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February 23, 2008
The Very Rock-bottom Basics of Community Associations
I get a lot of questions from people who find my web site, and I spend some time on HOATalk - a discussion board geared to board members. I am constantly amazed at some of the questions, given the fact that most of the writers have had numerous boards before they were elected, and why the question couldn't answered, or was answered wrongly, is sometimes leaves me staring at the screen, wondering what I've been working so hard at for the past 33 years. So let me outline some basics about community associations. These will apply to most, so assume they apply to yours until you can definitely determine otherwise:
You are a corporation - subject to your state's corporate laws. This is where you get your board structure.
You are not tax-exempt - you are probably "not-for-profit", but you're not a charity. You may fit into a couple of different tax categories - which one you should be in is up to you and a qualified CPA.
You have to file a tax return every year - that doesn't mean you will owe taxes, but you have to file. Yes - state too.
You have to renew your corporate status every year - if you missed a year, you may have lost the protection of corporate law.
It doesn't matter who does your books, someone else should be checking them and the bank accounts.
It doesn't matter how large you are or how small you are - if there are common areas involved in your association - you need to have reserves.
You are not required to have professional management, legal counsel or a CPA - but you'll be an idiot if you don't periodically call on them for help when you run into a problem. The good ones have "been there and done that", and won't waste your money.
You need to have insurance, and more importantly, you need someone on your side (not necessarily the agent you are working with) to tell what's really insured and what's not. Insurance surprises over the past few years have been very expensive for associations.
If you can't read your documents from front to back without falling asleep, or if you have to continually go back to try and figure out what they're saying - you're long past time having legal counsel come in and help you clean them up. Bad documents never make for good associations.
It's not your job to keep the assessments low - it's your job to spend the money wisely.
Most of the problems that end up in court between an owner and the board boil down to stubborness on both parties part. Don't let it get to that and you'll save everyone a lot of money and aggravation.
[Special note to association's in drought areas - if you're on water rationing, don't send owners violation notices for not having a green lawn - I don't care what your documents say - you look like idiots.]
More later-----
Posted by joewest at 8:16 PM | TrackBack
February 15, 2008
"You're Banned"
Note to criminals: Check your mail, it may keep you out of jail. To curtail nuisance crimes, residents of a Crofton (MD) neighborhood are sending letters to people they deem unsavory, telling them if they return to private property owned by the neighborhood they will be arrested for trespassing, a crime that could result to a $500 fine or 90 days in jail. Full article
When I saw this news article, for some reason my mind shifted to the religious groups that "shun" outsiders or people who have mis-behaved in their group. Since I hadn't seen this in a while, it had that "old-time" feel to it.
In this day and age of frustration with authorities who don't seem to be able to deal with minor issues any more, this might just strike some as something to try.
Posted by joewest at 5:12 PM | TrackBack
February 4, 2008
Watching Your Money (Again)
Last weekend, there were three more reported embezzlements from associations. So the usual questions were asked by people as to how they could better protect their money. I said that there were a number of policies and procedures they could and should take, but I wanted to highlight two:
FIRST - make sure that a copy of the bank statement goes directly from the bank to someone other than the person who keeps the books. ts really hard to steal your money if the crook can't doctor the statements to show that the money is "there". Better yet, through electronic banking, allow multiple people access for reviewing the bank statements, deposits and payments. But, at a minimum, if a manager or management company is writing the checks and handling the banking, then the Treasurer should receive a statement directly from the bank. If the Treasurer is writing the checks, then someone else should be getting the other statement. Don't just rely on the "two signatures" as most banks don't even look at the signatures anymore as they run the checks through scanners.
SECOND - You need either a Fidelity bond or Crime Insurance policy that covers the association for any theft of its money. AND - you need to know what the exclusions are for which they won't pay, or any policies or procedures that you need to institute in order to keep them from denying a claim. Your agent needs to explain this in detail and you need to make sure that any of the possible scenarios, in which money could be diverted or disappear, is covered.
You can find articles on our site covering more items, but I really wanted to stress these two as something that shouldand could be done immediately!!! DO IT!