Management Articles |
Harmony By Design One of the most important aspects of a homeowner association is the ability to effectively control the look and feel of the community. While this power may conflict with a particular member’s desire to customize his home or condo (looove that electric chartreuse paint color!), the concept is strongly supported by the majority and a condition agreed to by all members before they bought. Indeed, that’s an important reason many opt for HOA living. While most subdivisions have CC&Rs (Covenants, Conditions and Restrictions) which dictate what members can do with their property, when push comes to shove, a lawsuit is the only way to deal with someone that is bound and determined to violate them. Since most neighbors have neither desire or money to sue one another, subdivision CC&Rs are pretty much like a lock on a door (only keeps your friends out). Because of inability to control design standards, subdivision property often experiences declining market value as the original design character erodes. In HOAs, though, the Board can enact an Architectural Design Policy and a process for reviewing and approving alteration or addition requests. In fact, the Board has the duty to set clear design guidelines and be ready, willing and prepared to enforce them. The Board is the Defender of Market Values, and like the Marines, must be faithful and prepared to do the dirty work. In the case of Architectural Design Restrictions, forewarned is forearmed. If guidelines are not clearly defined already in the governing documents, the sooner they are, the better. To keep owners mindful of the issue, it’s good to have a statement that appears in all newsletters like: "Good curb appeal and high quality of construction are fundamental to sustaining high market values in our community. The Board is entrusted with maintaining design standards that address that very important goal. To that end, all exterior alterations or additions must be preapproved by the Board. The Architectural Design Policy is available at the HOA website and explains the approval process as well as approved standards for paint colors, roofing color/type, fences and decks. If your request conforms to approved standards, it will be "fast tracked". If you have a request not covered by standard, it will take up to thirty days (depending on the complexity of the installation) to complete the review process. Please plan accordingly." An important part of the Architectural Design process is helping owners to get the job done right. There is a tendency to rely on a contractor’s salesmanship rather than his credentials. It’s the HOA’s job to ensure that the finished product lives up to it’s advertising. So, making sure that the homeowner’s contractor is licensed, bonded and insured is the first step. Clearly defining the job by specifications and materials comes next. Permits, if required, are third. By requiring each request to provide this information, the HOA is looking out after the homeowner’s best interests as well as those of all the other members. Has past laxness allowed the design ship to meander? Whether your HOA is a single family planned community or a condominium, keeping a sharp eye on exterior design issues is critically important. It’s rarely too late to bring it back on course. Keeping design considerations under control will help harmonize the community. See a sample Architectural Design Policy and Architectural Change Request Form in the "Policy Samples" and "Forms" sections. BACK
On the Record Prospective buyers have the right to inspect most records and, indeed, it’s in the best interest of the HOA that they do rather than be duped into buying under false pretenses. An uninformed buyer is usually a contentious or uninvolved owner. Neither one is good for the community. So, to encourage informed and concerned people to buy in, information must be available that any informed buyer would want to know. While making records available may seem fruitless, tedious and expensive to some, in the end better members will result. Or at least, the HOA will have a sound defense against the "I didn’t know about (fill in the blank)" argument that uninformed buyers like to make. There are literally dozens of records that should be organized by category:
Whew! The list is mind boggling. Fortunately, not all items apply to all HOAs. But there are legal and practical guidelines on how long each kind of record should be kept. For example, the IRS has guidelines for records that are related to tax payments. Other kinds of records need only be kept as long as they are applicable. Others, forever. To ensure you stay up on the records, get them organized and have a clear understanding of how long you should hold them. For a Record Retention Checklist, see the "Planning Tools" section. BACK
Facilitating the Facilities Each HOA that has these assets is challenged to make good use of them. Most pretty much distribute keys and lay out the ground rules for use. The facilities get used from time to time but usually sit vacant, quietly becoming obsolete. As years pass, light use doesn’t wear out the carpet, furniture, paint colors, light fixtures and drapes. They just take on that "nightmare from a bygone era" look and get less and less use as time pass. How can the HOA justify updating the place when so few use it? These common amenities should be a source of pride and a value builder for the owners’ home prices. Instead, outdated facilities cause an embarrassment and home value reduction. May it never be! Protecting, polishing and promoting the HOA facilities serves a number of worthy purposes:
Taking full advantage of your facilities takes a plan. It’s the perfect opportunity for a Facilities Management or Social Committee to plan events throughout the year and promote rentals by members. The same committee can do inspections to ensure the facility is kept clean and in good repair. Take advantage of the facilities at your disposal and watch neighbors become friends, home values grow and greater harmony in the community. This opportunity is simply too good to pass up! For a sample Facility Reservation Form, see the "Forms" section. BACK
Target, Process & Objective The board needs to identify priority targets to aim for. Hitting each target requires a process to achieve a positive objective that will improve the the HOA. Here are some examples of priorities: A. Target: Long Range Planning. Reserve studies provide a multi-year projection of common element repairs and replacements like roofing, painting, fencing and decks. The components all have varying life cycles and costs. Some have long lives, like roofs, and others have shorter lives, like paint. The reserve identifies all of the common element components, predicts useful lives and current cost of repair or replacement. With this information, a schedule and funding forecast can be generated to assist the board in planning. Process: Hire a professional reserve study consultant and follow the recommendations. See www.apra-usa.com for options.Objective: To maintain the property in best condition to maximize values. B. Target: Stewardship. The board is entrusted with two things that mean a lot to HOA members: their money and their homes. Stewardship is a form of fiduciary responsibility. Good stewards handle the property of others with extreme care, making sure it is protected from forces that will do it harm or diminish its capacity. This requires careful handling of money and property. Process:
Objective: When it comes to money, the board should not penny pinch by keeping HOA fees the lowest around. Lack of money diminishes services that reduce HOA member property values. Spending money prudently will maintain highest property values and member satisfaction.. C. Target. Fostering Harmony. It’s a dog eat dog world out there. It shouldn’t be like that in the HOA. Process: Objective: There is no "I" in TEAM. Find ways for HOA members to resolve conflict and promote friendships. D. Target: Accountability. Hold members responsible. Process:
Identifying your HOA’s priority Targets, Processes and Objectives will help the board focus on what’s most important. Go TPO! BACK
Changing Course "What prevents human beings from successfully managing the natural environment and other complex systems? Dietrich Dörner, a cognitive psychologist, performed experiments and found out. Using computer simulations of complex environments, he invited intellectuals to improve the situation. They often made it worse. Those who did well gathered information before acting, thought systemically, reviewed progress, and corrected their course often. Those who did badly clung to their theories, acted too quickly, did not correct course, and blamed others when things went wrong. Dörner concludes that our failures in managing complex systems do not represent any inherent lack of human capability. Rather they reflect bad habits of thought and lazy procedures." State of Fear by Michael Crichton These observations point to several courses of action an HOA board might consider when endeavoring to make changes: 1. Do Your Research. If the board wants to change long standing policy, lack thereof or tradition, it’s important to truly understand why it stood so long. Don’t automatically assume that previous boards just failed to do their job. Homeowner associations have the ability to establish norms that vary if the members want it that way. So, failing to enforce rules may be the way most of the members may like it. Your HOA may have too many rules that need to be weeded out instead of enforced. So, rather than charge in to smite the offenders, consider polling the community to see just how important a new "get tough" policy is. 2. Organize Your Plan. Repointing the board takes careful planning since not every issue has the same priority. Even if the board and members are generally agreed on, say, correcting architectural violations, those violations come in large and small size, visible and not so visible. Prioritizing the plan of attack and laying out a time frame that doesn’t require the board to deal with everything all at once makes sense. 3. Do Progress Reports. As the board attacks individual issues, some will resolve quickly while others fester. Resolution is great because that reduces the number of issues. Progress reports will allow the board to celebrate its successes and refocus on remaining issues. 4. Rethink Solutions. The board has the authority to make judgment calls. Not all issues are black and white. In the case of an architectural violation, the board can compromise if it’s in the best interests of the HOA. For example, if an owner has illegally expanded a deck into the common area, the board’s order would normally be to remove it. However, if the owner has spent considerable money and a previous board granted permission (even though it had no authority to do so), the owner might mount a legal defense and be willing to go to court over the matter. The board could expend thousands of dollars of HOA funds in legal costs and possibly lose the case or compromise by getting the owner to agree to remove the deck upon sale of the property. The compromise allows the owner to save face, the HOA to save money and ultimately get the deck removed...it just will take a bit longer than anticipated. The lesson is to not get too entrenched in one solution. Circumstances may warrant creative thinking and the board has the authority to be creative. The board usually steers the HOA ship across calm seas with business per usual. But from time to time squalls and shallow rocks dictate a change of course. While governing documents and state laws point a direction that often works, be prepared to deviate when circumstances dictate. BACK
Business Judgment Rule What steps can a board take to comply with Business
Judgment Rule parameters? The Business Judgment Rule has a long tradition of protecting volunteer directors who make informed decisions that someone may not agree with. The operative word is "informed". Do your research and get good advice before making judgments on controversial issues. Adapted from an article by Orten & Hindman BACK
Committee Charters Nottacare
Condominium I. Purpose
The primary functions of the Budget Committee are to assist the board of
directors in fulfilling its financial oversight responsibilities with
respect to budgeting, finance and accounting procedures. The Committee
will encourage continuous improvement of and adherence to financial
policies, procedures and practices. III. Term of Office. Committee Members shall serve for one year subject to renewal by mutual agreement of the member and the board. IV. Meetings The Budget Committee shall meet on a quarterly basis, or more frequently as circumstances require. V. Responsibilities and
Duties To fulfill its responsibilities and duties, the Budget
Committee shall: 1. Formulate a draft
Operating and Reserves Budget each year and present it for approval by the
board of directors by November 1st of each year. The budget
shall based on a thorough review of the current year’s actual expenses,
cost increases in contracts and utilities and future reserve needs.
How to Deal with a Crazy
Board What should be done when a board or manager fail to enforce the governing documents fairly and consistently? What if a board or manager refuse an owner's request to review HOA documents? Or denies an owner's request for a hearing? In each of these circumstances, the owner should be able to point to particular provisions of the governing documents which require explicit action and compliance by the board. If a homeowner believes the board is failing to respond appropriately or acting irrationally, they should: 1. Articulate the issue(s)
in writing as succinctly as possible; The owner should then draft a concise written letter or request to the board that embodies the four factors described above. If the HOA is professionally managed, then a copy of the letter should be sent to the manager. The homeowner association's governing documents should have a process already in place to resolve the dispute. If so, the owner should identify the process and insist on board compliance. If not, and if the board does not respond adequately to the owner's letter, then the owner can request a meeting with the board. If the board continues to dismiss or ignore the owner and if the manager is ineffective in helping to resolve the dispute, then the owner should seek legal counsel. Keep in mind that many association governing documents require mediation or similar dispute resolution process be conducted prior to a lawsuit being filed. If an owner does not wish to seek legal assistance, and if they feel the board is failing to follow its governing documents and otherwise acting irresponsibly or irrationally, then the owner may wish to try to unseat the board through a special election. An HOA's governing documents ordinarily outline the process for removing a board member or entire board. The key to reducing and resolving disputes between the "crazies" (whether homeowners or boards) is to rely strictly upon the homeowner association's governing documents. A modicum of common sense and reasonableness also go a long way to solving the problem. If all else fails and the board cannot be removed via special election, then mediation or court interaction may be required. If so, in claims arising from enforcement or disputes, many governing documents allow the prevailing party to recover reasonable attorney's fees and costs. By Dan Zimberoff of Barker Martin BACK
Managing Solo According to The Owner’s and Manager’s Guide to Condominium Management "For self-management to be successful, unit owners must have plenty of time and experience, and a professional attitude toward their work for the association. For example, the treasurer must understand accounting and be willing to devote a significant amount of time to the maintenance of proper financial records and timely collections. The chair of the landscape committee should have gardening experience so that either a landscape contractor or a gardener can be properly supervised. If the association is fortunate enough to have members who have the three main attributes--talent, time and concern--self-management may be the best choice." Size of the development is an important factor. Although it should not be the ultimate factor in deciding to self-manage, a sound case can be made for limiting self-management to HOAs of fewer than 30 units with limited common area space and no recreational facilities. The larger HOAs have more work. Most volunteers don’t want or need another job, particularly an unpaid one. The main advantage of self-management is cost. However, if the motivation for adopting self-management is purely economic, the board should consider that decision closely. It makes little sense to save each owner a few dollars a month in management fees when the value of their property many decrease by thousands of dollars as a result of that decision. Equally important is the question of who directs contractors, employees and volunteers. Supervision cannot come from an owner who simply wants to be the boss. Supervision should come only from a person with time and experience to oversee and control work performance properly. The board must consider the legal implications of self-management, since the board itself is liable for its decisions or indecision. The board’s responsibility is to both fellow owners and the general public. Although many governing documents contain a hold harmless clause that seeks to protect board members from legal repercussions for their actions, this does not prevent their being sued for mismanagement. If the members consider self-management to be an adventure, enthusiasm may be high enough to be successful. However, that initial enthusiasm usually wanes as the demands on volunteers increase. A breakdown in the volunteer system spells disaster for continuity. Today’s "house-afire" is tomorrow’s "burn-out". Consider the two really nasty aspects of self-management: having to enforce rules on or collect past due fees from your neighbors. Suddenly, the neighbor relationship becomes a master-servant relationship and neither party enjoys the new role it must play. Controlling one’s own destiny in a homeowner association is a sea fraught with storms and smooth sailing. Under the right set of circumstances, self-management can work. As long as the approach is professional and business-like with a positive, affirming attitude, it can click. If it isn’t clicking, consider the alternatives that professionals can offer. BACK
Guide to Rule Enforcement
2. Impose a Lien. If a fine is not paid, the HOA usually has the right to file a lien against a member’s HOA property. This may not immediately get the fine paid but in most cases, the threat of filing a lien alone will. The HOA is usually entitled to reasonable attorney, collection and related fees as well which will increase the amount owed. This is also a great incentive to getting the fine paid early. 3. County Court or
District Court. The HOA is always represented by an attorney
since these courts have rules and procedures which only lawyers
understand. Court litigation is expensive and should not be undertaken
lightly. Make sure the expense and effort fits the crime. We’ve all read
about the time, emotion and money squandered on "matters of principle".
The board has the power to compromise when it’s in the best and financial
interest of the HOA. By William G. Gammon BACK
Tenants from Heaven The board can take some steps that will help assure a more successful tenancy. For one, it is reasonable to want tenants and landlords to comply with the rules. Of course, the tenant has to know what they are in order to do that. Remind the landlord that the tenant is bound by the same rules as owners and require that the HOA rules are part of every Rental Agreement. It’s up to the landlord to comply and failure to do so can be a fineable violation against the landlord. Include renters with other residents who receive information about the rules. Landlords should be required to provide the board with:
While the HOA cannot require it, common sense and good management practice indicate that landlords should also:
While the landlord is the key to properly framing a tenant’s role within the HOA, it’s also important that the board, manager and owners refrain from treating tenants like second-class citizens. When treated with respect and like owner members of the community, they usually act the part by taking care of the property and respecting the neighbors. Treat renters like owners and reap tenants from heaven. BACK |
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