By Sabrina Lopez, CMCA, AMS, Westwind Management Group
In most associations, it seems that doing that weekly drive to find those owners in non-compliance is the rage lately or has it been for some time now? Do you find that this brings a sense of community to those living in your association when they get this violation letter in the mail? I have come to find that many owners on the other side of those violation letters don’t seem to feel that way. Just think about if you maybe just moved in or bought that fancy lawn ornament and then got a nasty gram in the mail about how it is in violation and must be removed immediately. How would you feel? While I completely agree that the association board has a duty to enforce the governing documents, maybe there is a better way to bring in a sense of community along with such enforcement. Can we stop for just a minute to think about how we would view the association we just moved into or have lived in for some time after reading a violation letter received for that new beloved lawn ornament? What can we possibly do to ease the harsh punishment of a letter arriving in your mail and potentially making you feel that your community is a bunch of lunatics on a path to send letters for every little thing you do and love?
I would think that a reminder letter is a great way to begin. Rewording the letter to say “Hello fabulous owner in our loving association, we love your new lawn ornament, but unfortunately such a beauty is not currently allowed in your front yard. While we think it is a great purchase, the documents just don’t allow for it at this time. Maybe you can help us take a look at the documents to see if they need updating. If you are interested in helping us take a look at this, maybe, just maybe, we can allow such lawn décor to be placed in your front yard. They are likely in need of an update anyways and committee volunteers are certainly helpful in getting things as such updated.” WOW! Doesn’t that just come across so much better than “Dear Homeowner, you are in violation of our covenants and your lawn ornament must be immediately removed. If you do not remove it, you will be fined.” YIKES! I would not be too keen on my community if I got that verbiage instead. You see what I mean - the message has to come across differently, otherwise it just seems like harsh punishment as mentioned before. What a better community to live in if the message was a bit softer and more welcoming, right?
Now I am not suggesting you go out and rewrite every violation letter; what I am saying is maybe we need to be a bit more kind in our message. Form templates are easy and make our work simple by using a standard template letter to send out to all those in violation from our compliance drive but think about the receiver and the tone you will get on the phone call or email received from them after. That gut feeling after one of those doesn’t feel great. A little time and effort to acknowledge their situation and the approach that “we could use your help,” could go a long way. Especially on a first notice.
Another approach is reminders in your newsletters. I know most associations send out a monthly or quarterly newsletter (and if not, you should). This gives the owners a gentle reminder of the rules of the community. Think about a spring newsletter as we tend to see an increase in violations during the spring and into the summer months. The newsletter could be a great beginning to a better violation year by simply putting in reminders about those common violations we see, potentially reducing the number of violations we have to send out during this busy season. Remind them of items placed in their front yards and on their homes, to look at their homes to see if they may need paint, to maintain their lawns and oh boy those pesky weeds we so often have to send letters out on. Make the newsletter fun and inviting so people want to read it. Mention that these are things that the owner will want to do or to avoid if they don’t want to receive a compliance letter in the mail. I, for one, would read a well written and fun to look at newsletter and try to do whatever I can to avoid those nasty grams in the mail. A sense of community, that is what I think most owners want. Think about how we can bring this to all associations, making it a more peaceful place with less owners upset about how they cannot do certain things in and around their homes. Bring that sense of community to your association today!
As a manager with 14 years in this industry, I think we need to be a little more caring in what we do, and how we approach things. We here at Westwind Management care so much about each other and I think that goes a long way in the job we perform and the love we have for it.
By Eric Lecky, SageWater
Innovation is a curious thing. It happens in fits and starts, leaps and bounds; it is sometimes evolutionary and sometimes revolutionary. We see it daily, we experience it real-time - in our technology, in our society, and in our lives.
In many ways, innovation is front and center. In other areas it goes almost unnoticed. Take piping for instance: the concept of using a tubular vessel to carry water has been around since humans figured out how to make tubular vessels to carry water. From clay to metal to plastic, the material may have evolved, but the very nature of plumbing remains unchanged, to move water from one place to another.
So, what are the next innovations that will reshape the future of plumbing? Is there any better way to actually carry water from one place to another? Who knows, but as specialists focused on replacing aged and defective plumbing systems, we certainly see some obvious areas for improvement, and are approached every day by the “next big thing” in the industry.
But what if we aren’t thinking outside the box as much as we should, or further enough into the future. What are the real possibilities? Well, here are some theories:
Current Technologies That Will Evolve Plumbing in the Next 5 to 20 Years
From flow monitoring to remote controlled shut-off valves to water intrusion sensors, these technologies already exist, and it’s only a short matter of time before they become commonplace components of every piping system. Reporting when water is moving too fast, too hot, with too much pressure, or is showing up where it doesn’t belong is easily achievable by installing various sensors in and around your piping system that can report such information. As soon as you know a problem exists, the sensors can then be programmed to act on that information. Water is too hot, automatically cool it down; flowing too fast, reduce the pump rates; leaking, shut it off. Integrating computer technology and control systems into plumbing for both new construction and retrofits is a relatively easy task, and the costs are coming down every day. We predict it will soon be ubiquitous.
There is an almost infinite array of plastic composites that are available to scientists and inventors today. As research continues, advancements will be made and newer, better materials will continue to emerge in the marketplace, providing builders and homeowners with choices. From better insulating options (temperature and sound) to improved connections to fittings, new materials will drive some level of innovation within current piping systems and new piping systems that have yet to be conceived will emerge. Composites are even starting to appear with metal pipes, pre-lined at the factory with plastic resins to prevent corrosion, already available in the marketplace.
Environmental considerations are a chief driver in this area and looking at more energy efficient and environmentally friendly ways to heat and cool water, and to get it to flow (against gravity) with less energy, will continue to shape and influence how plumbing systems are designed and function. Advances in centralization, decentralization, thermal conductivity and even material friction will all impact how systems are designed. Is it better to have decentralized systems with shorter pipe runs, or centralized systems with longer runs but more friction resistant surfaces (e.g. hydrophobic coatings)? Research, innovation, advanced modeling techniques and even artificial intelligence will all help answer these and other, far more complex, plumbing questions of the future.
But that’s all relatively predictable. The harder and more exciting question is what happens next? What hypothetical improvements will impact plumbing in 100 years or more?
As biology and technology continue on their march towards “The Singularity” (singularity.com), there is no doubt that new concepts in plumbing will emerge. Think “smart” pipes that can sense corrosion and deploy an army of nanobots to perform an autonomous repair from inside the pipe. Or “self-healing” pipes that can adjust their size and wall thickness based on temperature, pressure and velocity to better accommodate changes in behavioral use. Need bigger, stronger pipes in the morning when everyone in a high-rise apartment building is showering and getting ready for work, but smaller, thinner pipes mid-day when usage is down? Easy. How about adaptive, organic pipes that can literally grow new branches to reroute around clogs? Is it science fiction or could it really happen one day?
Is there an eventual end to piping? Who knows, but probably. Could localized, high-speed “condensators” that quickly pull water out of thin air replace the need for pipes altogether? Maybe? How about rapid biodegrading evaporators that dissolve and consume waste and then gasify directly into the atmosphere, eliminating the need for drains? Science fiction? Probably. Or will we look back, 1,000 years from now, and marvel at the true genius of basic tubular plumbing, still going strong even after a millennia of evolutionary changes, simply moving water from one place to another?
Regardless of what plumbing innovations actually happen, there are three things we know are for sure:
1. Water is very important and truly essential to life;
2. Waste is bad and harmful if not handled properly (just read about the bubonic plague and plumbing issues during the dark ages; and
3. Until the next big thing comes along, pipes will continue to be used in residential construction, they will continue to age after installation, and when they do get old and start to fail, they will continue to require replacement. Until the future arrives, we all simply have to deal with that reality.
Eric Lecky (email@example.com) is an Executive Vice President at SageWater, North America’s leading pipe replacement contractor. SageWater is headquartered in Alexandria, Virginia, with offices nationwide. Over the past 30 years, they have replaced more than 35 million feet of pipe in over 100,000 occupied residential units.
By Kimberly Corcoran, CMCA, AMS, PCAM, Colorado Association Services, AAMC®– an Associa Company
Now more than ever, it is important for association leaders to do what they can to stay engaged with their membership and build community. The events over the last 18 months have increased our appetites for human connection and added even more reasons and ways communities can benefit by coming together in social settings. As we re-introduce ourselves to our neighbors and promote harmony within our chosen communities, these events can provide the opportunity for residents to connect outside of just the business aspects of the association. Community events can be held no matter the size or type of community, and there are several factors to consider when holding your event to ensure it is successful.
If the board is not able to dedicate the additional time to planning community events, get a committee together. Inevitably, there is at least one person in the community who wants to know their neighbors and build a social connection where they live. Empower them to invest their energy and ideas within parameters established by the board.
If your association is truly committed to building community and having more engagement with residents, it is worth the repeated effort of planning events and bringing neighbors together socially. “There is no power for change greater than a community discovering what it cares about.” ~ Margaret J. Wheatley
As a results-oriented leader, Kim Corcoran supports the team in delivering exceptional service and value to the Board and communities we serve. In a business that demands strong relationship skills, Kim understands the importance of effective communication and providing excellent and proactive customer service. Kim’s expertise in budgeting, operations, and board governance produces solutions, helping to create strong teams, partnerships, and results.
By Wes Wollenweber and Lee Freedman, PWF Legal
Is it better to wait until problems occur or to address issues ahead of time to prevent those problems from arising? This is a concept that community associations around the country, not just in Colorado, struggle with on a daily basis. Basically, the community version of the chicken versus the egg scenario – if we address the issue now, we may prevent the issue from ever occurring; however, if we do not address the issue now, we may never have to. This debate always involves risk assessment.
The “reactive” approach is premised on the thinking that it is likely not worth a community association spending time and money – which could amount to a great deal of money – if the problems the association is addressing may never occur. Board members and owners under this concept generally look at whether the association can save money by just addressing the issues on a piecemeal basis as the problems arise. Basically, the “we are not going to increase assessments if these issues may never occur” approach or the “money saved is money earned” approach. Further, such board members may believe they are better off politically by getting re-elected on a term-to-term basis if they can just keep assessments low by pushing the problems off to a future board of directors.
A big risk of this approach is that an association may be unprepared when the problems actually do occur. The association may not have sufficient funds in its reserves to cover the costs to remediate or otherwise address the problems. Greater damage or personal harm may result from the problem than originally anticipated if the association had taken reasonable precautions. The association’s insurance policy may not cover any such damage or remediation if the association did not take reasonable precautions to prevent or limit the risk of harm from such problems.
From a legal perspective, an association or certain of its prior or current directors or officers could face legal consequences by failing to comply with their fiduciary duties to the association or the community. In Colorado, an association must not act in bad faith and in an arbitrary and capricious manner. Directors and officers must act in good faith, in the manner a reasonable director or officer in a similar circumstance would act, and in the best interests of the association. Ultimately, the prior decision not to be proactive can come under scrutiny and substantially cost the association and its directors and officers dearly, not to mention the harm the problem may cause to person or property.
The “proactive” approach is to consider what problems are reasonably likely to occur in the future and address them now. This does not mean spending all of the association’s money or levying a special assessment in order to address all problems that can occur and remedy them in all ways possible to avoid them from occurring in the future. This approach focuses on a board acting reasonably to consider potential areas of concern; determine (a) which of those areas must be addressed first, (b) which may be addressed later, and (c) which may not need to be addressed at all by the current board; and come up with a proper strategic financial approach to address these areas that is affordable to the association in compliance with its governing documents.
In doing so, in Colorado, the board members have the right to rely upon consultants (reserve specialists, contractors, attorneys, accountants, etc.) and others who may have reliable information about the area of consideration. A board should utilize such people to help guide its strategic analysis in formulating a proper plan for and adopting proper policies for implementation in their community.
This does not mean the “proactive” approach does not have its own negatives. It does. The biggest negative is that it costs money – and may, in certain circumstances, cost a lot of money. A community association may just not have the financial resources to fund such a proactive approach without harming the owners or property in the community financially. This approach also requires some forward thinking about issues that simply may never arise, which could lead to accusations that the approach was not reasonable for this community.
However, some forward thinking in this regard is reasonable and appropriate in most communities. This typically should at least start with analyzing the common element improvements in the community and determining an appropriate reserve strategy for future repairs of such improvements. After analyzing its current financial status and limitations which its governing documents may place on its ability to levy assessments, an association should determine a reasonable amount of assessments to levy each year. Increasing assessments annually, even by just a little bit, will help alleviate any surprise in the future should a problem arise that the association must address financially.
Being proactive may very well prevent serious surprises and avoid serious consequences.
Pearson Wollenweber Freedman, LLC is the fusion of Matthew Pearson of the San Antonio litigation firm, Pearson Legal, PC, with Colorado housing litigation lawyers, Wes Wollenweber, and Lee Freedman. Our collective experience is your answer to the difficult issues that housing communities face in this ever complicated world. In short, clients turn to us when their issues are complex and require unique problem solving and extensive trial experience. Clients also turn to us when they want a different approach to the typical legal needs.
By Meaghan Brown, EmpireWorks Reconstruction
Year after year, I’m somehow always surprised by the amount of HOA communities that wait until the eleventh hour to solicit a bid with the full expectation that the project will be completed in its entirety before the first snowfall. Time and time again, they’re disappointed to hear that the project, which they put out to bid in October, will likely not be able to get done until the following spring. This is usually the case due to weather, contractor capacity, shortages in materials, etc. The list goes on. This article outlines a few helpful steps you can take to help you plan ahead for construction projects.
Step 1: Understand your Board of Directors (BOD) & get BOD buy-in.
At a minimum, the BOD should take a physical look at the work and agree on the desired outcome. A community’s needs must be fully addressed in the scope and specifications. The BOD should be involved in the scope development, so they know exactly what they are investing in and to ensure proper expectations are set. Ideally the BODs should walk the project with the manager and bidding contractors to determine details prior to the formal RFP being issued.
Step 2: Know how the project will be funded.
Before going through all of the hoopla of obtaining multiple bids, knowing where you’re obtaining funding is crucial. Have a clear understanding of what the board is budgeting for this particular project. If you are unsure of what the ballpark cost of the project looks like, reach out to a trusted contractor for a budget price. If the budgeted cost is higher than expected or outside of the amount budgeted in reserves, plan accordingly by getting a loan, doing a special assessment, or raising the monthly HOA dues. Due to material cost increases, contractors can usually only hold their pricing for about 30 days. So, make sure that the project is funded and the board is prepared to move forward before bidding it out to multiple contractors.
Step 3: Develop a clear and detailed scope of work to send out to bid.
A properly written request for proposal (RFP) is important for various reasons. Not only does it help vendors understand the board’s expectations and how they would like the job to be outlined or broken out, but it also helps the manager in obtaining apples-to-apples bids from the various contractors. This reduces back and forth questions from the contractor to the manager. You may want to ask a trusted business partner (such as a contractor or engineer) for assistance.
Step 4: Schedule a pre-bid site-walk with all bidding contractors.
Ideally, this happens all at once, with all bidding contractors present at the same time. By doing this, you’ll ensure that the same details are explained to each of the bidding contractors. Other ideas, product recommendations, or a more efficient way to attain the desired outcome may be recommended by a contractor, which can then be relayed to everyone on the walk. The bidding contractors may also be able to tell you at this time if engineered drawings are going to be required. As a helpful tip, you can almost always expect that drawings will be required for things related to life and safety. This includes railing, staircase, or balcony replacement, as well as retaining walls over 4 feet in height.
Step 5: Set the proper expectation for the BODs, so they better understand the timeline of turning around a bid.
Once the RFP is received by the account executive, the estimating team reviews the RFP to clarify details. The estimator will then inspect the property and determine the means/methods for project execution. Once quantified and calculated, the bid is then reviewed for accuracy, feasibility, schedule, exclusions and unforeseen conditions. From there, the account executive formats this information into a bid-packet presentation and delivers the proposal to the manager. During our busy season, it may take up to four weeks to turn around a bid. From there, it usually takes about 30 days to start the project from the time the executed contract is received. Not to mention, if the project requires engineered drawings, the community manager should allocate another three to four weeks on the front end for the drawings to be prepared. Below is a general timeline showing how this all pans out.
Community Manager and BOD identify the issue and agree upon a desired outcome.
Dependent on BOD
If applicable, Community Manager and BOD involve an engineering firm to attain engineered drawings. The firm reviews the project and submits a proposal to the BOD for signature.
If applicable, the BOD signs the proposal and hires the engineering firm to develop the scope of work and drawings.
The Community Manager, BOD, and/or engineering firm submit the RFPs to bidding contactors. The bidding contactors review the scope, clarify details, put together the estimate and submit their bid to the BOD.
The Community Manager, BOD, and/or engineering firm review and compare the bids. They clarify any questionable details, select a contractor, and submit the signed contract.
The contactor receives the signed contract and begins planning logistics. If applicable, they’ll submit applications for any necessary permits (timeline on this can be several weeks or even months.) They will then order materials. Depending on the project, this can also take several weeks.
TOTAL: 2-4 months from RFP to Project Commencement
Step 6: Review all bids for accuracy & schedule interviews.
Once the bids are received, thoroughly review all of them to make sure they are exactly per the RFP. A detailed step-by-step scope of work, products and equipment being used, exact quantities, and locations should all be clearly outlined in the proposal. Review the bids with the BOD to assure that every bullet point is covered. I recommend using a bid comparison worksheet to compare. You’ll then want to interview potential contractors. Many managers and boards are reluctant to interview and that is a disaster waiting to happen.
Taking all of this into consideration, it’s easy to see how a project can quickly be pushed back to the following year. By setting the right expectations for your board, identifying potential pitfalls, and starting the process early on, you can help to better serve your communities and board members alike.
About the author:
Meaghan Brown is an Account Executive at EmpireWorks Reconstruction, working with HOAs, multifamily, and commercial properties for their exterior, community-wide reconstruction projects. As an Account Executive, Meaghan acts as the liaison between their production team, the community/property manager, board of directors, and residents throughout the course of each project. Some of their core services include roofing, carpentry, EIFS/stucco, concrete, painting, decks/walkways, steel fabrication, and construction defect services.
By Richard Hirschman, ARS, Inc.
Every homeowners association should have a current reserve analysis to coincide with its annual operating budget. Following a (reserve) funding plan is crucial to preventing the three things reserve specialists don't like to see: a special assessment, deferred maintenance, or a sharp increase in reserve contributions. Interpreting a reserve analysis can be a daunting task, whether it's your first time or you have read many. They are long – can be 100 pages or more – have several summaries, graphs, and a whole lot of numbers that can confuse and deter any community manager or board member. But there are a few key factors to look for to understand one like a pro!
First, all reserve studies should have an Executive Summary. This is usually one page and shows the report results as a percentage compared to 100% funded. It also shows the first-year funding plan shown in annual, monthly, and monthly per unit figures. Understanding the executive summary will help you know your community's current overall financial health – as it relates to reserves. Reviewing the executive summary with your board will usually focus the board’s attention very quickly because it can see how much money is recommended to be contributed into reserves annually and monthly. The board will immediately compare that to what it is currently contributing.
Second, look for a summary sorted by the year of replacement; in our reports, it is the Annual Expenditure Detail (sorted by description). This summary sorts each component by the component’s year of replacement over 30 years. Summaries are an excellent tool for managers and the board because you can look at upcoming years and see how much money is projected to be spent out of reserves and what components are recommended to be replaced. For example, if a community's roof is recommended to be replaced in 2023, the manager and board can start preparing for this expense by getting bid proposals and inspections as needed.
Third, you want to examine the Projections page. This page shows the recommended funding plan over 30 years. It also contains other vital information such as projected beginning balance, annual member contribution, annual expenditure costs, launched annual ending balance, projected annual fully funded balance, and annual percent funded. This page is a great tool to examine the progress of your community's financial contribution reserve efforts during 30 years.
The last key factor to look at when interpreting a reserve analysis is examining the component detail section. This section looks at each component in the reserve analysis on one page. The component detail section is what drives the summaries (key factors) listed above. Each page in the component detail section has a title or component description, placed-in-service date, useful life, and remaining life, as well as a replacement year. It also shows the quantities, unit cost, future cost, a comments section, and a component photo.
Finally, ask for help! Your Reserve Specialist is specifically trained to help explain the results of the analysis and offer funding recommendations specifically designed to ensure every member of your community pays their fair share at any given time throughout the life of your community. And remember, there is no "one size fits all" for a reserve funding plan. Each community is unique, and a reserve analysis is designed explicitly for your community.
Richard Hirschman has been a reserve specialist practicing throughout Colorado since 2009. He is a past Chairman of the CAI Programs and Education Committee and is committed to helping HOA boards understand and communicate reserve studies to their communities. For more information, please visit his website at www.arsinc.com/colorado.
By Kacie Dreller, Haven Community Management
Holding a seat on your association’s board of directors is a highly coveted role within community associations. The pay is amazing, board members are highly respected, and earning a seat on the board of directors requires significant campaigning to beat out the competition.
Oh wait…none of that is true.
The reality is that potential board members are few and far between, unless of course there is serious discontent in the community or the threat of a significant assessment increase that is perceived by the membership as being unwarranted. Instead of leaping at the opportunity to participate, most homeowners are content to sit back and let those few poor souls serving on the board of directors handle the affairs of the Association. And we all know that those brave souls are most likely serving on the board of directors because they made the mistake of showing up to a board meeting to complain about something, which resulted in the well-known response of, “It sounds like you’d be a great board member.” Congratulations! You have now been appointed to the board of directors because you decided to complain about your neighbor’s landscaping!
Over the course of my career, I’ve heard the same handful of reasons why homeowners don’t want to serve on the board of directors:
1.) “I don’t have time.”
2.) “I don’t know anything about what it means to serve on the board of directors.”
3.) “I don’t want angry neighbors banging on my door all the time.”
So, how do we change this perception that being a board member is something that so few have the time for or the knowledge to be useful?
My answer to this question is simple: Set a good example. Be a board member that utilizes the resources available to support the role. Show your neighbors that being a board member doesn’t require that you give up your hobbies or first-born child.
How do you do this, you ask? Well, first, don’t spend hours of your time dealing with the affairs of the association. Use your association’s management company for the services for which the association pays. Don’t take on the work yourself and God forbid, don’t announce at board meetings that you have spent a significant amount of time working on a specific project that your management company could have handled for you! I frequently hear board members talk about how they don’t have time to do their full-time job because of board duties, yet they won’t let management handle the tasks in which they are contracted. If you find that your management company isn’t providing you the support you need, then speak up and ask for change. Homeowners aren’t going to raise their hands to participate if all they hear about is how much work it is to be on the board of directors.
Second, make it known that the management company is the resource for answering homeowner questions. If a homeowner stops you on the street, shows up at your door, emails, or calls you, direct them to the management company for assistance. Doing so will eliminate the perception that board members must always be available to the membership, and it will also help homeowners understand that board members don’t have to be industry experts. Even if not fully true, stating that you don’t know the answer will go a long way in convincing homeowners that you don’t have to be an industry or neighborhood expert to be a board member.
Lastly, if you know of someone in the neighborhood who would be a good fit for the board of directors, appeal to their self-esteem by asking them to attend board meetings to address specific needs in which the community is struggling. Making them a useful contributor to the community, before being asked to join the board of directors, will help build their confidence and understanding that if managed correctly, board member involvement doesn’t equate to a full-time job.
Kacie Dreller, CMCA®, AMS®, PCAM® is the Vice President of Haven Community Management. Kacie is recognized in the industry for her expertise in community management, professionalism, strength in leadership, and her desire to serve. Kacie considers herself to be a lifelong learner and is currently attending the University of Colorado to obtain her Masters of Science in Organizational Leadership degree.
By Bryan Farley, Association Reserves - CO
After you are done ringing in the New Year, you are starting to get back into the swing of things and you plan on reaching out to vendors to ask for preliminary bids. You notice that the preliminary asphalt seal coat bid is projected to be around $20,000, but your Reserve Study shows a $15,000 estimated (current) cost. Or you notice that the paint proposal is coming in at around $50,000 but the Reserve Study has an estimated $80,000 (current) cost.
What is going on? Why would your Reserve Study professional show such different costs for an expense? The answer is due to the unpredictable nature of the projections. As the saying goes – “It’s tough to make predictions, especially about the future.”
What can we do about it?
The goal of the Reserve Study is to offset the ongoing deterioration of a property. That means the purpose is not to make sure that the property has exactly $20,000 in year 2026 for the next asphalt seal, since the seal may cost more (or less) than what is projected on the Reserve Study, or the project may not even occur in year 2026! Rather, the Reserve Study will focus on the annual rate of deterioration. The way the math works, (assuming asphalt sealing occurs every 4 years), is: $20,000/4 = $5,000. That means that the asphalt seal deteriorates by about $5,000 a year; therefore, the client will need to offset that deterioration by putting $5,000 back into the Reserve account. Since costs may change next year, the client should anticipate that the $5,000/year number is just the ‘baseline’ amount needed. This means that if they are just putting away $5,000, then they are not factoring in inflation or the need to ‘catch-up’ if the Reserve account is underfunded.
The Reserve Study will then make a funding recommendation, based on the National Reserve Study funding principles, that not only offsets this annual deterioration but also allows for the inclusion of inflationary pressure, deferred maintenance, and risk avoidance. When a Reserve Specialist makes a funding recommendation, it is with the goal to incur the least amount of risk for special assessments.
How to Reduce Special Assessment Risk?
Statistically, a property that is between 70% to 130% funded will have a less than 1% risk of special assessment, whereas a property that is less than 30% funded will have a 30%-60% risk of special assessment. Therefore, the funding goal is to target a 100% funding level at the end of a 30-year timeline. However, the question we always receive is – “Is it unrealistic to be 100%?” Our response is that the point is not about achieving a specific percentage number, but rather fund the reserves to be in a specific range.
If a client is funding with a 50% funding goal, then a large increase in costs or supply issues in 2025 may severely deplete the reserve account. For example, a $20,000 increase in the asphalt seal cost may now drop the percent funded by 20 points, putting the property in a high-risk position of special assessing their owners.
However, if we are targeting a 100% funding level, then a 20 point drop still leaves the property at a low-risk position, or around ~ 80%.
Therefore, the way to reduce special assessment risk is by continually contributing funds into the Reserve account. This needs to happen every month of every year. It is as important as any other bill that the property needs to pay for.
How does the property know what the right amount of money is to contribute?
It is by commissioning a professional Reserve Study! The Reserve Study will guide the property to hedge the risk of special assessments by continually putting proper reserve contributions into the reserve account to offset ongoing deterioration. We argue that if you take care of the payments of the ongoing deterioration today, then the funds will be ready to go in the uncertain future tomorrow. Therefore, instead of thinking of the Reserve Study as a magic 8-ball, think of the Reserve Study as a planning tool that helps your property offset current annual costs of deterioration. Every one of your assets has a bill, however, not every bill is ‘due’ at the end of the month. Some bills may be due in five years, while others will be due in twenty. The Reserve Study will show your owners that even though the cost of the project will not be paid for in another twenty years, there is still a monthly cost that must be paid for now. This way, every owner, (not just the owners who happen to live at the property when the project occurs), will pay a fair and equitable distribution of the costs of the property’s assets.
Bryan Farley is the president of Association Reserves - CO and has since completed over 2000 Reserve Studies and earned the Community Associations Institute (CAI) designation of Reserve Specialist (RS #260).
By Gail R. Gudder, Moeller Graf
In the technologically-driven culture in which we now live, the question arises as to what is required of volunteer leaders as far as staying educated about all the technology options available? The flip side of that question, of course, is the question of security and privacy that can arise from taking advantage of the many technological resources. These questions have become even more pertinent in the past year and a half as the pandemic pushed meetings online and forced managers to go remote. This article will briefly examine the obligations of HOAs to provide technological education for its Board of Directors and Owners.
Board of Directors
The Colorado Common Interest Ownership Act (“CCIOA) C.R.S. §38-33.3-209.6 provides a means of financing Board education using common assessments. This provision governs the content of such education but does not make such education mandatory. In order to get reimbursement using common assessments, the CCIOA requires that the educational meetings and seminars be related to responsible governance of the Association, be specific to Colorado and make reference to the CCIOA.
Looking at §303(2), the declarant appointed Board members are required to exercise the care required of fiduciaries. The Board members that are not declarant appointed are not held to this same high standard of care and (for “full CCIOA” communities) will not be liable for acts or omissions made within the scope of their Board duties unless the acts or omissions are wanton or willful. Added to this is the Colorado Revised Nonprofit Corporation Act (“Nonprofit Corporation Act”), C.R.S. §7-128-401(1), which requires that volunteer leaders discharge their duties in good faith with the care of an ordinarily prudent person and in a manner believed to be in the best interest of the nonprofit corporation.
So, what does all this mean when considering technology education in general and in a post-pandemic world? Likely, it is no longer acceptable for Board members to remain resistant to online meeting tools such as Zoom, Google Meet, or Microsoft Teams. We have found that virtual meeting platforms have made Board and owner meetings much more accessible during the pandemic, to the point where we question whether it is prudent to disregard the ability of a group to hold virtual or hybrid meetings even when it’s not necessary. Luckily, these applications are extremely user friendly and relatively secure. The pandemic has caused Board members to become more adaptable and tech savvy.
Other technology that could be valuable for Board members in their responsible governance of the Association:
When choosing what products to use, Boards must be cognizant of security and privacy requirements as well as the cost to adopt and the cost to learn. Clearly, all members of the Board do not need to be educated in all the products that are adopted, but the primary user should have a good working knowledge of the tools used.
A final issue that may arise in connection with Board member’s education is the expertise of management companies hired by Associations. Under Colorado law, association managers and management companies are currently not required to be licensed and therefore don’t have continuing education requirements for licensure. However, in order to stay competitive, managers are well served to be, and largely are, very tech and technology-security savvy. While the Nonprofit Corporation Act §401(2) specifically states that directors or officers are “entitled to rely on information, opinions, reports, or statements … prepared or presented by” a variety of experts, this provision does not absolve the Board members of their ultimate duty to manage and make decisions for the governance of the Association.
The CCIOA §38-33.3-209.7 sets forth the requirements related to Owner education. This provision includes a mandate that is not present in the Board education provision and states that the Association shall provide, or cause to be provided, education to Owners at no cost at least once a year. The provision goes on to state that the Board is to determine the criteria for compliance with this section. There is little guidance in the CCIOA pertaining to this requirement. This section of the Act provides that the education must address “the general operations of the association and the rights and responsibilities of owners, the association and its executive board under Colorado law.” Technology education could fall within the “general operations of the association” language. Examples of technology training that might be offered to the Owners are:
As with the education of the Board members, the Association must keep in mind the security and privacy issues of providing these educational opportunities, as well accessibility to Owners who do not have access to the necessary technology.
When carrying out their duties to the association, the members of the Board must consider how best to educate themselves and provide education for the Owners. The lessons in the pandemic, we believe, show that using technology to include owners in association operations has been extremely helpful and has resulted in easier and more robust participation on the part of the owners. We hope the lessons learned during the pandemic with respect to the use of technology can continue to foster a lower-cost exchange of information and greater participation by the owners.
Moeller Graf was founded in 2005 by Tim Moeller and David Graf. Both partners have been practicing for 20+ years. David Graf is nationally recognized as a leader in the community law space with a heavy emphasis on educating others. Tim Moeller has dedicated extensive time to legislative groups who lobby on behalf of improving the HOA experience and outcomes. The firm currently employs eight additional attorneys, all with a diversified skill set ready to tackle the challenges that any situation may bring. The firm has dedicated its practice solely to representing the entity of Common Interest Communities. The practice is a full-service firm within community law focusing on; transactional, litigation and collections/recovery work. The firm currently has two locations in Colorado and is seeking additional regional expansion in the coming months. The client and manager experience is at the forefront of how Moeller Graf believes it is differentiating and defining itself as a premier provider of community law in Colorado.
By Clint Larson, Saddle Rock Security
For decades now, we have been able to use proximity cards, keys, or codes to open a locked door.
Cards have had some advantages over keys and codes, but those advantages have disappeared. It is very easy to copy these cards, just like you would a key. Once the keys or cards are copied, then you lose control of who has access to the facility.
Today there are smart access control systems that give you the ability to utilize smart phone technology to authorize and grant access directly from the phone. Rather than turning on your phone, opening the app, and then clicking on the app to open the door; you can leave the phone in your pocket or purse, and then wave or touch the reader to activate the door.
So what?You can use your phone - how will that help? These systems are cloud based, in other words they are connected to the internet, but again, so what?
Well, once they are connected to the internet, you can start to connect them to other connected products.
What would you be able to do if your access control system was connected to the property management software? How about a reservation system for the club house or pool? How about cameras or lights?
Let’s look at a couple of items, like club house reservations and property ownership transfers.
How do you handle access now? What if someone loses the key/card, or gives out the code? How do you get the clubhouse key back, or how often do you change the code? What if someone moves into the community, and they want access to the pool the same day? What if you have 2 or 3 reservations on the same weekend? Who is responsible for the cleanup if there is a mess? How would you limit the number of people at the pool or gym? How do you address package delivery or vendor access?
With a smart system connected to other services, these questions are easily addressed.
Connecting to the management software then allows you to control who has access to the pool, let’s say. So, if the owners wanting access to the pool are delinquent or have an outstanding violation, then access would be removed (in accordance with the governing documents and policies). Once the delinquency was corrected or the violation satisfied, access would then be reinstated. This could all be done without any intervention by the manager or anyone else.
With smart access controls, you have the ability to enable a self-service reservation portal for residents. Users would then be able to schedule the date and time they wanted, receive access to the clubhouse during their reserved time slot, all without talking to the management company or having to deal with keys, cards or codes. With this type of system in place, you could accommodate more reservations without the worry of double-booking the space.
For vendors, you can schedule them for specific times, or they can call in when they are on the property and the manager can remotely open the door from anywhere, or you can provide them with a self-service vendor portal where they can manage their own access.
You can also connect cameras to smart access controls to record a quick video clip of who opened the door once it’s activated. You also have the option to have lights activate when the door is opened.
With the Smart access control systems that are now available, you can throw away your keys and fobs!
With the utilization of smart phones, you will receive better control and reporting, especially since people are less likely to let someone borrow their phone to go to the pool, then they are to loan a key or card.
Cloud-based reporting is part of some smart access controls systems that gives the manager and the board better insight as to who and when the facilities are being used. They can now find out exactly how many people are using the pool, gym, or clubhouse. They can find out what time of day and how many times a day it is being used, or how many times it is being used in a week or month. With this type of information, boards can now make more informed decisions about expenditures and upgrades to the existing facilities.
Clint Larson the CEO of Saddle Rock Security has more than 20 years of service to management companies, managers, boards, and communities. For more information, please reach out to firstname.lastname@example.org.
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