Note from the Editor:

This will be the last issue for 2008.  We're going to take the holidays off and get ready for the new year.  First, thanks to everyone who sent in links to stories and articles.  It would be impossible to track them all down without your help.  Next, we're hard at work on the new version of our web site and this newsletter.  It probably won't quite be ready by New Year's, but hopefully it be on display shortly after that.  We hope you like it.  Last, in this time of economic crisis and our troops still in harm's way, we want to wish everyone happy holidays and the hope for a safe, peaceful and better new year.

 What if Santa was your neighbor? Would you rat him out? :)

Q: We have a homeowner who just ignores our governing documents and really is one trouble maker. He has a recreational vehicle that is improperly parked at the community. He painted his house without architectural approval and the colors absolutely clash with the common color scheme of the community. In addition, he made unauthorized modifications to his home by adding a new entry. The other day it appeared that he was even feeding sick animals in his backyard. If this wasn't bad enough, he has a huge canvas sack in the front yard that just recently appeared. His neighbors think that he is running either a day care or a business, which is definitely against the governing documents.   Read more

Bank Failures Highlight Need for Due Diligence on Deposit Insurance

When Indy-Mac, the California bank giant, failed in July, an estimated $600 million of its $19 billion in deposits were not insured.  Based on historical patterns, the consumers, businesses (and homeowner associations, if any) holding those uninsured deposits could expect to recover about 72 cents of every dollar. Think about that.  Would you want to be a member of an HOA board that had to inform owners that the association’s reserves or operating funds had been reduced by almost 25 percent?  The news would not be well-received and the board members responsible might well face legal liability for failing to make sure the association’s funds were protected. The federal government, through the Federal Deposit Insurance Corporation (FDIC), automatically insures up to $250,000 in deposits held in commercial banks and savings institutions.  (The National Credit Union Share Insurance Fund provides the same coverage for credit union deposits.)   The $250,000 limit is new and temporary.  Congress increased the coverage from $100,000 as part of the massive financial industry bail-out bill enacted a few weeks ago, subject to a sunset provision under which the cap will revert to the lower limit at the end of next year.   Read more

Key Provisions Associations Should Have In Every Contract

“A verbal contract isn't worth the paper it's written on.”  So states Samuel Goldwyn, in Goldwyn’s Law of Contracts.  What he didn’t say is that even a written contract, without key provisions, could be every bit as worthless as a verbal one.  The following are some key provisions that every contract should have:   Read more

Credential Controversy - Manager Licensing Gains Momentum

Ten years ago, the question, “Should community association managers be licensed?” was academic — a topic of discussion at seminars and cocktail parties and fodder for the occasional article in industry journals, but far removed, it seemed, from the day-to-day lives of managers. Today, the licensing question is no longer academic; it has become very real. Four states (Georgia, Florida, Alaska and Virginia) and the District of Columbia have licensing statutes in place; 10 more states are actively considering measures or on the verge of doing so, and 5 are studying the issue, according to the Community Associations Institute (CAI).
Read more

Audits, Reviews, and Compilations - OH MY!

Maintaining accurate records and internal controls are necessary for an association to ensure that the financial reports precisely reflect the financial condition of the community association. The type of year end report a CPA performs is primarily driven by the interests and needs of the association, as well as year-end financial reporting requirements mandated by state statute and the association’s governing documents. An annual audit is advantageous in that an independent Certified Public Accountant (CPA) will provide the highest level of accuracy assurance when examining the financial records of an association. An audit will also assist the board of directors with their oversight duties and can help them meet budgetary obligations.   Read more

Living in HOA Harmony

While conflict is inevitable in homeowner associations, we do have choices about how we are going to deal with it. When handled in a constructive manner conflict can be a catalyst for new awareness, new understanding, creative solutions and enhanced relationships.  However, when conflict occurs we don't always deal with it in the most constructive way or we sometimes don't deal with it at all. Conflicts rarely get better with time. Here are some suggestions for how to deal with conflict the next time it arises.   Read more

How Green Should My Reserve Fund Be?

Invariably the question will come up during one of our seminars. “How much should we carry in our condominium capital reserve fund? I usually answer by saying that the better question to ask is at what rate should you contribute to your reserve account. The time remaining until you need to replace things is going to have a significant effect on how quickly you assemble the needed funds. A baseball analogy may help. If you’re six runs behind in the second inning that calls for a whole different strategy than if you’re faced with the same desperate deficit in the eighth.   Read more

Maintaining Association Business Records

A homeowner’s association is a non-profit corporation.  Every corporation produces business records which can be a life line or anchor for a business.  If a business keeps proper records, these records can help lessen the threat of litigation.  If a corporation fails to maintain proper documentation, the ability of the corporation to defend itself is hindered.  The lack of clear, concise business records also makes a business vulnerable to lawsuits because weak business records provide adversary parties with an opening.  Business records may include tax, accounting, contracts, payroll, insurance, responses to disputes, etc.         Read more

Undoing Previous Board’s Decisions

If you have served on a board you most likely can relate to this dilemma: dealing with prior board decisions. Some decisions are genius and end up saving the association money, increasing property values, and creating a wealth of harmony in the community. Some don’t make much impact from the owners’ perspective, but aid in the board’s operations of the association. And then there are some decisions that fail miserably. These decisions or choices that don’t succeed are often the brain child of a board member or members who believe their idea will 1) benefit all; 2) change things in a positive way; 3) possibly create a financial savings, or in some cases, 4) set the stage for future boards to have more “power”. Oftentimes theses grand ideas are borne out of a real desire to better the association, but lack the research and rationale to make it work, or sometimes they are simply created to fulfill a certain group’s personal agenda. What we must keep in mind is that an association is similar to a small government and should be treated like a democracy. Decisions must be made that will benefit the majority, and also be founded on sound business judgment. Diversity is what makes the world go round, and being human we tend to make decisions based on emotions. Emotionally-based decisions generally turn out to be poor business decisions. This is a trap into which many well-meaning and dedicated board members fall. Generally when a poor board decision is made, it is not immediately apparent. Oftentimes the bad decision manifests itself on a future board of directors, leaving them to deal with the “fall out” and “emotional baggage” from the prior board’s actions. How should the current board respond?   Read more

Fire Detection in the 21st Century

Are you thinking about changing or upgrading your fire detection system?  There are many new options and features to consider.  We live in a new world.  September 11, 2001, changed all of our lives.  Priorities changed and the things we previously took for granted, like our basic safety, became a primary concern.  Even the way we think about our firefighters has changed.  They are no longer simply people who put out flames.  Now we all know them as "first responders" in an emergency situation.  Read more  (PDF)

Top Ten Management Company Interview Tips

One of the toughest jobs a board of directors can face is interviewing for a new community association management company. By their very design, homeowner association boards are comprised of homeowners from all walks of life, which means the expertise, experience, and talents of the volunteers serving on a board can vary widely. Many board members have never interviewed anyone for work, and have no idea what questions to ask or how the interview should be structured. Before a board decides to assign a board member to call management companies and ask for bids and interviews, here are a few helpful tips for making the process and the choice the ideal one for your homeowner association, from a veteran of over 20 years of the management side of board member interviews.   Read more

Pay As You Go? Can a Program of Periodic Maintenance Reduce the Number of Major Repair Projects in a Community Association?

There are some repairs that require a large, specialty or general contractor, a project-wide bid, and major funding. Examples are: wholesale re-roofing; a complete re-painting project; or re-construction of a major portion of a building--especially where engineering or architectural expertise is required. But a lot of the work required keeping an association looking and working well can often be done by a qualified individual, or small contractor, and in at least one case, by an employee of the association.   Read more

Facing the Financial Crisis: 10 Smart Things Your Board Can Do Now

It's undeniable, and the reality of that hits anew every morning. All we have to do is get out of bed and turn on the morning talk shows, retrieve the newspaper, or glance at the faces of passersby as we head to work. All tell us loud and clear that our economy is in turmoil. It's tempting to crawl back in bed, pull the covers over our heads, and pretend all is well. As board members, we're not immune to these feelings. But in these very troubled financial times, our organizations are looking to us for leadership. How we react to the economic crisis can go a long way toward calming fears and ensuring that our nonprofits remain solvent in this difficult environment and are even better prepared to enact our organizational missions in the future. Here, then, are 10 things your board can do now to address the financial crisis   Read more

If You Don't Pay To Play . . . Beware

Does the Association have a movie night where it plays or projects a popular DVD on a common area TV or blow-up screen?  Does the Association play popular music CDs over a sound system in the clubhouse during Association events?  In both of these cases, the performance in a common area or clubhouse of the published music or movie goes beyond private use, and may be considered an unlicensed public performance under the Copyright Act.  In the event of such an infringement, the violator can be punished with damages ranging from $750 to $30,000 per infringement (PER PLAY!), plus attorney fees.  Read more

 Implementing Smoking Bans: Taking the Gradual Approach

Whether or not to allow smokers in your building is the next hot issue confronting co-op and condo boards. How difficult is it to implement a ban? Should you do it at your property? And what are the short- and long-term consequences for resales at your building and the overall quality of life?   Read more