SaveTheHill.org

Jan. BOT Meeting Summary, **NEW VOTING RULES** by Kevin Wine, Jan 19, 2024, 6:32 PM, reply, branch, edit

A lot has happened since January 14th so this is going to be long. If you are in a rush:

1- The association insurance deductible is now $50,000, so you probably should increase your "Coverage A" on your HO6 policy and make sure this is covered. If you ever have a lot of damage to your unit, the Board will bill the $50k master policy deductible to you!

2- There still are not enough votes for the 2023 annual meeting/election. I think the total is about 185 - and probably about 240 are required. Election postponed again, to the March 19th BOT meeting. It is interesting that we are short by just about the number of proxies that Linda and Tong used to bring to the annual meeting and vote, all for their candidates of course. Coincidence?? Hummmm...

3- The board sent out another "rejection proxy" a few weeks ago to amend the bylaws to reduce the quorum requirement for the election. I assume very few are going to vote NO, so that will pass and the quorum will eventually be reduced from 50% to 33%. It will still take time for that to go into effect. Even though this change is probably to my benefit, I am opposed to it for reasons described below.

4- There was a recent change in NJ State law regarding condominium associations - this time, the legislature has mandated structural building inspections and capital reserve studies. Apparently, the structural inspection requirements do not apply to us, but the reserve study and the funding of the reserve study does. At the Feb 20 non-meeting meeting, we were advised the capital reserve need is $30 MILLION over the next 30 years, and thus the capital fund is significantly short. Expect another large fee increase, since the board has systematically dismantled our in-house large project capabilities, so now most of this work will have to be contracted out at significantly more than the in-house cost.

For those that want the details:

In my January 14th message I mentioned three voting methods, based on past elections. At the Board meeting on January 16th, I asked to confirm nothing had changed, but IT HAS CHANGED. I was advised that you CANNOT submit proxies via email, so that means the only way to vote at this point in time is to request replacement proxy/ballot and envelopes from the management office. Call 732-463-3434, or email scole@tc-mgt.com and/or cgarito@tc-mgt.com. If you have trouble getting replacements let me know (kwine@optonline.net). I won't be able to do a thing about it, but I'm curious as to how many owners are having such problems.

HOWEVER, this change is not consistent with state law, specifically N.J.S.A. 15A:5-18, "Proxy voting", in which it is stated: "Every proxy shall be executed in writing by the member or the member's agent, except that a proxy may be given by a member or the agent by telegram or cable or its equivalent." The language may be dated, but email qualifies as "or its equivalent", so therefore the Board is legally obligated to accept proxies via email. This should mean that you can submit a proxy just for quorum, or submit a proxy giving voting rights to another person, via email. Emailing a ballot is a separate issue which I can see them complaining about, but you can still vote for candidates via a proxy holder by just emailing the proxy, correctly completed to name a proxy (put a name in the second blank at the top, and check box 2). The proxy form is available here:

https://www.savethehill.org/Election/Proxies/Proxy2023.pdf

Example of appointing a proxy holder to vote for candidates on your behalf:

https://www.savethehill.org/Election/Samples/2023ProxyExampleOption2.pdf

The next attempt to hold the election will be March 19th. I'm told the replacement proxy/ballot/envelopes have to be mailed from the Town & Country Red Bank NJ office, so that will take some time. I still have owners telling me it takes a while to get a response, so there is no time to waste if you want to vote the regular way.

As mentioned, the Board decided to send out another by-law amendment proposal - this time they want to reduce the election quorum requirement to 33% of the members in good standing. The reduction would first be to 40% after 30 days of no quorum, and if still not enough votes 15 days after that, the requirement would be reduced to 33%. There are pros and cons to doing this. Interestingly, they still aren't proposing to amend the bylaws to allow for on-line voting! It seems that would help with participation too, but no, they are going down a different path. There are also some issues with their amendment language, and since they like picking apart my proposed amendment language, I will point them out here. They keep saying "from the time of the original meeting", when resetting the clock for the next adjournment, which makes no sense - it was probably meant to read "from the time of the last adjournment". It is also unclear as to the disposition of the quorum requirement for other matters that may come before the membership at the annual meeting. Is that a separate requirement, which remains at 50%?? The management company and condo attorneys absolutely hate the concept of members voting on other matters at the annual meeting, so I assume this is another under-handed attempt to stomp on more of our rights.

About a month ago you should have receive another low-key bylaw amendment "rejection proxy" in your mailbox. The 30 day deadline is already very close - I didn't mail anything about this amendment because not many people cared about the previous amendment which was much more serious. I'm still voting no, because if it was up to me I would allow on-line voting first to see if that helped, rather than go straight to a quorum reduction. The 33% requirement would reduce the quorum to 148 votes if 100 owners are delinquent, or 165 votes if 50 owners are delinquent. If they get this change in place soon, it might impact the current election, but I doubt they will be able to do that because they still have to count the rejection proxies (which last time took them about 2 months) and then if passed, it has to be filed with the county clerk before it's valid and goes in to effect, so there's several more weeks.

Although I can see the practical attraction to reducing the quorum requirement, fundamentally I don't like the idea because it lets the board off the hook on doing the work that it should be doing to keep the community as a whole engaged in its governance. It lets the board run the place in a dictatorial and confrontational "us vs. them, we're better than you" style with most people angry and disengaged. This is not a good thing. I would much rather compel the board to operate in a more community oriented manner and not piss off over 50% of the owners and do things which alienate us from them. Secondarily, I'm also concerned that the 33% threshold is getting down to the point where individual voting blocks could very nearly and very quickly control the outcome of the elections. While this could go either way in who it benefits, I don't like the idea that this is a greater possibility with the lower threshold.

Insurance Premium
-----------------
It was confirmed at the January 16th meeting that the association master insurance policy premium has increased from $300k/year to over $600k/year! I guess the board finally came to the realization that if they hit us with any more fee increases there might be a riot, so they voted to use the surplus funds collected for the hill removal to help offset some of the premium increase - for this year. All indications are that the premium increase will remain for next year, so eventually this is going to result in a fee increase. So I was wrong in my January 14th prediction - they must be reading my emails :)

Insurance is now essentially half of the entire operating budget of the association, with no end in sight. That's over $1,000/year per unit for insurance. We were lead to believe that there isn't much we can do at this point in time to reduce the premium. The increase was the result of the loss history - the recent fire in building 2 (expected to cost $1.2M to repair!!!), the slip-and-fall from 2018, and other smaller claims. A couple of years with no losses will be needed to have any chance of reducing the premium.

It should be noted that the master policy deductible has been increased again to $50,000!! So if you have a water damage disaster in your unit, you will be on the hook for the first $50k! Therefore, we were advised to make sure we have at least $50k plus the cost of our upgrades of "Coverage A" on your HO6 policy. I'm sure there will be a lot of owners who won't worry about this, and eventually one of them is going to find themselves with a $50k bill. The fire damage deductible has been increased to $250,000! So if we do burn up another building, the association (meaning all of us) will be on the hook for the first $250k. That's $460 per unit. Unless.... the Board tries to pass the fire damage deductible on to the unit that caused the fire, which means that owner will be getting a bill for $250k!

So the Board has some work to do. They have a choice - the easy way out is to just send in our money. I will give this option a 90% chance. The other way is to take serious measures to reduce the risk of more disasters - fires, and slip-and-falls. Dryer vent cleaning, while certainly one measure, is a drop in the bucket. Dryers are not the only source of fires. We still don't know what burnt up building 2, but it wasn't the dryer. The dryer did burn up building 32 in 2015 though. We've had a couple candle fires, I remember an attic fan, an exploding car, and a kitchen fire. They were all caught early. They didn't get out of control like building 2, and building 32. Mitigating the fire risk is going to take a lot more than what is currently being done.

I didn't think of at the time of the meeting, but as far as fires go there are a couple of things that could be done. They cost some money, but with the amounts that are being thrown around now, even expensive mitigation measures become economical in the big picture. Sprinklers systems are not uncommon in multi-family housing, however an after-built retrofit is crazy expensive so that's probably out (only the clubhouse building is partially sprinklered). However, fire detection systems might be feasible. The old saying "every second counts" is still very true with fires. Handled early they are no big deal. Smoke/fire detectors are required by law, but they are not connected together, and they don't report out to anyone. Having as early a warning as possible would be best.

Another idea is to have some internal fire handling capability. Both major fires occurred during the day, with lots of people around. The crew was here and working at the time building 2 caught. I was home watching building 32 burn up on a weekend. EMS was called quickly, but things still got out of control. I'm sure some will laugh at this, but maybe we should have a fire truck! Not a big one - but some way of getting water on a fire quickly. With the cost of fixing building 2 running over $1M, it's time to look at such options.

The slip-and-fall exposure is another issue. Treating every square inch of every road, walkway, step, and parking lot, 24 hours a day, 7 days a week, to the extent necessary to totally mitigate the risk is going to be very difficult. I won't say impossible - just expensive, and hard to manage. Is $300k/year of additional insurance premium enough to start working in that direction? Quite possibly.

I'm sure this is also where the anti-employee voices are going to start screaming that we should out-source the snow removal, so when we get sued, the snow contractor will have to worry about it. Well, that's not exactly how it works - everyone gets sued, and has gotten sued in the past, when there is an injury - the snow contractor, the management company, and the association/board. While it is true that the damage will be spread amongst more insurance companies (maybe - but complicated) the reality is that the snow contractor and management companies are not going to just eat the cost of their insurance premiums - that is going to get passed on to us! So while there might be the illusion of insulation or dilution of loss, that's not the reality. And finally, given the extremely poor level of snow removal service I lived though here for years prior to 2008 (1996 to 2008), there will be a lot more slip-and-fall incidents, more suits, more settlements, and more cost. I hope the decision makers keep this in mind as the proverbial knee jerks.

By the way, there was a plan, engineering drawings, and a site plan application to slightly reconfigure all the condo building walkways to reduce the risk of icing and slip-fall hazards at the 12 condo building. This was shot down by Tong Zhou in 2018. The breezeway and walkway areas around these buildings are very hazardous in the winters - many thaw and refreeze problems from snow melt, and downspouts, and no place to stack the snow.

Dryer Vents
-----------
At the January 16th meeting, the Board voted to fine anyone that hasn't had their dryer vent "cleaned" by an outside contractor. The fine will be $25/month until the work is performed. About 180 units have still not complied. I am one of them. My vent is clean. I am not opposed to vent cleaning. I don't want the buildings burning up/down either. The problem is the way the board is going about this, and now that it has been mandated, with cost and fines, the picture changes. This is essentially another maintenance fee charge - they are making us pay it - we have no choice. So the fees went up another $100/unit/year, with an overall cost to the owners of $54,500, or $26k/year if this is really going to be done every other year.

On the legal front, this mandate is different than other board rules or requirements, because of the cost associated with it. And that cost is inevitably going to vary from unit to unit. There is caselaw on similar situations in which a Board was non-uniformly applying a charge to unit owners. The courts ruled that the Board can't do that - everybody must be charged the same. Is this similar enough to fall under the same legal treatment? I would say yes. I'm sure the Board will say no. I just received the $25 fine a few days ago, so I guess we will get to find out if the Board really has such authority or not.

Again - not opposed to some way of reducing dryer fires. But I'm not sure the Board is taking the best route to achieve the goal. What is to prevent someone from clogging up their vent in the 2 years between cleanings? Two years is plenty of time to jam it up again. Why isn't there any effort to educate owners/tenants of the signs of clogged vents?? If you are in-tune to this sort of thing you can tell very quickly that the vent is blocked - why is it taking 4 hours to dry a load of clothes?? Why do my clothes smell burnt!?? Why is the outside of my dryer so hot I can't touch it?? Why isn't the crew allowed to do the vent cleanings/inspections like we used to do?? They had the tools - even the cameras - we had two cameras.

Financial Statements
--------------------
It looks like the Board has finally realized that hiding the full financial statements from the owners has only fueled speculation of financial impropriety, especially over the past few years. Thus, the board voted to post the full 50 page financial statements on the frontsteps website, instead of just the 4 page summary. This is what we did for all the time I was involved, from 2004 to 2018. It was stopped by Tong Zhou and his Board in early 2019, and we have been in the dark ever since (unless you were on the board).

So I will give the board some delayed credit for this move, and for not hitting us with another fee increase right away for the increased insurance premium. I say "delayed credit" because the financial statements are something that should never have been a secret in the first place. Those should be available without the threat of removal from office or other political pressure.

Building Inspections/Capital Reserve
------------------------------------
In response to the high-rise condo disaster in Florida a few years ago, the NJ Legislature just passed legislation requiring structural inspections, reserve studies, and reserve study funding. The details are summarized here:

https://www.bechtbt.com/nj-s2760-a4384

And a copy of the bill that was recently passed is available here:

https://www.njleg.state.nj.us/bill-search/2022/S2760

The structural inspection requirements do not apply to us, since our building are not concrete and steel. However, apparently the capital reserve study and funding requirements do apply to us. This has significant consequence, as the capital reserve funding studies have always come up with very large funding numbers, requiring significant increases in maintenance fees. In the past, we mitigated the problem by focusing on repairs to extend the life of the buildings and grounds, and used internal expertise and staff whenever possible. Unfortunately, recent Boards have pretty much destroyed our in-house capabilities, especially in terms of larger-scale projects. After separating with me in 2018, they replaced by function with individuals(s) that clearly didn't know much or anything about running a building/grounds/maintenance operation. We are about to pay the price for their incompetence, as we will be at the mercy once again of the outside contractors who have no shame in overcharging us by whatever they feel. "The Hill" removal was the most recent case-study in such overcharging.

Had Mr. Zhou and a few other individuals not upended the entire operation in 2018, we would be in a very good position now to handle future capital repairs/replacements in an economical manner. I would have had the final infrastructure and crew in place by now, and we would be working on multiple repair/replacement projects. Given the sums involved - the recent reserve study is estimating $30 MILLION will be needed over the next 30 years - all the options should still need to be on the table!! $30 MILLION is a lot of money, and opens a lot of options on how things could be handled.

At the February 20th meeting, the engineering firm preparing our reserve study put up a slide showing various reserve funding options. The best case one projected an additional $115/month per unit will be needed to meet the requirements! The new law imposes a limit of 10% fee increase per year for capital reserve fund catch-ups (see link above for complete details), so that pretty much guarantees a 10% fee increase every year for the next several years! Plus the $600k/year insurance premium for at least the next few years. I have little to no confidence that Board in its current form will have the sophistication to resist the forces trying to separate us from our money and come up with other solutions. I know those reserve study estimates are very conservative - the engineering firms preparing them don't want to be sued when they under-estimate, and I know for a fact that the condominium industry contractors routinely over-charge their customers by whatever they can get away with ($500k to remove a pile of dirt, $2.5M to replace the roofs, and many other smaller examples).

At the very least, this board will have to add $45/month per unit to pay the $300k increase in the insurance premium, and they will have to add the 10% increase for the reserve fund, which would be $23/month (or $28/month if they start with $235+$45), so the 2025 fees will be at least $303/month. At the same time, they will continue to undermine the routine maintenance, pinching every penny everywhere they can - the exact OPPOSITE of what they should be doing. I'm sure they will blame me, or blame the State, or blame other outside forces, and play the old line "we live here too and don't like paying more but we had no choice" and "the money has to come from somewhere". Well there is a choice - a lot of choice. If you haven't sent in your vote yet, to finish getting this board replaced, this might be a good time to get on that.

Appellate Court Update
----------------------
Although many people may have forgotten about the petitions that were filed in 2022 for the removal of the board, and the election procedure bylaw amendment, that case is still with the appellate court. I called the court last week for an update, since it had been a while, and was advised that the case is on the schedule for review on March 5th. It is not uncommon for the appeals process to take a while. It now been 8 months since the final briefs were filed, so this is about normal. It will be very interesting to see if the appellate court will agree that it is OK to step on homeowner rights like this Board, various counsel, and the trial court has done.

Kevin