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Ask the HOA Expert
Q&A |
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Claims Made vs. Per Occurrence Answer: A Claims Made policy only covers claims during the period the coverage is actually in force. A Per Occurrence policy covers a claim even after the coverage is no longer in force, subject to your state's statute of limitations. If you plan to stay with a particular insurance company forever (or they don't cancel you), a Claims Made policy will work because coverage is always in force. But what if a claim is filed the day after a Claims Made policy expires or doesn't renew for whatever reason? Unless the premium difference is significant, a Per Occurrence policy is the way to go. BACK Mold
Coverage Answer: Mold and fungus are now excluded from many HOA insurance policies because the courts have handed out substantial awards against HOAs related to health problems mold cause. The HOA can prevent such lawsuits by paying close attention to mold remediation. Mold is not that hard to detect. In 99% of the cases, smell alone indicates its presence. Locating the mold source is a resident's responsibility as well as the HOA's. Often it's in an accessible space like the attic or crawlspace. Once informed of the problem, the HOA should take corrective action as soon as possible so negligence can't be claimed. Hire only licensed contractors trained in mold abatement. Mention the mold issue in your newsletters and request residents to call if a moldy, musty smell is detected. Mold is a health hazard that should be treated seriously. If the HOA does treat it seriously, there likely will be no legal issues to contend with. BACK Paid
Board Members Answer: Unless your governing documents are different than most, board members may not be compensated for work done on behalf of the association. The President would have a huge conflict of interest since it's the President that oversees contractors and employees. If she resigns from the Board, that will eliminate that particular problem but there is another practical consideration: Hiring a neighbor is a formula for disaster. If performance doesn’t live up to expectations, she would have to be fired and likely be resentful. It’s not worth risking an already fragile relationship. BACK
Filing HOA Insurance Claims Answer: You are correct to be concerned. Homeowner association insurance is designed to be very broad and cover many kinds of claims including damage to unit interiors. It is up to HOA policy to restrict the kinds of claims that can be submitted. This is necessary to safeguard the HOA’s insurability. Excessive claims cause premiums to rise or the policy to be cancelled. To solve this, the Board should adopt an "Insurance & Maintenance Areas of Responsibilities Policy" which separate responsibilities either by "association" or "owner". Another policy should be adopted to require all owners to carry condominium insurance insuring their unit and personal property. Once these policies are in place, each owner will know what kind of claims may be made to the association's insurance and should advise their agents accordingly. All insurance claims made against the association’s insurance should be pre-approved by the Board before submission and the agent should be put on notice not to accept one unless it has that authorization. This will help control the number and types of claims. There are cases when the damage is so small that the association should just pay for it rather than submit a claim. Insurance companies track the number of claims closely, even if no money is paid out. Claims cost money to process and above average number of claims indicate higher risk. Getting put in a higher risk category is never to the HOA’s benefit. See a sample Areas of Responsibility policy in the Policy Samples section. BACK
Releasing Unapproved Minutes Answer: The problem with waiting until after the next meeting to circulate approved minutes is that some or all of the action items in the previous meeting's minutes may have already taken place. It is a good practice to post the minutes (clearly marked "DRAFT subject to revision and approval by the Board") so that the members have an inkling of what happened. Same goes for the annual meeting minutes. BACK
Removing Board Members Answer: If not clarified in the governing documents, I recommend the Board adopt a policy. Here are a few situations that could lead there: 1. Guilt of any criminal action
involving the HOA. A member in good standing is one whose balance with the HOA is current or, at least, not delinquent for a long time or in a significant amount. You could also include "not in violation of rules, regulations or architectural restrictions" although the severity of the violation needs to be factored in. BACK
Committee/Manager Interaction Answer: Interaction varies according to committee. Committees are authorized to do what the Board decides they should do. A Newsletter Committee, for example, should normally work directly with the Property Manager to produce the newsletter. A draft should be presented to the Board for approval and the Property Manager sees that it's printed and distributed. The Budget Committee presents a draft budget to the Board for approval. The Landscape Committee typically oversees the landscape contractor and the Pool Committee oversees the pool contractor. As long as everything is going according to plan, the committee can function on its own. If there is a problem, the committee should pass the information on to the Property Manager, the Board or both, depending on the severity. Committees don't make policy. They carry out administrative functions approved by the Board and assist the Property Manager is refining their area of focus. In other words, since the HOA can't afford to have the manager do daily inspection, a vigilant committee of volunteers can assist in more regular oversight and advise the manager when action is needed as in the case of the landscape contractor. The Board should be sure each committee has a clear job description with limits of authority defined. The Property Manager should understand that committees are advisory only. If there is an issue that needs approval, the Manager should take it to the Board or Board President. BACK
Insider Reserve Study Answer: HOA members (regardless of profession) are rarely qualified to do reserve studies unless they have extensive construction background and knowledge of HOA operations. A reserve study is meaningless if the numbers are not reality based. Homeowners typically do not have access to reliable construction cost information or contractors so end up guessing at or using off the cuff estimates given by contractors over the phone. Accurate reserve studies require site work by trained experts that know what they are looking at. The issue of conflict of interest with a homeowner generated reserve study is also a real one, especially if you have members pressing for lower homeowner fees (almost always the case). There will be a steady pressure to suppress reality to justify reducing fees.. This is always detrimental to the asset values and livability of the community. Have your Reserve Study done by a trained professional with both credentials and local references to prove capability. Having and following a good Reserve Study can dramatically increase asset values and marketability. Having none or a bad one is like an appendix: absolutely useless and one day may do you in. BACK
Enacting Design Restrictions Answer: Unless there are architectural design restrictions against fences, play equipment and sheds on owner property already in the governing documents, the Board has no authority to dictate other than what is placed in the common area. Owners are free to do as they please on their own property as long as it's legal and complies with city/county building code. The related issues of noise, quality of installation and aesthetics (harmonious with the prevailing colors and architecture) are something the Board can be involved with but not to the same degree as common area control. For example, if an owner decided to construct a fence out of used pallets, it would definitely degrade the area property values. The same could not be said of play equipment unless the kids were allowed to run amuck and create havoc. So banning play equipment or fences on someone's private property is going too far even if the majority agree it's a good thing. Private property rights apply to HOAs just like anywhere else. Common area control, however, is a different matter and the HOA can control what goes on there. BACK
Withholding Homeowner Fees Answer: This is a fairly common ploy by owners to either force their maintenance request to the top of the stack or to justify late payments. As long as the request has been received and processed in a reasonable time frame, the HOA is under no obligation to treat every request is urgent. A reasonable repair time is probably 30-60 days. But the owner should not be put off indefinitely. Give him a date. That said, if the dues aren't paid in a timely manner, charge late fees as you would anyone else that didn’t pay on time. BACK
Property Tax Discrimination Answer: This kind of HOA taxpayer discrimination occurs in many cities across the country. HOA members are sometimes taxed for services they don't get like road, park and storm sewer maintenance plus garbage service, bus service, street lighting and many others. If the cost of the service not received can be cost quantified, members of your HOA are entitled to a tax rebate or tax reduction. However, it’s likely you’ll need to hire an attorney to plead your case since getting tax relief is not a simple process. From a practical standpoint, it may not be worth fighting unless the cost savings are significant. But if your city has a wide spread policy of charging HOAs for services they don’t receive, you may be able to find an attorney to mount a class action suit and share costs with other HOAs. BACK
Private Use of Common Area Answer: The Board has no authority to grant use of the common area that is contrary to the governing documents. If owners are allowed exclusive use of the common area, this must granted by amending the governing documents and approved by the appropriate majority of members. Thus far, your violators have enjoyed a free ride. But if the governing documents are not appropriately amended, they should be brought into compliance. The fact that previous Boards were lax does not change the standards. It only confirms the problems caused by the Board failing in its fiduciary duty. The current Board should enforce the restrictions and not perpetuate the problem. BACK
Disrupting Board Meetings Answer: The Board Meeting is designed for Board business. Owners should be welcome as guests to listen but should never speak unless requested to by the Board. To get the situation under control, the President needs to lay down the ground rules before the meeting starts. Then, if this person interrupts Board business, he needs to be stopped cold by the President. If he won't cease and desist, he should be asked to leave. If he refuses to leave, adjourn the meeting to another time and place and inform him that he is not welcome at future meetings. Keep your promise. BACK
Doing Paid Maintenance Answer: No one appointed or elected to serve on the Board or Committees should be hired as an employee or contractor since there is clear conflict of interest. And all contractors that perform work for the HOA, regardless of who they are, should be properly licensed, bonded and insured for the kind of work they are performing. BACK |
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