Given the choice, Gary Karlin will live in a small homeowners association over a big one any day. He has been president of two associations-the first one a community of 400 single-family homes in Barrington and now a six-unit condominium building on the Gold Coast.
“Everybody knows everybody” in a small association, he says. “There are fewer problems and less politics. When you have hundreds of personalities to deal with, people fragment into cliques. Then it’s hard to get anything accomplished.”
Homeowner associations with hundreds of units-such as Chicago’s Sandburg Village and Lake Barrington Shores-are highly visible on the real estate market. But more prevalent are the small communities dotting the metropolitan landscape that have but a dozen or two units. Some have as few as three.
Do you want to live and invest in a very small association? We asked several real estate professionals with expertise in communal living for their thoughts. They offered the following pros and cons to help you decide:
– Small communities are more intimate than big ones. This can be desirable or undesirable, depending upon your sense of personal space. The location is likely to be amid single-family homes, rather than downtown or on sprawling suburban acreage. If the building is a condo conversion, your unit may be wrapped in vintage charm. High-rises usually have contemporary architecture, which some people find sterile.
As for fellow unit owners, they are few but close at hand. Carmel Perone of Century 21 Classic Properties, Oak Park, thinks that’s just dandy. She lives in a seven-unit condominium building and says, “It’s the next best thing to being in a single-family home. We share a back yard and lawn furniture and a grill.”
“You tend to know the neighbors better and that makes for a more secure environment,” says Frank Baloun of Re/Max Lincoln Park, Chicago.
– Neighbor disputes are highly visible. It’s one thing to argue about parking spaces with a unit owner who lives five acres or five floors away. It’s another to endure loud music, a whining dog and slamming doors from someone who lives in the same four-flat.
The tension escalates when unit owners don’t agree on procedures and purchases, says Frank Jara, property manager with Baum Property Services Ltd., Aurora. “Will you pay someone to shovel snow or will someone say, `We’ll take turns’? There might be a tendency toward a lot of volunteerism. That’s very good but there are also some disadvantages if everyone doesn’t pull his weight. Or someone may say, `We don’t need a new roof. It’s not leaking on my side.’ “
“As long as everybody is happy, it’s great,” Baloun says. “One disgruntled person causes a problem for everybody.”
– Most small associations are self-managed. Even if a small association wants to turn the job over, professional management is hard to come by. Many management companies simply aren’t interested in associations with fewer than 50 or 100 units. If they are, the cost is high. A suburban association with 200 units might pay $10 to $15 per unit per month. Owners of a converted six-flat could pay triple that or more.
“You have to find people who are willing to be the doers,” Karlin says. “That’s fine if you can find them and if the doers enjoy (the work). If it’s a drain on them or if people don’t cooperate,” self-management can be difficult.
Karlin and his wife, Cheryl, are the doers at the Newberry Mansion Condominium Association, where they live. He handles the day-to-day operations. She pays the bills and does some of the gardening. When the association decided to resurface the exterior of its late 19th Century brick building a few years ago, all unit owners pitched in. Some researched restoration techniques while others investigated contractors.
– Economies of scale work both ways. On one hand, there are fewer people to chip in and pay for a new roof or parking lot. On the other, small buildings usually don’t have expensive amenities such as 24-hour security personnel or swimming pools.
Whether assessments are higher or lower in a small association depends upon a variety of factors, including age of the buildings, type of amenities and number of services contracted. The small association is particularly vulnerable when it comes to collections.
“The cost of running the association could be borne” by three people, Baloun says. “If one is not timely with his payments, it could affect the financial operation of the association. If you have 20 units and one person doesn’t pay, it’s only 5 percent of the budget. One or two renegades don’t tend to impact the association as hard.”
Some expenses will be constant regardless of the number of unit owners. Audits, document changes, lawsuits and collecting money from delinquent homeowners fall into this category.
“I can’t cut short an audit or not do certain tests despite the fact you have 16 units,” says Christine Nyborg, president of both the accounting firm Nyborg, Condill & Nyborg, Ltd., Roselle, and the Illinois chapter of the Community Associations Institute. “I still have to confirm the bank balances. I still have to review the insurance policy.”
– Consensus is easier to obtain in a small population. Major changes, such as amending a declaration or passing a special assessment, often require approval from a majority of the unit owners. Large associations can spend months tracking down votes. The same job might be done in a weekend in a small association.
Nyborg cites the example of a 700-unit association that spent two years deciding how to decorate its lobby. “A six-unit association, if it even has a lobby, can make the decision much quicker. It doesn’t take two years for everyone to give input.”
Five other unit owners aren’t always easy to find, Karlin says. As president of his six-unit association, he needs approval for expenditures over $300. Many of his neighbors travel or have vacation homes. He makes sure he knows how to reach them when they are away.
“I make long-distance phone calls when necessary,” he says. “I mail documents and take votes by mail. These are the same things I’d do anyway if we had 300 unit owners.”
Small numbers can sometimes make getting a consensus too easy, warns Baum Properties’ Jara. “Maybe your neighbors decide they want a therapeutic hot tub and spa in the club room. You’re saying, `I don’t need that,’ and they spend $5,000 anyway. You pay for it or move.”
– Resale is a tossup. Which sells faster, a unit in a small association or a unit in a large association? They both have buyers, real estate brokers say.
“I think it depends upon the community,” says Perone in Oak Park. “We have so many conversions that most of our buildings are small ones. People like that feeling and expect to do more pitching in. I think closer to the airport or downtown people may not want anything to do with maintenance. Then the bigger buildings would be more in demand.”
“Some people want to be close to the lake, live on the 15th floor and have a doorman downstairs,” Baloun says. “That tends to drive (sales in) some of the bigger complexes. Other people like more of a Victorian feeling with some outdoor space. They tend to gravitate to the smaller buildings.”
