By: Tiffanie Thompson, SentryWest Insurance
Who is handling the funds in your community?
I hear all the time, “We have procedures in place, that would never happen to us”.
While the majority of board members are committed and hardworking volunteers, it only takes one to behave dishonestly.
Fraud can cause serious consequences for an HOA, including financial instability, increased fees for homeowners, deterioration of community amenities, and legal action against those responsible.
The potential for fraud and theft grows when these responsibilities lie with one or two individuals on the HOA board, employees or other volunteers. But, with a few tweaks the HOA boards can quickly fill the cracks.
By: Ann Marie Baird - Brighton Corporation
There’s a point in every new community’s life where it must transition from the Developer’s control to homeowner control. Sometimes this can feel like a huge task. With a little planning and coordination, the passing of this baton can be seamless. The Developer’s role is to build the community by installing infrastructure and building out common and home lots. There’s a lot of information to transition so starting early and doing it over time is best. As the Developer, you should know when the turnover should happen, so you can be prepared. Review community documents and make sure they’re completed. Create committees like an advisory, ACC, event, and neighborhood watch. Getting people involved and serving helps them learn the information and creates history, shares knowledge, and shows transparency, which allows you to gain input and even face issues or concerns upfront. Openness and communication builds trust.
Hopefully, management is in place before the transition, but if not, once the transition happens, with an election of a homeowner board, work with their chosen management company to review the community records and documents. The management company will help new board members with getting organized, understanding their positions and roles, and keeping everything rolling, so as information and leadership changes, the day to day operations continue on. Knowing the process of the turnover and reviewing all the documents can be consuming, but it’s worth it for a smooth transition.
By: Melissa Guyott, CMCA, AMS, PCAM - Ponderosa Community Management
I’ve donated countless hours in various volunteer positions throughout the years. I’ve been a PTA president, served on professional councils, coached a little league fastpitch team and even did a tour as an elected city councilperson. In each of these scenarios, I had a personal agenda or spark of madness that led me to serve. With my own point of reference and almost two decades of non-profit Board management, I like to think I’ve learned a thing or two about what makes a good governing body tick.
Let’s say an involved and engaged homeowner decides to take the leap and serve for the Board. Bright-eyed and bushy-tailed, this new leader begins to learn about the business of running their association. In this fictional scenario, our new Association leader has even taken the time to read their governing documents, review contracts and ask questions about the association’s financial health. Our new community volunteer begins to become dismayed when their questions are answered with, “I don’t know. We’re waiting on our manager.” As more questions are posed, the same answer is returned, “We don’t know. We’re waiting on our manager.”
By: Leslie Alvarez; CMCA, AMS, LSM, & PCAM
These past several years have been indescribably stressful for everyone. Economic concerns after a year’s long pandemic, lack of socialization, mask-wearing, and general fear and anxiety have only increased the slow erosion of kindness and empathy we have seen devolve over the past few years.
In our business, verbal and written abuse have reached new, unacceptable levels, and basic respect and common courtesy are no longer so common. We are told not to take the job personally, but it is personal. It's our livelihood. It's our reputation. It's our name. It is very hard to not take insults and rudeness personally. Our health takes a toll.
One time I lost 20 pounds in less than six months due to the stress of a position, and I have seen and experienced other managers suffering other stress-induced health issues. I believe it's time for some important behavioral changes in the industry.
By Michael Madson, MGM Management
Your association may contract with an association manager, but are they qualified? We’d like the residents and an HOA’s membership to know what a manager has – and has not – been hired to do.
An association manager has two primary responsibilities:
1. Carry out the policies set by the HOA’s Board.
2. Manage the association’s daily operations.
Quite often, members assume the manager performs certain tasks that just aren’t in the contract. And, when the manager doesn’t meet their expectations, residents are unhappy. Here are a few clarifications to help you understand the role of an association manager.
· The manager works closely with the Board – as an advisor – not as a Board member. The manager is not your advocate with, or conduit to, the Board. If you have a concern about your HOA, your first action is to contact your Board or send them a letter or an email.
· The manager should be available to the membership. However, that doesn’t mean the manager will drop everything to take your call. If you need to see the manager, it’s best to call to arrange a meeting or email them.
By: Brittaney Bones, VF Law
Living in a planned community comes with a set of benefits, including access to community amenities, shared spaces, and often a sense of community belonging. However, it also comes with a set of rules and regulations that every owner and resident must adhere to. These rules are typically outlined in the community's governing documents, including the Declaration of Covenants, Conditions, and Restrictions (CC&Rs), Bylaws, and Rules and Regulations.
Unfortunately, not all residents follow these rules, which can lead to frustration and tension within the community. The community association’s Board of Directors is often granted the responsibility and authority to do all things necessary to carry out and enforce the terms and provisions of the governing documents. When an owner or resident is in violation of the community association’s rules, the Board of Directors may rely on a combination of enforcement tools in order to persuade the offending owner to abate the violation and deter future rule violations.
I. Demand Letters
The least severe enforcement tool available to an association is to send warning notices and demand letters to owners who are in violation. These letters can be sent directly from the Board of Directors, or by the Association’s manager or attorney.
By: AJ Scott, CPCU, CIRMS,. Community Partners Insurance Agency, LLC
If your Association is professionally managed, it’s critical that your Directors & Officers Liability (D&O) insurance extend coverage to your management company.
Pause – which one is D&O again?
D&O protects the Association, the Board of Directors collectively, and individual board members against “wrongful acts” allegations, much like an errors & omissions policy. Essentially, if someone objects to how the Association is being operated, administered, or governed, this is the policy most likely to respond. Common claims include failure to enforce the governing documents, improper handling of an election, challenges to assessments, breach of fiduciary duty, objections to architectural review decisions, and so forth. Like other liability policies, D&O insurance contains coverage for both defense costs (legal expenses to defend the claim) and indemnity payments (money damages, such as a settlement or a judgment, IF awarded to the claimant).
Whether you are a board member or a community manager, it is important to determine the quality of the Association's D&O insurance because the scope of coverage can vary significantly from one provider to the next.
OK, so why should our management company be covered under our policy? Shouldn’t they have their own insurance?
Yes, management companies need their own errors & omissions insurance for their business dealings. However, when acting under the Board's direction as the Association's designated agent, it is reasonable and appropriate for them to be covered by the Association's insurance.
By: Shelley Grover, HOA Solutions Inc.
Who decides whether a community will be an HOA?
Forming an HOA isn’t necessarily decided by one person/group. If a city will not maintain the open space areas in a community, an HOA must be formed to take on that role. If there are private roads, an HOA must be formed to own the roads, and maintain them. If there is no open space or roads to maintain, sometimes a developer will form and HOA anyway because they want to see the properties maintained and built a certain way, which they can control through the creation of an HOA and the CC&R’s.
Can an HOA be dissolved? How would a community go about dissolving one?
The CC&R’s will specify how to dissolve the HOA. A vote would be required with 67% to 100% of members required to agree on dissolving, plus lender approval. However, before an HOA can attempt a vote, there are many steps that must occur first, especially if there is common area (land the HOA owns and maintains). The board must work through everything the HOA owns and maintains and find other entities, such as the city, to be willing to take the areas over should a vote succeed. The board must work with the HOA’s attorney through the process. Most managers will never experience this process. It is rare for an HOA to be able to dissolve, especially if it has common area.
What would you suggest to people who are not happy with their HOA?
Get involved. If you are not on the board, attend meetings anyway. If you can, run for the board. Volunteer if you are not elected. Help however you can. If you really can’t get involved and don’t like it, you should consider a move to a community that does not have an HOA.
If you like to maintain your property, have pride of ownership that reflects this and you want everyone to follow the rules, an HOA is perfect for you. If you do not want someone telling you what to do – and can’t handle that at all – then don’t live in an HOA.
I personally moved to a non-HOA area because when I did live in one, I hated it – – didn’t want anyone telling me what to do, and at the same time, was mad that my neighbors wouldn’t follow the rules.
HOAs serve a purpose and are a perfect match for some. The key is to educate yourself and make the decision, hopefully before you buy a home!
By: Brandi Pearson, Verity Property Management
January is a month of New Year cheer, and new Association budgets and assessments. It is the Board of Directors fiduciary duty to approve their Associations budget of anticipated revenues and expenses for the new year based on contract amounts, prior years actual expenses, and levels of services desired for the community. It’s also a best practice to provide the Board and members a budget narrative which explains critical budget line items. To avoid confusion and questions and provide transparency, a sound budget needs to be shared with the members. This may also be required by the Associations governing documents and state statutes.
By Michael Madson, MGM Management
A homeowners association is the cornerstone of a planned community. When run properly, it brings continuity, preserves architectural integrity, maintains common areas, protects property values, and promotes the concept of “community.” Every association should be responsible for its assets and operation in accordance with state laws and the community’s governing documents.
To be effective, an association should have a strong board of directors whose members know the responsibilities that come with their volunteer positions, including the need to govern uniformly and fairly, and have a clear understanding of the association’s strengths and weaknesses, its history, and what needs to be accomplished. The board’s authority includes all of the powers and duties contained in state statutes, as long as these are consistent with the provisions of the governing documents.
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