CONDOBUD Ombudsman, mediator, arbitrator, educator

Article Courtesy of The Chicago Tribune

By Pamela Dittmer McKuen

Published June 17, 2007

After moving into his four-unit Jefferson Park condominium two years ago, Hermiz Khamo found a dysfunctional association. Assessments are not collected and, last time he checked, the communal water bill was in arrears. Khamo cuts the grass and cleans the carpeting.

"I'm forced to fix whatever I can, but this can't all be on one shoulder," he lamented.

Khamo repeatedly has called for reinforcements. When he asked neighbors to chip in on lawn mower rental, they said they don't need grass. When he phones the developer, she hangs up. The City's Department of Consumer Services told him to file a lawsuit.

"My name is on the line," said Khamo. "I don't want to ruin my credit. Courts take time and money I don't have. Half of my hair, being naturally red, is white due to stress."

In Illinois, condo owners in disputes with developers, boards and each other don't have an expedient, low-cost option for resolution. Is an ombudsman or other advocacy program, as several states have established, the answer?

Evan McKenzie thinks so. He's an attorney, associate professor of political science at the University of Illinois at Chicago and author of "Privatopia: Homeowner Associations and the Rise of Residential Private Government" (Yale University Press, 1994).

"I know that most associations are run pretty well most of the time, but they are run by volunteers," he said. "Without institutional oversight of these boards, you are talking about billions of dollars being handled by untrained, unsupervised amateurs. The problems you hear about are just the tip of the iceberg."

"I get calls all the time from people who ask, 'Can't you help me?' " said Rep. Elaine Nekritz (D-Des Plaines), who supports ombudsman legislation. "I have to tell them the state has no regulatory oversight. This is a private contract and we really can't get involved."

Last month the Illinois General Assembly passed the Condominium Advisory Council Act, which creates a council to study owner and association issues and make recommendations for legislative changes by Jan. 31. But some organizations and owners believe legislators should stay out of the matter.

The Community Associations Institute, a trade group in Alexandria, Va., has helped defeat ombudsman legislation in California and Virginia. "We think it makes more sense to give residents and associations the tools to resolve their problems without placing this burden on state government," said spokesman Frank Rathbun. "Building communities and creating a sense of community requires educating and empowering homeowners to resolve disputes based on trust and commonality. That's not a function that can be readily outsourced to the statehouse."

An ombudsman would have been useless during her three-year dispute in Irvine, Calif., said Alisia Ross, who later moved to Oklahoma.

When her board closed the pool for long hours for swim-team practice and meets, she sought greater access for all residents. She ran for the board, unsuccessfully, garnered neighborhood support, attended mediation and arbitration sessions, filed a lawsuit, spent $30,000 and lost.

"An ombudsman is another legal hoop to jump through," she said. "While you're running around seeing an ombudsman or going to arbitration or mediation, you give your case away so they know how to argue against you, and the statute of limitations is running out."

State-sponsored advocacy programs have varying degrees of authority. Most view education -- through seminars, Web sites and other media -- as a primary mission. They typically are funded through fees, annual owner assessments of $2 and $4, or both.

"We try to resolve their issues," said Danille Carroll, Florida's ombudsman. "If someone says, 'I can't get my records,' we'll call the board or property manager. A lot of times we can get things worked out through cooperation and remind them what the law states."

When that doesn't work, parties are invited to meetings in hopes of achieving reconciliation or referred to mediation or arbitration. The office also provides educational programs and election monitoring.

Association attorney William Guthrie of Baker Hostetler in Orlando said that education alone is valuable: Unhappy owners often bought without understanding association governance or did not read their purchase disclosures and documents. Boards acting outside their authority are often well meaning but unknowledgeable.

"An ombudsman's role tailored to answer peoples' questions by a neutral source will resolve the majority of issues out there," he said. "I don't suggest the role be expanded beyond that."

Arizona last fall launched a program that allows owners to petition for hearings before an administrative law judge, who makes decisions and levies fines. The filing fee is $550.

"Of the cases that have been filed, homeowners have won the overwhelming number," said Pat Haruff, president of Mesa-based CHORE, Coalition of Home Owners for Rights and Education.

The group, which spearheaded the program, helps owners prepare their paperwork and arguments.

"The associations are hiring attorneys," said Haruff. "But when you don't have an attorney or can't afford one, you have to take time and make sure you do it right."

In Hawaii, information, education and referral are the primary functions of the Condominium Section of the Real Estate Branch. Staffers take calls from anyone in the condo community including developers and property managers. Depending on the issue, callers may be referred to mediation, arbitration or administrative hearings.

Lindsay Waite, Nevada's ombudsman for owners in common-interest communities, mediates between willing opponents. If talks fail and the issue warrants, parties may be referred to an administrative law judge or alternative dispute resolution, which is a prerequisite to court.

"It's always better to try to work out problems between the parties. These folks have to live together," Waite said.

Advocacy programs must define "legitimate complaint" or they will be swamped, cautioned association consultant David Stone of Nevada Association Services in Las Vegas.

"If someone says, 'I've complained nine times about my neighbor's barking dog,' that may not be for the ombudsman's office," he said. "But if it's very clear that a violation of the law or the association's governing documents is taking place, an ombudsman's office can be an avenue to pursue some sort of resolution."

Closer to home, Toni McConnell is frustrated by the casual operation of her Uptown association. Even though there are only three units, she believes the owners should follow governing documents, establish rules, and plan for their vintage building's future needs. Her neighbors say she's too formal.

"I think they are decent people, but they just do whatever they want to the common areas," she said. "It's not uncomfortable on a daily basis, but it's uncomfortable to go to condo meetings every six months."

(Condo boards must meet a minimum of four times a year, according to the Illinois Condominium Property Act.)

"These may seem like small things, but we could get a lot done if we collaborate," she said. "It keeps me searching for someone who can impress upon them that we have to live with fiduciary responsibility."

She'll probably search for quite a while. Those who favor an advocacy program here, and those undecided, disagree on the role it should play. Some prefer an authoritative body while others champion the softer approach of education and mediation.

Any program must recognize the law as paramount rather than "play Solomon" to appease disgruntled owners, said association attorney Shelley Barnett of Barnett Law Firm Ltd. in Elgin.

"Also, let us not forget the cost of the new bureaucracy," she said. "After all, one is not really discussing a single person, but a staff and a location and computers and phones. People who already do not like their assessments will have to pay yet more to directly support such an agency. What will be the timeline for a resolution? Who checks the ombudsman?"

Byron Yaffe, an attorney and partner at Chicago's Midwest Mediation for Homeowners Associations, proposes free mediation that is binding only if parties agree. A sunset provision would allow lawmakers and industry-watchers to evaluate its effectiveness.

"If the prospect of a big budget is threatening, consider developing a roster of skilled mediators," he said. "Here's a panel of three names. We'll pay for one meeting. If you want to continue the process, it's on your own."

Angela Falzone and Shirley Feldman of Association Advocates, a consulting firm in Park Ridge and Chicago, could offer little more than sympathy when Khamo and McConnell called for help. The duo backs mandatory education for boards, stricter developer regulation and a ban on associations smaller than six units.

"It's the smaller properties that have the most trouble," said Falzone. "Because everyone thinks they have a say-so, the board-owner concept is lost."

McKenzie wants everything: an agency that hears cases, subpoenas testimony, enforces rules and imposes fines, plus alternative dispute resolution and election monitoring. It should cover homeowner associations as well as condo associations.

"Illinois is light years behind what other states are doing," he said. "One of the things we don't have is a well organized homeowners group to push back. If we did, you'd get a lot more stories and a more comprehensive homeowner perspective on what the law should be."