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  • 08/01/2022 11:47 AM | Bridget Sebern (Administrator)

    By Mary Sarah Schweiger, Citywide Banks 

    Are you a board member or a manager of an HOA covenant community? If yes, you understand that it can be hard and expensive to keep your community looking its best. One possible solution to consider is obtaining a loan from a local bank to complete the entire capital improvement project all at once. 

    Imagine: The buildings are damaged and continue to worsen right before your eyes. Or the community has a sewer system that is slowly but surely falling apart, causing backups. Or, the roads and the parking lots have lived their best lives and require serious repair. Or maybe it is time for a paint refresh. What does an association do? Does the reserve account carry a high enough balance to complete these capital improvement projects, and is there enough left over to facilitate emergency projects? Can the community continue to afford the band-aid solutions that prolong these projects? 

    If you are like most HOA's, you have put aside money in your Reserve account regularly; however, the project could cost more than what you have saved. Plus, it would be dangerous to deplete the reserves in the event there is an emergency in the future. Obtaining a loan can get the job done faster, lessen the strain on your reserve account, and allow the Association to pay overtime to lessen the strain on the homeowners.

    This is not always the most straightforward task, and it can take some time. Here are some initial questions and answers to help you decide if your Association should seek a loan and how to get started:

    • The first step is to always speak to your local banker. 
      • Each bank is different in its loan requirements. It is good to understand the information you will need to start the process and build that relationship with your banker early in the project.
    • Check your governing documents. 
      • It is essential that the Association's documents allow the Board of Directors to borrow money and pledge future assessments and enforcement rights to the bank to secure the loan. If this is not in your governing documents, you may need to make an amendment. I would seek an opinion from your attorney.
    • Who can approve obtaining a loan?
      • Usually, borrowing money requires a vote of the homeowners. Does that mean 2/3 of the homeowners? Or does that mean a majority of the homeowners present at a special meeting? Can you do this at the annual meeting of the members? Or does it have to be a special meeting with special notice requirements? Or maybe it is as simple as the board of directors' approval. Your governing documents will guide you. 
    • What is the financial health of your Association? 
      • Are you a healthy association with few to no delinquencies? Are you able to meet your operating budget on a monthly basis with the monthly dues you collect? Or are you dipping into your reserves on a regular basis to make ends meet? Could your operating budget afford a loan payment? Or do you need to increase dues or get a special assessment to repay the loan? 
      • Remember, the income of the Association is what the homeowners pay to the Association. What comes in must be able to pay the expenses, i.e., water, electricity, management fee, trash, landscaping, etc., including the transfer to the reserve account. You will want to continue to transfer to the reserve account because it ensures future projects will be supported as needed. The Association will continue to stay healthy above and beyond the loan.

    - What is the entire scope of the project?

    • Do you have a clear picture of the whole project and all parties needed to complete the project's scope? What is the project timeline, and what is the estimated cost for completion? Do you have a company you know and trust and want to work alongside? Have they provided a complete bid to do the work? Are they reputable in the community?
    • It is always best practice to obtain 3-4 bids for comparison. Try to compare apples to apples. Ask for references. Get to know these companies. What is their customer service like after the project is completed? 

    Ask questions, this will help start the process. Your next course of action will depend on the answers to these questions. Maybe you will need to start with amending the documents and cleaning up delinquencies. Or perhaps you just need to amend the budget and set a special meeting for the homeowners. Feel free to reach out to your local banker with questions or concerns. 

    A little about me, I have been a banker at Citywide Banks for the last 15+ years. I take care of the HOA portfolio at Citywide Banks and have experience lending to Associations across Colorado. I have sat on an HOA board for eight years and have experienced a lot (embezzlement, large million-dollar capital improvement projects, insurance claims, etc.)! We are creative at meeting the needs of the community. Citywide Banks prides itself on being a Community Bank, helping communities across Colorado. I am always happy to help and share my experiences and knowledge. Feel free to contact me at

  • 08/01/2022 11:43 AM | Bridget Sebern (Administrator)

    By April Ahrendsen, CIT Bank

    Does your community association need to fund a big project? Whether it’s tackling deferred maintenance, making emergency repairs, or upgrading landscaping, you have options to cover the costs – and financing may be the right choice.

    Three Options for Big-Ticket Projects

    1. Reserve funds can be a good choice if they’re available and the project meets the community criteria.
    2. Special assessments can be used to raise funds without permanently increasing assessments to cover a specific project within a particular timeline. 
    3. Financing can be a smart option when reserve funds are unavailable, the project does not meet the criteria for using such funds, or special assessments place financial difficulties on your homeowners. 

    Three Tips for Seeking a Community Association Loan 

    Get your papers in order. Banks are highly regulated institutions, so they’ll need to examine your documents carefully. 
    • Make sure the community documents are complete and current. It can be extremely difficult to underwrite a loan if they aren't.
    • Know what the association can and cannot do. If, for example, the bylaws require approval by association members before the board seeks a loan, be sure to have that approval in hand. 
    • Consult with your legal counsel to resolve any ambiguity before you begin your application. 


    Be specific about your HOA project’s scope and cost. Banks that specialize in HOA lending to community associations often provide project-specific financing. It may be for façade work, new roofing, drain systems – almost anything – but remember:
    • An itemized budget is key.
    • The bigger the project, the more complicated the variables will be.
    • You may want to hire an experienced construction manager to define the project specs, evaluate contractor bids and prepare a detailed budget presentation as an extra cost in the short run could be more than offset by savings later.

    Work with an experienced community association lender. A financial provider that understands community association banking can offer:
    • Products that streamline the HOA lending process
    • Creative solutions for difficult situations
    • Flexible loan structures, competitive rates, and expedited loan processes

    Working with a financial provider with experience in community association lending can be especially beneficial. The bank’s experts can help you through the loan process – even attend your board and membership meetings – and assist you with gaining the necessary approvals you need to move your projects forward. 

    1. Get your papers in order. Banks are highly regulated institutions, so they’ll need to examine your documents carefully. 
    • Make sure the community documents are complete and current. It can be extremely difficult to underwrite a loan if they aren't.
    • Know what the association can and cannot do. If, for example, the bylaws require approval by association members before the board seeks a loan, be sure to have that approval in hand. 
    • Consult with your legal counsel to resolve any ambiguity before you begin your application. 


    1. Be specific about your HOA project’s scope and cost. Banks that specialize in HOA lending to community associations often provide project-specific financing. It may be for façade work, new roofing, drain systems – almost anything – but remember:
    • An itemized budget is key.
    • The bigger the project, the more complicated the variables will be.
    • You may want to hire an experienced construction manager to define the project specs, evaluate contractor bids and prepare a detailed budget presentation as an extra cost in the short run could be more than offset by savings later.

    1. Work with an experienced community association lender. A financial provider that understands community association banking can offer:
    • Products that streamline the HOA lending process
    • Creative solutions for difficult situations
    • Flexible loan structures, competitive rates, and expedited loan processes

    Working with a financial provider with experience in community association lending can be especially beneficial. The bank’s experts can help you through the loan process – even attend your board and membership meetings – and assist you with gaining the necessary approvals you need to move your projects forward. 

    The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of CIT, a division of First Citizens Bank. For any matters concerning your specific needs and objectives, you should seek the professional advice of your own independent legal counsel, insurance advisors or other consultants.

  • 08/01/2022 11:39 AM | Bridget Sebern (Administrator)

    By Jennifer Kinkead, RowCal

    Have you ever found yourself looking at a set of association financials that appear to be a bunch of codes that need deciphering? Imagine the pressure of being a new community manager at your first Board meeting, and you are expected to explain the association's financial position. The financial portion of the meeting is inching closer, and your worst fear of having to explain this outlandish financial blueprint is before you. At that point, you find yourself thinking, “How can I explain the financial state of the association if I cannot properly read the financials?” 

    I am confident we have all felt like this at one point or another in our careers. The great news is that you will become more familiar once you know how to properly read an Association’s financial statements. This incredible knowledge will empower you to provide a simplified overview that you can confidently share with your Board members and homeowners. I hope to help you comprehend the “story” your association’s financial statements tell by highlighting the key points to focus on when reading them. The best way to decipher any code is to simplify it! 

    To begin, you must become familiar with the accounting method(s) your association practices as there are three common accounting methods in this industry: Accrual accounting, cash-basis, and modified-accrual accounting. The most common methods used are accrual accounting and modified-accrual accounting. 

    The first part of this story can be compared to a “table of contents” or a list of what a financial package should contain on a monthly basis. The community manager should receive a financial package that includes: a Balance Sheet, a Revenue and Income Statement, an A/R Aging Report, and Bank Statements/Check Register. These items I have just listed can be compared to chapters of your association’s financial storybook. 

    The balance sheet is the part of the story that shows the financial position of the association. There are three essential items to verify when reading an association’s Balance Sheet. First is the operating account balance to ensure there are enough funds in the account to pay the monthly bills; next is the reserve funds balance to ensure there are enough funds for expected and unexpected reserve expenditures. The last key point is the receivables balance to ensure the association is not exhausting more monthly funds than received. It is important to ensure an association does not have more money in one account than is protected by FDIC insurance ($250,000.00.) The Balance sheet is a helpful way to see if there are any potential cash-flow problems.

    The next chapter in the financial story is how the association operates compared to its budget. This information can be found in the Revenue and Income Statement. This statement is a side-by-side comparison of how the association is operating or spending vs. how the association budgeted. The budget is a planned, estimated expenditure for the fiscal year; however, it does provide the framework to evaluate revenue and expanse in relation to the current budget. Those two columns will not always match up, which can be described as a variance. Any variances are the key points to focus on when reading this statement, as there are two distinct types of variances. A real variance is a result of over-spending or under-spending, and a timed variance is due to the timing of the expense. Timed variances occur as most budgets are typically divided into 12-month increments, but contracts only last for a 6- or 8-month period. When a timed variance happens due to a contract, the budget will typically balance towards the end of the fiscal year. You want to focus on any variances the association may be facing and explain the reasons to your Board members. 

    As you navigate your financial packet, you will approach the most crucial part of your association's financial story, the A/R Aging report. This report is a detailed record of any owner who may be delinquent on their monthly assessments. You will be able to view each owner by unit address, the amount(s) they are past due, and the length an owner has been past-due. By using this report, you can ensure the association is collecting those funds according to the Collection Policy of the Association. If this number is large, this could indicate the association may be facing a cash-flow problem. Make sure you involve the Board and association's attorney on the progress of this report. 

    Coming to the end of our story, we will then find the bank statements and check register. When looking at the bank statements, you want to focus on ensuring it reads the same as the balance sheet. It is important to verify if the account balance has remained positive each month. The check register is a great tool to view who was paid and the details of the payments. It is also a record of those payments if you need to reference them at any time. 

    Knowledge is power! Remember, you gain financial knowledge by knowing how to read a financial package properly. By focusing on the key points listed above, you can confidently tell your association’s financial story, as each association has a unique story to tell.

    Jennifer Kinkead is a Supervising Community Association Manager with RowCal Denver. Her career began in the Association accounting department five years ago before progressing into a Community Manager role. Jennifer takes pride in educating her colleagues on the importance of association financials, budgeting, board education, and appropriate time management.

  • 08/01/2022 11:32 AM | Bridget Sebern (Administrator)

    By Jake Brooks, AGS Construction Inc.

    Everyone wants their community to be the absolute best it can be especially when it comes to safety, security, and appearance. Some boards will do everything possible to keep their reserves robust, dues stable and special assessments from occurring. In this environment many managers find themselves being asked to delay scheduled maintenance and capital improvement projects even when it comes to life safety issues. Kicking this proverbial can down the road proves to be exponentially more costly in the future in more cases than not.

    As professional managers part of your responsibility is to educate board members, provide them with expert opinions on defects, options for repair and judiciously execute actions on your community’s behalf. It is the job of a good restoration contractor to not only provide an estimate on cost of repair but to also act as a consultant and find solutions that strike a balance between maintaining a budget and addressing life safety issues and improperly constructed assemblies that may be present and need of repair in a community.

    In the past few years, we have all dealt with personal increases in cost of living, food, fuel and more. The same can be said for our industry. Much of the increase in construction cost is driven by a combination of the availability of skilled labor and the materials needed to make the necessary repairs. In the past year major suppliers of coatings have had to increase prices five times, siding has increased nine times, and roofing materials have increased by more than  thirty percent! Every building component has experienced the same increase and to add to that have become harder to obtain in some cases. Unfortunately, today this trend is the “rule” rather than the “exception” and right now the forecast is that this trend will continue going forward.

    To control job related costs, part of planning for any capital improvement project should include partnering with a reputable contractor that is aware of the above-mentioned supply chain issues, has access to available skilled labor, can meet the desired start/end dates, and has the experience to provide viable solutions for any type of project. The reality of what is requested and what can be provided are, in some cases, not the same. A knowledgeable contractor should be able to provide the insight it takes to produce viable solutions to overcome all these obstacles all while acting as a trusted consultant.

    For most contractors there can be a lengthy delay in scheduling quality crews between the authorization of work to the actual mobilization of resources. Additionally, depending on materials selected, this length of time could be even longer. Most companies will not commit resources to a project with out a fair degree of certainty that materials will be available for work to begin. Depending on the type of restoration and time of year this could potentially extend project start dates by months due to weather patterns and conditions needed for application of certain products such as stucco, roofing, sealants, and coatings. 

    The good news is by choosing a contractor that also acts as your project consultant there is a solution when moving forward with capital improvement and restoration projects. These contractors typically have in-house tradespeople, solid working relationships with design professionals, long term relationships with material suppliers, storage yards and warehousing capabilities. Having in-house tradespeople allows for better control of not only quality but also scheduling of resources to any given project. Having good relationships with design professionals allows for timely resolutions to the “known unknowns” we all encounter due to poor existing conditions. Long term relationships with material suppliers results in preferential treatment during product procurement. Having the ability to store and warehouse materials helps mitigate potential price increases and price fluctuation by being able to buy in bulk.  This also ensures there will be no lag in production due to delivery delays. Combine all these qualities and you have a contractor that can preform the repairs necessary to any community with little to no setbacks from the supply chain.

    So, avoid kicking that can down the road any longer by partnering with a contractor that can educate your boards on expected price increases for the foreseeable future and help them maintain their reserves, preserve the stability of their dues, and keep special assessments to a minimum.

    Jake Brooks is the Business Development Manager at AGS Construction, Inc (2022 CAI-RMC Titanium Sponsor). Jake has over 21 years of construction experience focusing on large scale HOA complexes and commercial and residential projects. Jake is experienced in building envelope, structural, civil and concrete repairs. He has an extensive knowledge of and experience with building materials. Jake is known for the creative solutions he offers for complex solutions. Jake can be reached at

  • 08/01/2022 11:28 AM | Bridget Sebern (Administrator)

    By Gene T. West, RBC Wealth Management  

    When we discuss the best practices for investing association reserve funds in today’s world, it is probably best to review a bit of history with this topic. Community Associations began to take hold during the 1970s. During the 1980s, association reserve accounts began to grow. At the time, interest rates were substantially higher than today. The 10-year US Treasury Note was yielding 9.04% on January 2, 1986, compared to about 3% +/- today. Virtually all the reserve assets of HOAs in the 1980s were sitting in bank savings accounts or money market accounts when the 10-year US Treasury Note was as high as 12.02%. Since ‘real’ rates were so high, no one cared about ‘investing’ the funds. The 1990s brought lower rates and slightly more sophisticated investing by community associations. In 1996, the 10-year treasury had declined to 5.58%. Laddering, or staggering maturities became popular. This was, and still is, a great way to provide liquidity and may guard against the risks associated with dramatic moves in interest rates. Making use of other US government securities like GNMA mortgage bonds also came into play. By 2005, the 10-year treasury yield had dropped further to 3.89%. Using a financial advisor specializing in HOAs was becoming more popular, and a small percentage of communities were using mutual funds. On 7/8/2016, the 10-year treasury closed at a then record low yield of 1.36%. Association boards were patiently waiting for rates to go higher. But they didn’t. From 2016—2021 associations struggled with the concept that inflation was outpacing the earnings of the reserve account, and most all associations were losing purchasing power on their reserve fund assets (inflation being higher than the rates earned) every day. Most association boards are now discussing this concern. The fact is, if earnings in a reserve account do not keep up with inflation, there is generally only one way of making up this difference. That is by raising assessments. Remember, every dollar you earn in a reserve account is one less dollar that needs to be assessed to owners.

    Today, we spend a lot of time discussing the definition of ‘risk.’ Is risk defined as the possibility you could lose money on an investment? Or is risk defined as the possibility that you could lose purchasing power because of inflation? Each board must prioritize its concerns on this topic.

    When it comes to ‘best practices’ in today’s world, we see boards taking one of two avenues. Those boards who define risk as the chance you could lose money, will continue to invest reserve funds as we have done in the past: laddering CDs, treasuries, and making use of other government securities like GNMA’s. The boards that view risk as not keeping up with inflation will invest a portion of their reserve funds in non-US Government instruments in order to obtain a higher return.

    The bottom line on reserve accounts is that this money is being put aside to spend at a future date. Associations must always have cash available when assets need to be repaired or replaced. Laddering CDs or treasuries can be essential in any investment strategy. Using a financial advisor specializing in Community Associations may assist in improving the chances of the association having a strategy. It may also help fulfill any obligation that each board member has to their community and can assist with a more proactively maintained community.

    Gene T West

    Senior Vice President - Financial Advisor

    Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested.

    RBC Wealth Management does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in connection with your independent tax or legal advisor.

    Interest rates sourced from FactSet web application.

  • 08/01/2022 11:26 AM | Bridget Sebern (Administrator)

    By Kiki N. Dillie, Esq,  Altitude Community Law

    When a management company or board becomes aware of a homeowner being foreclosed on by their mortgage company and/or being in bankruptcy, often the first question is “What does this mean for the Association?” With reports that the economy may be taking down turn in the near future, foreclosures and bankruptcies are likely to increase and impact more and more associations.

    Foreclosure: When a homeowner’s mortgage company is foreclosing, the homeowner legally remains the owner of the property until approximately the 9th business day after the foreclosure sale. (The exact date depends upon whether there are junior lienholders that want to redeem the property after the sale.) The homeowner remains personally responsible for any assessments that come due while they are the owner, so they are obligated to pay whatever comes due up until the sale actually happens, even if the sale is continued several times and/or if the homeowner moves out of the property before the sale. 

    Even after the sale, the homeowner remains legally responsible for any assessments due while they were the owner, minus the superlien amount. The foreclosure sale does not end that responsibility and the homeowner can be collected against for that amount, even after the sale is completed. Practically speaking, if the homeowner moves out of the property and can’t be located, it might not be a good use of the Association’s funds to continue to try to pursue the homeowner and it might be a good idea to consider writing off the balance to bad debt, but that depends on the individual circumstances.

    In Colorado, the superlien also takes effect in these situations. When a foreclosure is initiated, the superlien comes into existence. This lien is valid for any assessments that came due in the 6 months prior to the foreclosure being initiated and remains against the property even after the foreclosure, if not paid sooner. Sometimes the foreclosing mortgage company will pay the superlien during the foreclosure process, but if not, the superlien will have to be paid at the time the post-foreclosure owner attempts to sell to a new owner.

    Bankruptcy: Whether or not the homeowner is personally responsible for assessments in bankruptcy is more complicated and depends on the type of bankruptcy filed, as well as other factors.

    Chapter 7 Bankruptcy: This type of bankruptcy is most common when the economy is bad and people are either unemployed or severely under employed. In a Chapter 7, after the bankruptcy is filed, the Association can no longer contact the homeowner about the balance due. This includes sending letters regarding the balance. Once the homeowner receives a discharge, they are no longer personally responsible for the balance due as of the date the bankruptcy was filed. They remain personally responsible for any assessments that come due after the date the bankruptcy was filed through the date that they no longer owner the property. Additionally, the lien remains against the property for the full balance due, so if the homeowner retains the property through the bankruptcy and later sells to a new homeowner or refinances, the full balance due, including any pre-bankruptcy balance, can be collected at closing.

    Chapter 13 Bankruptcy: This type of bankruptcy is more common in good economies when people are employed, but just have too many debts and need time to repay their creditors. When a homeowner files a Chapter 13 bankruptcy, the Association can no longer contact the homeowner or any other co-debtors about the balance due. Whether or not the Association will be repaid the pre-bankruptcy balance will depend on if the homeowner retains the property or surrenders it, so this varies case to case. Also, even if the homeowner intends to retain the property, the Association will have to file documents with the Bankruptcy Court very quickly after the bankruptcy is filed in order to validate their claim and actually get paid. If the documents are not filed timely, the Association likely won’t receive payment, even if they otherwise would have been entitled to payment.

    In either a Chapter 7 or 13, it is very important to contact the Association’s attorney right away after being notified of the bankruptcy filing, so the attorney can get the required documents filed timely and protect the Association as much as possible through the bankruptcy.

    If you have any questions about the impacts of a foreclosure or bankruptcy on an association, it is best to contact the Association’s attorney to get the best advice on how to handle that particular situation.

    Kiki is a partner with Altitude Community Law and runs the debt recovery department.  She has an extensive understanding of all areas of association debt recovery, but also has experience with foreclosure, covenant enforcement, and transactional issues. Kiki has taught dozens of classes for managers and board members in a variety of association-related subjects.

  • 08/01/2022 11:10 AM | Bridget Sebern (Administrator)

    By Cylinda Mobley, Westwind Management Group

    I’m a budget nerd, and I freely admit it. Putting together an HOA budget and seeing each month how accurately the projections and actuals fall into place gives me a sense of satisfaction and downright gleefulness. In the coming weeks, this process begins again as I start the budgets for the communities I manage. With so much in the news recently about inflation and its effect on so many of us in our daily lives, how do we factor that into the budgeting process for 2023 and beyond? defines a budget as “an estimate of income and expenditure for a set period of time .” I start the budget by projecting the expenses. Only then (IMHO) can the income be projected because you need to know how much money you need to cover the expenses. Let’s roll up our sleeves, put on some good tunes, print out the past years’ reports for actuals vs. budget, and get to work!

    The economy is cyclical, and the way I like to factor that in is by using a five-year history of expenses to determine an average and then modify where needed, but in our current market, that may not be enough. We are still being affected by COVID supply chain and labor shortage issues. Many of our industry business partners are struggling to keep staff while still providing the services needed to keep our HOAs going. Before you throw your hands up in despair, channel your energies into the below recommendations:

    • See if the utility companies are talking about increases for the next year (in addition to what may have occurred in the middle of the current year!). 
    • Check with your service providers for any increases and fuel surcharges. To retain staff, they may be competing with others and having to offer incentives for employees, which drive up costs.
    • Where can your association cut costs? Does it make more sense to look at xeriscaping over the higher watering costs of turf? 
    • How healthy are your reserves? Has your association conducted a recent reserve study? Are you capitalizing on the inflationary market and investing your funds where you can get the best return on investment? Can you put off a capital improvement until this volatile market slows?

    Putting together a budget shouldn’t cause you grief, but rather provide some relief that you have as accurately as possible created a road map for the association for another year! If you need a good playlist to jam to while you are number-crunching, Sister Hazel is always my go-to! Check them out here: 

  • 06/01/2022 12:24 PM | Bridget Sebern (Administrator)

    By Gary Deck, CAIS, LLC 

    Why Every Community Associations Needs a Workers Comp Policy


    Even though all Community Associations should only hire licensed insured contractors, we know this does not always happen.  By hiring uninsured venders or contractors the Management Company and the Association can be held liable for workers comp claims submitted by their vendors.

    To protect the Management Company and the Community Association against unwanted workers comp claims the association should purchase a 0 payroll (referred to as an “if any”) workers comp policy.  Many managers and association board members think that since their association does not have employees, they do not need workers comp coverage.  California Court of Appeals case, Heiman v. Workers Compensation Appeals Board proves that associations and Management Companies can be held liable for vendors that are injured working for a community association.  A workers comp policy provides a “backstop” should a contractor's policy fail.  Both the Management Company and the Association are protected with a workers comp policy. 

    Management Companies should amend your contract

    Because of the potential “shield” this “if any” backstop provides for you as the manager, you might seriously consider rewriting your contract to require your clients to carry this coverage.  Most management contracts that I’ve seen require the association to carry Directors and Officers (D&O) and General Liability (GL) insurance.  Because of the far-reaching consequences of this case, Workers’ Compensation should be a required coverage in your management contract. 

    Coverage for volunteers

    In addition to the "if any” exposure addressed in this case, the Association and the Management Company are at risk of owing workers’ compensation benefits to injured volunteers who perform “work” on behalf of the Association.  Imagine these scenarios:  An association member volunteering at a “Saturday Community Clean-up Day” is injured, or a Board Member slips and falls during a site inspection.  While the General Liability policy provides “bodily injury” coverage, bodily injury to an “employee” is specifically excluded so the exposure can be pushed to a workers’ compensation policy.  A volunteer performing work on behalf of the Association could easily be construed as an "employee” by the GL carrier, especially if the injuries are significant.  To cover volunteers, board members and committee members the association must purchase a workers comp policy that extends coverage by endorsement to volunteers.  Without volunteer coverage the associations volunteers are NOT covered. 

    If they refuse to buy

    Sometimes, good Boards make bad decisions.  All they see is someone else (this time the insurance guy) sticking it to them for another $352 to insure for some highly unlikely incident. Sadly, that will be the perception of some of your clients.  The best thing you can do is present the details of this case California Court of Appeals case Heiman v. Workers Compensation Appeals Board (available at website), explain the coverage opportunity for the exposure, and recommend that they buy coverage.  If all that fails to inspire them to buy coverage, all you can do is protect yourself if they say “no” is to have the association board sign a “refusal/rejection of coverage” letter.  The associations broker/agent should keep a copy for if and when a workers comp claim arises.   


    Until recently, this type of complete workers’ compensation policy for common interest developments has been tough to come by.  While some carriers offer coverage for the “if any” exposure, they do not offer coverage for volunteers.  Other policies provide “if any” coverage and only offer coverage for Board Members, recommending that you simply extend the definition of “board” via appointed committee.  It is important that the policy obtained offer coverage for both the “if any” exposure and ALL volunteers working at the direction of the Board. 


    All Management Companies and Associations should follow these recommendations:

    1. Hire only licensed and insured contractors
    2. Purchase an “if any” workers comp policy with volunteer coverage.

    Insurance agents who insure Community Associations should offer their clients a workers comp policy that includes coverage for volunteers every year at renewal and keep a signed rejection letter on file incase the Association decides not to purchase this policy. 

    Gary Deck is the Director of Sales and Distribution at CAIS, LLC. CAIS is a specialty wholesale Broker and national wholesale Managing General Agent and is the National Program Administrator for the PMA Association Workers’ Compensation program. For additional information regarding this article, he can reached at 916-212-8310 or at

  • 06/01/2022 12:22 PM | Bridget Sebern (Administrator)

    By Alyssa Chirlin, Smith Jadin Johnson, PLLC

    Inflation is noticeable everywhere today and HOAs are not immune to the pressures caused by higher relative costs. One common remedy to these pressures is cutting costs and one area where it is always tempting to do so is in insurance premiums. However, skimping on insurance coverage now can generate significant costs down the road. For HOAs specifically, it is imperative to have comprehensive directors and officers (D&O) insurance in place. Unlike an HOA’s general liability policy, which protects the HOA, D&O insurance, as its name suggests, protects its board members. 

    As anyone who has lived in an HOA knows, keeping all members happy all the time is impossible. It is inevitable that some homeowners will be unhappy and some of those unhappy homeowners may file lawsuits. D&O insurance kicks in when those lawsuits name individual board members. Defending a lawsuit is expensive and even when the case is dismissed or settles, the costs can still be substantial. Should a homeowner’s lawsuit be successful and judgment be entered against a board member, the costs could be astronomical. Without a D&O policy in place, these costs can fall to the HOA, if it indemnifies its board members, or even to the board members themselves, if the HOA does not indemnify its board members or does not have the funds to fulfill its duty to indemnify them. HOA board members are often volunteers, committing their time, energy and talents to their community, and, in order to attract and retain qualified, valuable board members, HOAs need to offer them protection from expenses that, even when claims are completely unjustified, can be potentially ruinous.  

    HOAs need to protect not only their board members, but also themselves. Many HOAs already indemnify their board members in their governing documents and even without specific authority therein, the Colorado Revised Nonprofit Corporation Act permits HOAs to provide such indemnification. By doing so, HOAs assume responsibility for the costs that may arise when a board member is sued for his or her HOA work. This can be an expensive assumption and an HOA can face depleting its reserves or, if it does not have the funds in place, assessing the costs to its members. HOAs should not take on this responsibility without D&O insurance in place.

    D&O insurance coverage can vary widely, but typically covers the attorney fees and costs associated with defending board members against legal claims that are related to their work for the HOA as well as any settlement or judgment amount. Some D&O policies may limit coverage to only board members, while others include an HOA’s employees, committee members, and management. Some policies cover lawsuits, but not arbitration (which may be required by an HOA’s governing documents) or mediation. Some policies may only cover claims for monetary damages, but many lawsuits brought by homeowners against their HOAs do not seek financial compensation at all and instead seek an order from the court that the HOA perform a certain action. Failure to enforce the governing documents or adhere to the bylaws, challenges to assessments or architectural review decisions, improper removal of a board member, and failure to maintain common areas are all examples of non-monetary claims that may be brought by a homeowner and would not be covered under a D&O policy that limits its coverage to monetary claims. 

    HOAs that are subject to the Colorado Common Interest Ownership Act (CCIOA) are required by law to carry D&O insurance, so it is likely your HOA has a policy in place. Instead of selecting the least expensive policy in order to meet this requirement, however, boards should discuss their HOA’s specific needs with their insurance agent and ensure that their D&O policy covers them. Although it may be difficult to fund a comprehensive D&O policy now, it can save the HOA, and its board members, large sums of money later on.  

    Smith Jadin Johnson, PLLC aims to provide comprehensive legal services for HOAs, from daily governance issues, including collections, covenant enforcement, and governing document drafting, to representation on insurance and construction defect claims. Our experienced team of attorneys can handle all of your HOA’s legal needs in house, eliminating the need to hire multiple firms to handle its legal affairs. Call us to discuss your HOA today at 720-550-7280. 

  • 06/01/2022 12:18 PM | Bridget Sebern (Administrator)

    By Devon Schad, The Schad Agency 

    Growing up in Louisville, Colorado, I like many others, could have never imagined the scene that unfolded on December 30, 2021. Early in the day a staff member mentioned a small brushfire had started in Boulder. Miles away we went on with our day only to see what looked like dust in the air around 11am. By 1pm the fire was roaring, coming up the hill towards Superior. As the winds shifted, the devastation that unfolded was nothing short of unimaginable. What seemed like only a matter of minutes, more than 1,000 structures were lost along with decades of memories and only charred remains littering the landscape.

    This is what insurance is designed to do. To help when the unthinkable happens. To come to the rescue on the brink of financial ruin. With this fire just behind us and years of rebuilding still to come, what can we learn and do to help if the unthinkable happens again?

    The biggest asset for most associations is the buildings themselves. Many people found, during the fires, that they were significantly underinsured. It is critical that associations review their current building coverage amount and work with their agent in determining a value that the association is comfortable with. The agent should be able to help provide input and explain how they arrived at the suggested limit. With the ever changing cost and rising inflation this is not a perfect science. If an association is underinsured at the time of the loss, they have a few options to cover the shortfall such as using reserve funds, taking out loans or assessing owners. This is never ideal and hopefully by reviewing the limit you can reduce this exposure from happening to your association. 

    When looking at building coverages it is common to see policies come in three main coverage options. 

    1. Guaranteed Replacement Cost which pays the full cost to replace the property even if it exceeds the policy limits. An important caveat typically applies to this provision that requires the association to insure to replacement cost (and update the amount when any improvements are completed) for the coverage to be triggered at the time of loss. 
    2. Extended Replacement Cost extends the limit in the event of a total loss to provide additional coverage by a set percentage. This generally follows the same requirements as Guaranteed.
    3. Agreed Value which gets rid of any coinsurance provision by the company and the insured agreeing to the maximum limit for a schedule of property values. Since each item has a specified limit, it becomes more important to review since there is less margin for error. An option is Blanket coverage, which would allow the total limit to be used for any building that suffered damage. However, this is becoming increasingly difficult to secure on Agreed policies and often is not available regardless of price.    
    4. One item of note is coinsurance, and not to be confused with the same word used in health insurance, as property coinsurance works a little differently. Coinsurance is a provision that penalizes the insured if the limit of insurance is not equal to or greater than the specified percentage. The higher the percentage the more likely a penalty will happen from a loss. A quick example is the coinsurance percentage is 90%. A building replacement value is $1,000,000 and the client only carries $800,000. A fire does $300,000 of damage. Since the insured was under the required coinsurance $800,000 vs. the $900,000 required (90% of $1,000,000), the insurer will add a penalty ($800,000/$900,000=.889). Even though the association's loss was $300,000, the insurer will only pay $266,700 minus their deductible ($300,000 x .889).

    Reserve studies can also help the association and their agent account for items that are owned by the association and give some ideas on their replacement cost. This helps provide a greater roadmap for coverage requirements but should not be the only thing utilized. Many items may fall outside a traditional reserve study such as trees, plants and shrubs, roadways, etc.

    After a loss, monthly assessments may need to stay the same or close to since often most of the cost associated with the association do not go away. Owners should purchase loss of use coverage that would keep their total cost before the fire the same after the fire. Business income or loss of dues may be added to policies to help collect for uncollectable assessments and/or loss of income if parts are rented to others. 

    Knowing who is responsible for what prior to a loss will help alleviate conflict at the time of a loss. Having a maintenance and insurance chart that clearly defines responsibilities between owners and the association should help accomplish this.

    Lastly, every policy is different, and insurance is nowhere near perfect. Many policies today exclude or limit coverage for foundation, underground pipes, roadways, outdoor property and others. Be sure to spend the time with an educated, experienced agent that can uncover the pitfalls and recommend coverage options.

    Devon Schad is the current Chair of Marketing and Membership for CAI Rocky Mountain Chapter, an Educated Business Partner, and owner of the Schad Agency. The Schad Agency specializes in insuring association and has been since the family founded the agency in 1976.

(303) 585-0367

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