy makers (with the usual caveats about sodium choloride).

      And you’re absolutely right how he somehow left out the costs of attorneys. I noticed that, too. Unless he conflated those with what he called necessary “operating costs”, which would be disingenous and lawerly of him.

      One of his suggestions in the episode that I disagreed is when he said that H.O.A. corporaitons should be allowed to automatically raise assessments to account for inflation. This may come as a shock to him, but when costs go up, most people have to make sacrifices and cut spending. Many of us have not gotten raises in years, even though our costs have gone up. Sometimes, we have to do without the things we want (or even need). What makes H.O.A. cororations so entitled to be exempt from this basic fact of life? (Answer: the lawyers’ yachts aren’t going to pay for themselves).

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