By Nicole Stone, LMI Landscapes
Natural disasters typically announce their arrival by uprooting trees, roaring tornados, or blazing wildfires wiping out entire landscaped communities. Geophysical, hydrological, meteorological, and climatological factors all create severe disruptions to the functioning of communities and exceed their capacity to cope with them using their own resources. Climatological disasters are becoming a much more standard part of everyday life; examples include extreme temperatures, fire, and drought. Drought, unlike most disasters, does not make a grand entrance. Most of the time, many believe it is just a dry spell, while the drought itself continues to build and grow in complete silence. Droughts happen naturally; however, human activity can exacerbate the conditions. Has your community created an action plan to continue beautification efforts while protecting a potential natural disaster again?
We do not have a crystal ball, and mother nature does not share her forecasts with us, but we need to be mindful of current climate situations. According to the National Weather Service, the drought forecast for the next six months does not look good for Colorado.
Drought is not an uncommon term for Colorado, highlighting the necessity of using water-wise landscape practices. It is hard to believe that almost 75% of summer water is consumed by exterior landscape vegetation. When using water-wise landscape practices, significant reductions can be gained through minor changes in the arrangement of plantings, alternative plant selection, and soil preparation.
Xeriscape is one item that can be achieved to help reduce water use and keep a community looking beautiful. However, this term seems to confuse many individuals. Xeriscape does not mean a specific look or even grouping of plant material. It is a combination of several commonsense principles that save water while creating a tremendous colorful landscape pallet. The big question is how to accomplish this without breaking the bank.
While xeriscape can assist in water usage during droughts, we next look at protecting communities from wildfires during droughts. As building increases, we begin creeping closer and closer to wilderness areas raising the urban wildfire danger. We have seen fires rip through Colorado neighborhoods creating overwhelming devastation and overstretching community resources. Even though wildfires are natural occurrences, climatological conditions such as windy, dry, and hot can ignite vegetation quickly and spread, leaving widespread devastation.
For communities that live near areas susceptible to wildfires, steps can be taken to protect your property and properties around you.
Climatological change is ever shifting but can have considerable impacts on communities. The best solution is to address the risks, create a solution, and start implementation to reduce your risk while keeping your community looking beautiful. While natural disasters have unfortunately become far more frequent, planning for the unknown should as well. Through planning and preparation, communities can remain beautiful while keeping the community safe for years to come.
Nicole Stone is the Director of Maintenance Operations with LMI Landscapes. A Nebraskan native but Coloradan at heart, Nicole Stone has over 17 years of experience in the Green Industry ranging from construction, estimating, irrigation, and maintenance. Nicole is inspired by the opportunity to create an environment where clients know their value. Nicole’s experience and qualifications have allowed her a solid understanding of business visioning, establishment, consolidation, and expansion – she continues developing and refining her innate talent for developing strong client alliances and partnerships.
By Lindsay Smith, Winzenburg, Leff, Purvis & Payne, LLP
Many communities choose to undertake self-management in an attempt to minimize costs and assessment levels. This structure can make a lot of sense for certain communities, but if you’re new to the Board, or unfamiliar with your obligations to your community as a Board member, you may quickly find yourself in over your head. Communities that are currently self-managed, and communities that are exploring self-management, should consider the following when making the decision to go it alone.
Is it Permitted?
Your governing documents may actually require that you retain professional management. Particularly for condominiums, the Declaration might require you to provide notice to lenders before establishing self-management if you’ve been professionally managed in the past. If your community has historically been professionally managed, review your documents and check with legal counsel to make sure you don’t run afoul of any management or notification requirements. If you are obligated to provide notice of this change to all the lenders in the community, your lawyer can help you navigate the process.
Who’s in Charge?
The Board typically acts as the executive branch of the community, and management implements the Board’s policy decisions. When you undertake self-management, you need to decide who is responsible for actually completing the work. If the Board decides to retain a snow removal vendor, who reaches out to vendors to request proposals? Who reviews and communicates with the vendors? Who calls the vendor when a problem occurs? And when that person is on vacation? Your vendors don’t want to hear from a dozen different people. Keep your lines of communication and chain of command clear.
While the President typically acts as the chief executive officer, you can’t expect the President to do all the leg work. Clearly allocate responsibility amongst other Board members, or where appropriate, to a duly-designated committee. If you have a committee in charge of vendors, make sure you have clear boundaries for what the committee can, and cannot do. A thorough committee charter will help set expectations. Similarly, if your liaison is a Board member, make sure the Board member understands their boundaries. Major decisions, such as selecting a vendor and approving a contract, need to be made by the Board to protect individuals from personal liability. However, day-to-day decisions, such as approving the landscaper’s reduction of irrigation in a location that is receiving too much water, are appropriately delegated to the representative.
Dollars and Sense
Financial management and transparency are crucial for community associations. If you do not have competent financial management, don’t undertake self-management. Your treasurer needs to be experienced and able to account for Association funds using generally accepted accounting principles. The treasurer should know the numbers forwards and backwards and be able to explain everything to curious homeowners at a moment’s notice. In addition, your financials need to be properly maintained to ensure your legal counsel can take necessary steps to collect. Keep in mind that if your ledgers are wrong, and the attorneys take action on those incorrect ledgers, the attorneys and the Association can face legal liability.
Many communities will retain professionals for “accounting-only” services. This is a good balance between the financial risks of self-management and the financial costs of full-service management. If you’re considering self-management but are worried about accounting, ask your management company if they provide different service levels.
When you are self-managed, you need to rely more on the professionals who advise your community. Make sure you have a good insurance agent who truly understands your community’s needs, risks, and how insurance works in your HOA. If your community was formed on or after July 1, 1992, or if it is required by the governing documents, you will have to carry property and liability coverage for the common elements and in most condominiums, on the units themselves. Even if your governing documents are silent on insurance, you should still talk to a broker and protect yourselves. Not all insurance is the same!
Don’t look solely to the bottom line when selecting an insurance policy. Ask your broker whether the property policy will actually cover everything that needs to be covered if the community is destroyed. As we are seeing with the Marshall Fire, many homeowners are underinsured, whether due to a general misunderstanding of actual replacement cost, or due to a failure to carry sufficient coverage to address building code changes and the costs of removing debris.
Similarly, the cheapest Directors and Officers Liability policy isn’t necessarily the one you want in place when the Association is sued. Ask your broker whether the policy covers all prior acts, what is included and what is excluded, and how much the insurer will pay in a worst-case scenario lawsuit. Will the policy cover discrimination? What about a judgment if you lose? Your policy will include a date for “prior and pending litigation.” Make sure this date stays the same across new policies to avoid a gap related to when a claim is filed. You want to make sure your D&O policy will cover all prior acts.
Finally, management companies can do a lot of good when it comes to vetting vendors and avoiding unscrupulous contractors. Many management companies require vendors submit proof of insurance before the manager will even entertain work by the vendor. When you’re self-managed, you may miss this step or not think about it until problems crop up. If a bad vendor has forged a certificate of insurance or allowed a policy to lapse (and this can happen regardless of management’s diligence), the Association can be left holding the bag. Carry worker’s compensation insurance to protect against the risk of an injured worker, and consider checking on the Colorado Department of Labor and Employment website to verify the vendor’s worker’s compensation policy is not lapsed.
Reliance, Business Judgment, and Blame
The Colorado Revised Nonprofit Corporation Act provides the general standards of conduct for directors. These standards apply whether you are self-managed or professionally managed. Directors need to discharge their duties in good faith, with the care an ordinarily prudent person in similar circumstances would exercise, and in a manner the director reasonably believes to be in the best interests of the corporation. Directors are entitled to rely on the advice and opinions of professionals in discharging their duties, so relying on the advice of a seasoned manager can help a Board that finds itself in litigation establish its reasonable business judgment. Of course, managers cannot provide you with legal advice and are not engineers, but they can help spot issues that you might not even recognize – such as changes in the law – which can help you avoid unseen dangers.
If you are self-managed, you may find yourselves reaching out to your accountants, engineers, and attorneys more often for advice to help ensure you are acting reasonably and prudently. Make sure you consider these additional needs as you budget your time and money. You should also plan to take educational classes that may be offered by CAI or other industry partners.
One underappreciated aspect of professional management is that a manager’s actions help to insulate a Board from angry neighbors. No one likes being towed, or receiving a violation letter, and if a Board member has to tow someone from a fire lane, that Board member might receive a knock on the door late at night. Management can help redirect this improper anger (don’t park in fire lanes!), and protect the Board member from personal conflict. Board members have to wear multiple hats when a community is self-managed, and when one of those hats is labeled “Enforcement,” heavy is the head that wears the crown. While no one has the right to abuse or make personal attacks as a result of proper enforcement activities, angry homeowners may still act irrationally. If you’re considering self-management, ask yourselves whether you are likely to face this kind of interaction, and whether you and your community would be better off with the homeowner leaving a message for a professional who is trained in this sort of interaction – and who isn’t a next-door neighbor.
Is it Worth It?
If your community has minimal maintenance obligations, is reasonably harmonious, and has owners who are willing to follow the rules, you can probably undertake self-management. At the end of the day, however, Boards are full of volunteers who have other obligations that are almost certainly more compelling than comparing different insurance policies and preparing letters to owners with pink houses. Legal requirements for community association governance require more sophistication every year. While you may be able to undertake self-management with your current Board and existing challenges, it’s common for the additional workload to burn out volunteers more frequently. If something goes wrong – a major insurance claim, a lawsuit, an unexpected move – you may find yourselves scrambling to retain professional assistance. Be realistic in evaluating your capabilities and your community’s needs, both now and in the future. While everyone wants to save money, the costs associated with self-management may exceed the dollars saved.
Lindsay Smith is a partner at Winzenburg, Leff, Purvis & Payne, LLP, where she focuses on general community association law, enforcement, and governance. She is also a volunteer for and the current Chair of the CAI – Colorado Legislative Action Committee. Many thanks to Wendy Weigler, Brad Henderson, and Marci Achenbach for their assistance in this article.
By Tressa Bishop, MBA, CIC, CIRMS, USI Insurance Services LLC
A manager or Board member’s role within the community association requires many, many hats be worn at various times. One of the more stressful parts of working within a common interest community is assisting in times of crisis, whether it be involving one owner/member or the entire community association. If you’ve managed or volunteered within a community for any length of time, chances are you’ve encountered a situation where the insurance carrier has had to be notified of a claim or a situation that may give rise to a claim. Here, we’ll discuss the best way to handle various claims situations with the goal being the most positive outcome possible for the association.
Property claims, such as when a fire or large water loss occurs, are the most common type of claim and, for the most part, are more ‘cut and dried’ as far as when to notify the carrier. If the loss originates within a unit, that owner should immediately notify their personal insurance carrier of the loss and begin the mitigation process (cleaning up the damage and preventing additional damage from occurring). Unless there is a specific property form stating otherwise, most commercial property policies follow the governing documents in place at the time of loss as far as coverage on the interior of the units. Many Board members assume that the association’s policy does not cover interior unit damage which leads to confusion and unnecessary delays following a property loss. Occasionally, this can ultimately lead to a liability claim as the owner assumes the association is trying to skirt their responsibility, yet the Board truly doesn’t think the association has any responsibility for the interior of the unit following a loss. Any time there is a loss, we recommend reaching out to the insurance broker immediately for assistance and to clarify the responsibilities of all parties.
As soon as it is known that the property loss, including mitigation and estimated repairs to get the property to pre-loss condition, will exceed the policy deductible but before the repairs are made, the property carrier should be notified. The association’s insurance adjuster and the owner’s insurance adjuster will work together to ensure each policy is covering the appropriate parts of the claim. Both parties have a right to inspect the damage before repairs are made, so it’s important to allow this to occur before any repairs are made. Typically, the association’s adjuster will issue an Actual Cash Value (ACV) payment early in the claim process (this is calculated as the agreed upon claim amount/scope, less the policy deductible and less the holdback depreciation amount for the damaged property – don’t’ worry, they will pay this amount once proof of all repairs is provided). The unit owner’s carrier, if required by the governing documents, will pay the association’s policy deductible (less the owner’s personal policy deductible) and for any part of the damaged real property that is required by the governing documents. Once all repairs are made by the owner’s contractors and final invoices are received, the association’s adjuster will release the holdback depreciation amount and the claim should be paid in full. The unit owner will expect that the association forward both the initial ACV payment amount and the holdback depreciation payment amount so they can pay their contractor(s) for the agreed upon claim amount/scope.
Liability claims can be a bit more confusing and have increased significantly over the past few years within common interest communities. General liability (GL) claims occur when there is bodily injury or third-party property damage (property not owned by the association). The most common type of claim we see filed under the GL policy is due to a slip and fall or trip and fall. When the manager or Board is notified that someone has been injured on association property, there is a possibility of a GL claim forthcoming. Sometimes, the injured person simply reaches out to notify the association so they can correct a problem and ensure that no one else is injured but they aren’t actually making a claim (not asking for medical bills to be covered nor monetary damages from their injury). Even in this situation when a claim is not being made, we recommend an injury report be taken with as many specific details as possible (exact location, weather conditions, witness information, and other pertinent details). If a claim is made at a later time, all of this information will be needed. We recommend notifying your insurance broker when you first become aware of the accident even if a claim is not immediately being filed.
There are times when an injured party sends a small medical bill for payment. As tempting as it may be to simply pay the bill to get it to ‘go away’ and avoid a claim being filed on the association’s GL policy, please do not do this. The association’s GL policy has certain reporting requirements and, while you believe that it is just a small amount and will quickly go away, if the association makes the payment they may be jeopardizing coverage altogether should a larger claim or lawsuit rear its ugly head down the road. Reach out to your insurance broker or agent right away so the carrier can be notified.
Occasionally, a letter of representation is received and the manager or Board has no idea who the person is nor were they previously notified of the accident being reported. Again, reach out to your insurance broker or agent right away so the carrier can be notified and respond on the association’s behalf. The policy which was in place at the time of the accident/occurrence will be the one to respond.
For allegations of wrongful acts by the Board, manager, committee members or other volunteers, the professional liability policy carrier (also referred to as Directors & Officers liability policy) will need to be notified right away. Since most professional liability policies are written on a ‘claims made’ policy form, the carrier that is in place at the time the claim is made or that there is reason to believe that a situation may give rise to a claim must be notified to ensure defense and coverage (if applicable based on the policy exclusions and limitations). Reach out to your insurance broker or agent right away so the carrier can be notified. Unlike the property and GL carriers, unless a claim is being made by the party alleging the wrongful act, professional liability adjusters will generally note their file and follow up with the insured to see if a claim develops over the coming weeks.
There is no getting around the fact that insurance claims are tricky, policies respond differently depending upon coverages, exclusions and limitations, and no two claims are exactly alike. Even if one association’s claim appears to be similar to another’s on the surface, they may be handled very differently by the two different carriers depending upon the policy’s insuring agreements and the facts at hand. One thing is for certain, do not go it alone. Work closely with your insurance broker or agent right away to ensure the association doesn’t inadvertently jeopardize coverage by assuming anything.
Tressa Bishop is an Executive Vice President with USI Insurance Services LLC and specializes in assisting community associations with their insurance needs. She holds the Community Insurance Risk Management Specialist (CIRMS) designation through CAI, demonstrating her commitment and expertise in this insurance niche. Tressa is the immediate past President of the Southern Colorado chapter of CAI, is the current Chair of the Activities committee and is a member of the Programs & Education committee for the Rocky Mountain chapter.
By David Ford-Coates, Alliance Association Bank
When managing your association’s funds, the number one concept to remember is, it is not your money! You are a fiduciary who is responsible for the funds of a non-profit corporation, owned by all the individuals in the association. Your first priority should always be safety of principal, with return on investment as a secondary, or even tertiary objective. It is all too common where HOA’s flip these priorities.
The temptation for boards to “chase a higher yield” is always there and it can create more inherent risk, especially if it leads to the association making unsuitable investments. Chasing yield has been more prevalent over the past 12+ years, for several reasons. The most important being that as a society we have dealt with a historically low interest rate environment. This has affected savers a great deal (both corporate and individual). Even as we head into a rising interest rate environment, we will likely see bank interest payments on deposits lag behind. This is because there are also historically high levels of cash and banks are carrying these deposits. Therefore, the banks are not currently incented to increase interest payments to drive in deposits. The good news is this is cyclical. Interest rates will eventually rise, and if the principal is safe, your HOA will benefit. On the flip side, it can be tough to replace a market loss when making unsuitable investments. That’s why we always need to stay focused on priority number one – safety of principal.
It is a best practice for community association boards to establish and maintain a clearly defined Investment Policy, so the treasurer and community association manager always know what actions to take with the association’s funds. This keeps the board from having to meet every time there is a surplus of funds or a CD comes due. The Investment Policy will address the amount of money to be held in the operating account and what happens when the account goes over or under the target balance. It will also address how the reserve funds should be invested. Areas to consider when developing or updating the IPS should include safety of principal, time horizon for investing, liquidity needs, and target return on investment. You may notice that I listed return on investment last.
For example, some associations elect to keep funds invested in FDIC insured CD’s with maturities less than one year. This is a conservative approach, but it keeps funds liquid, generates some interest, and FDIC insurance is considered the “Gold Standard” when it comes to principal protection. For large balances over $250,000, some banks offer excess-FDIC programs like the IntraFi Network (Formerly ICS & CDARS), which offers liquid and certificate of deposit options to keep up to tens of millions of dollars in deposit balances FDIC insured. This eliminates the need to run all over town looking for another bank to place a $250,000 account and dealing with multiple signature cards.
Another common investment strategy for associations is to ladder certificates of deposit (CDs), which can maximize interest income, while at the same time maintain an ideal level of liquidity. Since we are likely heading into a rising interest rate environment, it’s currently common practice to keep the duration to less than 12 months. If you have $100,000 to invest, you could consider opening a 3-, 6-, 9-, and 12-month CD each for $25,000. As they mature, roll them into a 12-month CD. In nine months, the association will have four 12-month CD’s that mature every 90 days.
Associations that keep high balances in their checking accounts and spend more than $250,000 per month might consider utilizing a sweep account. In a sweep account the association can set a target threshold for their checking account that is constantly met by sweeping funds in and out of a separate investment account. These funds are often invested in money market instruments and backed by the full faith of the federal government. Many excess-FDIC programs offer this feature, as well.
In closing, I recommend being “boring” with banking and investments and “aggressive” with reserve contributions and capital planning. That simple philosophy will help you maintain a financially stable community in this ever-changing environment.
David Ford-Coates is Vice President of HOA Banking for Alliance Association Bank in Colorado.
By Steve Walz, RealManage
Steve Walz, CMCA, is the Vice President of Operations – Colorado for RealManage. Steve recently joined the CAI-RMC Editorial Committee. His self-care includes hanging out with his dogs, playing piano, cooking and a glass of wine on his balcony.
By CAI Headquarters
CAI encourages all designation holders to review the revised Designation Ethics Enforcement Procedures and the Professional Manager Code of Ethics and Certified Insurance & Risk Management Specialist (CIRMS®) Code of Ethics.
The CAI Board of Trustees approved revisions to the Professional Manager Code of Ethics by:
And revisions to the Professional Manager Code Clarification Document by:
The Board of Trustees also approved revisions to the CIRMS Code of Ethics by:
And revisions to CIRMS Code Clarification Document by:
The Board of Trustees approved revisions to the CAI Code of Ethics Enforcement Procedures by:
The revised changes and documents are effective upon publication. Please maintain your integrity—keep up to date on these important changes. Please click here for more information on professional credentials.
By Justin Bayer, Knott Laboratory, LLC
When it comes to the reconstruction and restoration of HOA communities, the civil and structural engineers who make up a part of this niche market are accustomed to working behind the scenes. After all, there’s nothing high-profile and flashy about designing repair plans, pulling permits, or writing up engineering reports about potential issues within a community. Some recent, tragic events have flipped that script around and shone the spotlight directly on the engineering side of this industry. The collapse of Champlain Towers South and the even more recent failure of the Forbes Avenue Bridge in Pittsburgh have created an awareness into a topic that engineers have long feared was falling on deaf ears; deferred maintenance in our communities can lead to catastrophic consequences.
Clearly, these are extreme circumstances, and not every situation is dire straits when it comes to deferring maintenance and its impact on structures. That being said, the awareness these current situations have created can go a long way toward preventing catastrophes due to deferred maintenance in the future.
There are many ways that a civil or structural engineer can assist a community, and this article will aim to point community managers, Board members, and contractors toward some situations in which you can or should contact an engineer. (It should be noted that most engineers within our CAI community are more than happy to be a resource and answer questions for the communities we serve, so never hesitate to ask!)
The most common way to engage an engineer is when your community is in need of a repair/reconstruction project. This would be for things like deteriorating framing of stairs, decks, and patios, as well as foundation issues, severe cracking, negative drainage, moisture intrusion, and a myriad of other similar issues. It’s always a great idea to start with engineering because this gives the community a chance to have their potential problems assessed by a third-party, independent expert. This allows for the community to get a report and/or design plans which can then be sent to general contractors to bid.
Another way to engage a civil or structural engineer would be for construction defect concerns. An engineer will often work with an attorney to diagnose issues with new build construction, which is then used in mediation or in court to fight for a settlement that the community will use for repairs. Once a construction defect case is settled, a community will bring on a civil/structural engineer to work with the Board to prioritize repairs (life safety, building safety, community concerns, and aesthetics). Once repairs have been prioritized, the engineering team will design the repair plans for general contractors to be able to provide pricing to conduct the repairs.
There has been an influx of requests over the last 7 months (and rightfully so) for facility condition assessments. This is essentially having an engineer provide a report about the current state of the building(s). The eye-opening tragedy in Surfside, Florida has led many communities to gain a new-found concern for the level of deferred maintenance that their aging infrastructure may have. An engineer will be able to provide a report that details the visible building systems and informs the community on when those systems should be investigated further. For example, let’s say the engineer noted in the report that the stairs are in a deteriorated state, and that this should be addressed as soon as possible. Now the community can work with the engineer and a contractor of their choice to further investigate the root-cause of the stair issue. Keep in mind, destructive testing is often the only way that engineers can truly see what is happening inside of something like a ceiling, foundation, staircase, or balcony. A facility condition assessment can give a community a reason to investigate further, which can assist with knowing which items suffering from deferred maintenance should be addressed, and in what order.
So, now you know a bit more about when to call an engineer, why it is a great resource for the community to have an engineering firm representing their best interests, and where the engineering role falls into place as it concerns reconstruction projects.
Let’s wrap up with some terms which you may see when dealing with engineers on your projects:
Knott Laboratory has been in operation for over 40 years and is the premier resource for forensic engineering in the HOA, Apartment, and Commercial industries in Colorado, Arizona, and Texas. Justin Bayer, Director of Business Development, currently serves on the Board of Directors for the CAI-Rocky Mountain Chapter.
By Bryan Farley, Association Reserves, CO LLC
When looking at the component list on the Reserve Study, the reader will need to understand that there are generally five ways a component can fail. Just because the Reserve Study indicates that a specific component needs to be replaced, does not mean that it has to be replaced. Rather, the Reserve Study is indicating that the component has reached the end of its useful life.
However, there are specific components that should never be deferred. This includes life safety equipment (elevators, fire control panels) as well as protection projects (painting, asphalt sealing).
When considering project timelines for your property, here is a guide that can help your board establish what projects should be prioritized.
This guides your project timing decisions… do it now or delay. Bottom line: Don’t delay Protection or Catastrophic projects!
Bryan Farley is the president of Association Reserves, CO LLC has since completed over 2000 Reserve Studies and earned the Community Associations Institute (CAI) designation of Reserve Specialist (RS #260). His experience includes all types of condominium and homeowners’ associations throughout the United States, ranging from international high-rises to historical monuments.
By Arthur Beisner, RowCal
Many homeowners association boards shy away from addressing day-to-day maintenance needs and may be unwilling to spend assessment funds for preventative maintenance. That apprehension is often motivated by a genuine desire to keep HOA dues low or simply due to indecision from a good faith desire to make only the right decisions. Whatever the motivation, failure to address a community’s maintenance needs has long term consequences for the community, consequences which inevitably are more costly.
In an effort to keep HOA dues low and to save a nominal monthly sum, a community will experience first devolving aesthetics, leading to heightened frustration lessening the sense of community, and ultimately decreased property values—and, if left unchecked, more severe structural or infrastructural problems will not be uncovered until an emergency repair costs more in a day than years’ worth of preventative maintenance would have cost. A few dollars saved today may be a few thousand dollars spent tomorrow.
A lack of carefully planned preventative maintenance increases the need for regular, day-to-day maintenance, and failure to address regular maintenance needs results in deferred maintenance, which becomes increasingly more costly the longer it is left unaddressed. To make matters worse, as maintenance gets consistently deferred, the community’s needs snowball until identifying clear priorities and funding becomes a challenge.
The challenging decisions boards face is understandable: how do you keep HOA assessments cost-effective in the present for your neighbors when both the cost of maintenance and age of the community are increasing every year?
Ultimately, boards as volunteers will often rely on professionals to guide them through these challenges. Just as board members have a fiduciary responsibility to their communities, professionals in management have a duty to offer responsible and thoughtful guidance. While the easy road is to nod in agreement when the consensus is to keep assessments low, professionalism requires arguing for unpopular opinions, and painting a clear picture of what years of deferred maintenance becomes.
Fortunately, there are a few strategies up front that HOA boards can use to lessen the impact of paying for and taking care of proper maintenance, however they all require consistency:
Of course, these tools are only as good as the consistency with which they’re used—a reserve study, for example, is just another expense as long as the association refuses to fund reserves. As professionals in management, recommending and following through with the use of these strategies can make all the difference.
But what should a manager do if a board pushes back against funding and performing necessary maintenance for the community?
At the risk of sounding too reductive, the answer is simple: be honest.
The popular answer might keep the smiles and good vibes going in the board meeting. Agreeing that the siding that’s starting to fade or even rot can wait till next year so the budget won’t go up may make board members feel good. Convenience may call for just painting over some of those old ugly water stains that won’t go away. But applying band aids where surgery is required is disastrous in the long run. As professionals, we know this to be true and taking the neutral position of order-takers for the board does a disservice to the communities we serve.
So, be honest. Be honest and share anecdotes gained by every-day experience. Share the real-life stories of astronomical special assessments, 2 A.M. emergency mitigation calls, denied insurance claims due to preexisting damage, and even receiverships. We see the consequences every day of bad decisions made a decade ago, and we have a responsibility to guide the communities we serve to make decisions that will bring success over the next decades.
It doesn’t feel good to raise assessments 5, 10, or 20%. But it’s worse to keep dues artificially low. As professionals, we should be offering strong guidance to our communities. And when board members push back, whether from cost-concerns or otherwise, argue with conviction and don’t be shy to remind them that they’re paying a professional with experience for a reason. It’s not always easy, but it’s always right. It’s either pay a little now or pay a lot later.
As the old saying goes, an ounce of prevention is worth a pound of cure.
RowCal is an HOA Management Company that delivers full-service management and maintenance solutions, through empowering Community Managers who are supported by a team of subject matter experts. At RowCal, we assist boards in preparing and following preventative maintenance plans and our efficient monthly maintenance programs keep communities ahead of maintenance issues.
Arthur Beisner began his career in the HOA industry managing a high-rise condominium building in Miami Beach, Florida, and has been with RowCal in Colorado since December, 2020.
By Chris Marion, 3.0 Management
It is common knowledge that community associations often struggle to adequately fund property maintenance and upkeep. The unfortunate outcome is something that no manager, board member, or HOA resident wants, yet it continues to happen year over year. At best, the property appears unkept and unsightly. At worst, the property may experience serious hazards or safety concerns due to deferred maintenance.
Board members and community managers alike always speak to the importance of being proactive, rather than reactive when it comes to property maintenance. Being a responsive manager is undoubtedly important in this proactive endeavor. Work orders need to be received and issued in a timely manner. Vendors need to be scheduled and given the right amount of information to complete the work successfully. However, the deferred maintenance scenario is not always a result of poor management. Rather, many times, an association’s lack of financial planning is the true cause.
In this article, let’s look at five ways to adequately plan for property maintenance from a financial standpoint:
It is important to acknowledge the difference between these two categories and to understand when good money is being thrown at bad. A quick sealcoat might enhance the appearance of a parking lot for example, but if the asphalt needs a more comprehensive repair like a mill and overlay, the maintenance money would be better appropriated towards the larger capital improvement project.
Maintenance issues are not going anywhere in the community association industry. It is an issue that we will continually learn to solve in creative ways. Many communities are realizing the benefits of diligent analysis and the ability to look at community comprehensively. By investing time and effort into these types of planning activities, we’re seeing greater levels of predictability and confidence in HOA maintenance spending.
Chris Marion is the Chief Strategy Officer and founder of 3.0 Management. Chris is continually motivated to help HOAs develop comprehensive plans that enable communities to thrive both today and for many years into the future.
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