Steel Porches, Building Maintenance and Condominium Assessments

Today, while riding the Red Line L into work, I was struck by how many steel porches are rusting on Condominium Buildings.  About ten years ago, a porch collapsed in Lincoln Park.  The porch was in adequate condition by porch standards of the day, but it was pushed past its limit with nearly 100 people crammed on a porch designed for about 5 people.  Unfortunately for the owners of the building, several people were killled....an guess what they were wealthy and politically connected.  The result, the new Chicago Porch Ordinance and the witch hunt against landlords and condominium associations to upgrade their porches.

The good news - Chicago has some great porches that are much safer than ordinarily found.  The bad news....well many of the condominium conversions of the housing boom now have strong, but rusty steel porches.  I remember the ballyhoo of developers discussing how great these "premium"steel porches would be.  Practically no maintenance, incredibly strong and panacea for anyone wishing to avoid the costly replacement of wood porches.

Well  - think again.  Steel Rusts.  And it  rusts really well.  In fact, typically rust starts forming immediately after a painted steel surface is exposed to moisture.  So guess what - you need to to regular maintenance on these porches, such a sanding, painting and testing the integrity of rusting areas.

Example:

In 1999, Developer converted 12 unit apartment building to 6 condominiums.  Each unit has "miraculously" only paid $150 per month for their assessments which are to cover primarily condominium association insurance and miscellaneous expenses.  The association does not reserve money and has not ever had an increase in assessments.  Since 1999 all of the original owners have sold and moved out with only second or third generation owners present.  The "new" roof is now over 10 years old, there have been reports of small leaks onto the ceilings of the top floor units.  Also, the "deluxe" steel porches prominently featured in the original advertisement for the condominium development have worked out well for 3 units and poorly for the other 3 units.  Apparently the porches don't all drain outward leaving puddles after rainstorms  After ten years, 3 units have consistently rusty areas that really need to be fixed.  The owners are angry but can't get the association to fix these rusty spots as this is "unnecessary".

Solution:

Automatically raise assessment 15% each year in the budget regardless of whether the membership thinks this is a good idea to get assessments more in line passively over the next few years.   Propose a modest one time special assessment for porch maintenance involving sanding and painting and if the areas are significantly corroded have an engineer prepare a report indicating that now replacement of the deck is necessary.  The increase reserves to at least 10% of budget for the current year - this will make the association FHA compliant.    With good maintenance a steel porch can last indefinitely, but unlike treated wood, constant small amount of maintenance are necessary.

No Saturday Walk-In Office Hours for August 6, 2011

There will be no Saturday Walk-In Office Hours for Saturday, August 6, 2011.   The next walk-in office hours are Saturday, August 13, 2011 from 12 Noon to 4pm at 2215 South California Avenue; Chicago, Illinois.  For more information call 877-GO-GO-NLO or visit http://ping.fm/eZqTA

The Dangers of Non-Bankruptcy Credit Consolidation

The Bankruptcy Act of 2005 wrote in a number of provisions that "encourage" potential bankruptcy debtors to consider non-bankruptcy debt relief such as Credit Consolidation.  The problem with Credit Consolidation is that it is not regulated and is not a global settlement of debts.Also, the cost of credit consolidation is usually between 30 to 50 cents on the dollar which typically is more expensive than what most debtors pay in a Chapter 13 Bankruptcy. 

Just last week, Lisa Madigan, Illinois Attorney General filed a Cease and Desist Order Against Legal Helpers, an Illinois Based Debt Consolidation Firm under the new law effective January 1, 2011 that prohibit any non-lawyer from offering non-bankruptcy debt consolidation.

So what's the solution:  Bottom line is this.  If you are wealthy enough that a bankruptcy is more harmful than good, the traditional route to take is to spend some serious money on legal fees to restructure you debt and also defend lawsuits as they arise.  For most people's debts that are beyond their ability to pay, bankruptcy is the only safe choice because it is court supervised and is global in its effect.  This is not to say that Bankruptcy is the best debt relief ever, but is simply to say that only in a bankruptcy can you get the automatic stay which stops all lawsuits and debt collections from happening without court order.  Also, in a bankruptcy,  a repayment plan uses long established and well thought out priority rules to determine which debts are paid in preference to other debts.  Lastly, all parties in bankruptcy proceedings generally have attorneys which helps to ensure that the focus is on debt relief and not on silly mistakes of procedure or allowing one creditor to have preference over another.

Here is a typical example of why non-bankruptcy debt relief through non-attorney assisted credit consolidation is now prohibited in Illinois:

Sally and Ben are married with two children.  Their family income is $50,000.  The have $2000 of tax debt from last year, Ben owes child support arrears to his ex wife in the amount of $10,000 and Sally has $60,000 in credit card debt.  Ben and Sally own a modest home with a $80,000 mortgage and $500 per month payments.  Ben and Sally are 4 months behind on their mortgage payments and are about to have foreclosure lawsuit filed against them.  Sally has two court judgments against her.  Both have been sent to collection.  15% of Sally's gross income is being deducted each month for these garnishments.  Currently Sally will be in garnishment for 5 years before they are paid off.

What should they do:

If they file a Chapter 7 Bankruptcy, all of the credit card debt will be gone and they can surrender their house and move out in approximately 6 months. Ben will still be garnished for his child support arrears up to 50% of his gross income and he and Sally will also have to make steep payments on their back taxes.  The family will move into low quality rental housing within 9 months.

If they file a Chapter 13 Bankruptcy, all of the credit card debt will be paid at 10 cents on the dollar or $6000 over 60 months.  The arrearage on the home mortgage will be paid first without interest and is approximately $2000 over 60 months.   The tax debt will be paid back before all other creditors at 100% with 9% interest over 30 months.  Ben and Sally will be able to keep their home.  Ben will pay back all of his child support arrears without interest over the 60 month plan at 100%.  In this case, the garnishments stop.  Meaning that the family now only pays 10% of its gross income not to just two unsecured creditors but in satisfaction of ALL of the unsecured creditors - this is where the good deal is.  Also - if Ben and Sally had a car loan, it would be converted today to 6.25% interest with payment spread out over 60 months.

If they went with debt consolidation, Ben and Sally would most likely pay $4500 for debt consolidation services up front.  Then they would pay approximately $1200 per month for at least 36 months.  At the end of the 36 months, the creditors who voluntarily agreed to a reduce payoff would be gone and paid off.  The creditors who did not join in would still be owed money and most likely would have filed a lawsuit for collection and have entered a garnishment against Ben and Sally.  The Child Support and Tax Debt would be paid through garnishment of Ben's Salary up to 50% of his gross income and the tax debt would be paid through a tax lien which would tie up all of their real and personal property, freeze their bank accounts and ruin their credit rating.

Bottom line - when the Bankruptcy Reform Act of 2005 was enacted, part of the goal was to increase the payout to credit card companies.  This has been accomplished by increased payouts under Chapter 13 plans and the means test that forces everyone with above mean income into a Chapter 13 repayment plan.  Bottom line - voluntary credit consolidation was bad for most people prior to 2005 and it is still bad today.

Only the very rich with very private and expensive attorneys benefit from these types of restructuring and usually it is done to simply keep control of many assets with very little equity but lots of income.

For more information about debt relief through bankruptcy, please email  info@nelsonlawoffice.com  or Call 877-GO-GO-NLO to set up a free bankruptcy consultation.